economy of the united states

8/8/2019 Economy of the United States

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Constitution of USA(UNITED STATES OFAMERICA)


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Economy of the United States

Economy of The United States

Rank 1st

Currency United States Dollar (USD)

Fiscal year 1 October 30 September

Trade

organizations

NAFTA, WTO, OECD, G-20, G8 and others

Statistics

GDP $14.266 trillion (2009)[1] (nominal; 1st)

$14.266 trillion (2009)[1]

(PPP; 1st)GDP growth -2.4% (2009)

[2]

GDP per

capita$46,442 (2009)[1] (nominal; 17th)

$46,442 (2009)[1] (PPP; 6th)

GDP by sector agriculture: (1.2%), industry: (21.9%), services: (76.9%)


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(2009 est.)

Inflation (CPI) 2.2% (May 09-10)[3]

Population

below poverty

line

13.2% (2008)[4]

Gini index 45 (List of countries)

Labor force 154.5 million (includes unemployed) (2009 est.)

Labor force

by occupationfarming, forestry, and fishing 0.6%, manufacturing,

extraction, transportation, and crafts 22.6%, managerial,

professional, and technical 35.5%, sales and office 24.8%,

other services 16.5%

note: figures exclude the unemployed (2007)

Unemployment 9.7% (May 2010)[5]

Main

industries

petroleum, steel, motor

vehicles,aerospace, telecommunications,chemicals, creative

industries,electronics, food processing, consumer

goods, lumber, mining,defense

External

Exports $1.057 trillion f.o.b (2009 est.)[6]

Export goods agricultural products (soybeans, fruit, corn) 9.2%,

industrial supplies (organic chemicals) 26.8%, capital

goods (transistors, aircraft, motor vehicle parts, computers,

telecommunications equipment) 49.0%, consumer goods

(automobiles, medicines) 15.0% (2009)

Main export

partners

Canada, 13.2%; Mexico, 8.3%; China, 4.3%; Japan, 3.3%.

(2009)[7]

Imports $1.558 trillion c.i.f. (2009 est.)[6]

Import goods agricultural products 4.9%, industrial supplies 32.9%

(crude oil 8.2%), capital goods 30.4% (computers,telecommunications equipment, motor vehicle parts, office

machines, electric power machinery), consumer goods

31.8% (automobiles, clothing, medicines, furniture, toys)

(2009)

Main import China, 15.4%; Canada, 11.6%; Mexico, 9.1%; Japan,


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partners 4.9%; Germany, 3.7%. (2009)[7]

FDI stock $2.398 trillion (31 December 2009 est.)

Gross external

debt

$13.77 trillion (30 June 2008)

Public finances

Public debt $13.2 trillion (July 2010)[8] 88% of GDP

Revenues $2.106 trillion (2009)[9]

Expenses $3.515 trillion (2009)[9]

Economic aid ODA $19 billion, 0.2% of GDP (2004)[10]

All values, unless otherwise stated, are in US dollars

The economy of the United States is the world's largest. Its nominal

GDP was estimated to be $14.3 trillion in 2009, almost three times the size ofthe economy of Japan. In purchasing power parity terms, it is larger than

the economy of the People's Republic of China. Notwithstanding, the U.S.

economy also maintains a very high level of output per capita. In 2009, it was

estimated to be$46,381, the 6th highest in the world. Historically, the U.S.

economy has maintained a stable overall GDP growth rate, a

lowunemployment rate, and high levels of research and capital

investment funded by both national and, because of decreasing savingrates,

increasingly by foreign investors. In 2009, consumer spending, coupled withgovernment health care spending constituted 70% of the American

economy.[11]

Since the 1960's, the United States economy absorbed savings from the rest of

the world. The phenomenon is subject to discussion among economists. Like

other developed countries, the United States faces retiring baby boomers who

have already begun withdrawing from their Social Security accounts; however,

the American population is young and growing when compared to Europe or

Japan. The United States public debt is in excess of $13 trillion and continues

to grow at a rate of about $3.83 billion each day.[12]

Total public and private

debt was $50.2 trillion at the end of the first quarter of 2010, or 3.5 times

GDP.[13]

Domestic financial assetstotaled $131 trillion and domestic

financial liabilities totaled $106 trillion.[14]


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The American labor market has attracted immigrants from all over the

world and has one of the world's highest migration rates. The United States is

ranked second, down from first in 2008-2009 due to the economic crisis, in

the Global Competitiveness Report.[15]

The country is one of the world's largest

and most influential financial markets, home to major stock and commoditiesexchanges likeNASDAQ, NYSE, AMEX and CME.

History

Economic history of the United States

The economic history of the United States has its roots

in European settlements in the 16th

, 17th, and 18

thcenturies. The American

colonies went from marginally successful colonial economies to a small,

independent farming economy, which in 1776 became theUnited States ofAmerica. In 180 years the United States grew to a huge, integrated,

industrialized economy that still makes up over a quarter of the world

economy. The main causes were a large unified market, a supportive political-

legal system, vast areas of highly productive farmlands, vast natural resources

(especially timber, coal and oil), a cultural landscape that valued

entrepreneurialism, a commitment to investing in material and human capital,

and at times a willingness to exploit labor. In addition, the U.S. was able to

utilize these resources due to a unique set of institutions designed to encourage

utilization and extraction. As a result, the U.S.'s GDP per capita converged on

and eventually surpassed that of the U.K., as well as other nations that it

previously trailed economically. The economy has maintained high wages,

attracting immigrants by the millions from all over the world.[16]

In the 19th century, recessions frequently coincided with financial crises.

Because of the great changes in the economy over the centuries, it is difficult

to compare the severity of modern recessions to early recessions. Recessions

after World War II appear to have been less severe than earlier recessions, but

the reasons for this are unclear. The Depression of 1893 was one of the worstin American history with the unemployment rate exceeding 10% for half a

decade.

After the Great Depression


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For many years following the Great Depression of the 1930s, when the danger

of recession appeared most serious, the government sought to strengthen the

economy by spending heavily itself or cutting taxes so that consumers would

spend more, and by fostering rapid growth in the money supply, which also

encouraged more spending. In the 1960s, economic woes brought on by thecosts of the Vietnam conflict, major price increases, particularly for energy,

created a strong fear of inflation. As a result, government leaders came to

concentrate more on controlling inflation than on combating recession by

limiting spending and tightening credit.[citation needed]

Ideas about the best tools for stabilizing the economy changed substantially

between the 1930s and the 1980s. From the New Dealera that began in 1933,

to the Great Society initiatives of the 1960s, national policy makers relied

principally on fiscal policy to influence the economy. The approach, advancedby British economist John Maynard Keynes, gave elected officials a leading

role in directing the economy, since spending and taxes are controlled by

the U.S. President and the Congress. The economy and living standards grew

strongly during this era, but a period of high inflation, interest rates and

unemployment after 1973 weakened confidence in fiscal policy as a tool for

regulating the overall pace of economic activity, and instead, a combination of

loose monetary policy and record budget deficits, both financed partly

with foreign direct investment, became prominent as tools for reigniting

economic growth after 1981.

The U.S. economy grew by an average of 3.8% from 1946 to 1973, while real

median household income surged 55% (or 1.6% a year). The economy since

1973, however, has been characterized by both slower growth (averaging

2.7%), and nearly stagnant living standards, with household incomes

increasing by 10%, or only 0.3% annually. The worst recession in recent

decades, in terms of lost output, occurred during the 2008 financial crisis,

when GDP fell by 3.9% from the spring of 2008 to the spring of 2009. Other

significant recessions took place in 195758, when GDP fell 3.7%, following

the 1973 oil crisis, with a 3.1% fall from late 1973 to early 1975, and in the

198182 recession, when GDP dropped by 2.9%.Recent, mild recessions have

included the 199091 downturn, when output fell by 1.3%, and the 2001

recession, in which GDP slid by 0.3%; the 2001 downturn lasted just eight

months. The most vigorous, sustained periods of growth, on the other hand,


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took place from early 1961 to mid 1969, with an expansion of 53% (5.1% a

year), from early 1991 to late in 2000, at 43% (3.8% a year), and from late

1982 to mid 1990, at 37% (4% a year).

Since 1976, the US has sustained trade deficits with other nations, and since

1982, current account deficits; the nation's long-standing surplus in its trade in

services was maintained, however, and reached US$140 billion yearly in 2008

and 2009. In recent years, the primary economic concerns have centered on:

high household debt ($11 trillion, including $2.5 trillion inrevolving

debt), high net national debt ($9 trillion), high corporate debt ($9 trillion), high

mortgage debt (over $15 trillion as of 2005 year-end), high unfunded Medicare

liability ($30 trillion), high unfunded Social Security liability ($12 trillion),

high external debt (amount owed to foreign lenders), high trade deficits, a

serious deterioration in the United States net international investmentposition (NIIP) (-24% of GDP), and high unemployment In 2006, the U.S

economy had its lowest saving rate since 1933. These issues have raised

concerns among economists and national politicians.

The United States economy experienced a crisis in 2008 led by a derivatives

market and subprime mortgage crisis, and a declining dollar value. On

December 1, 2008, the NBERdeclared that the United States entered

a recession in December 2007, citing employment and production figures as

well as the third quarter decline in GDP. The recession did, however, lead to areduction in record trade deficits, which fell from $840 billion annually during

the 2006-08 period, to $500 billion in 2009, as well as to higher personal

savings rates, which jumped from a historic low of 1% in early 2008, to nearly

5% in late 2009.

In 1980, the U.S. public debt was $909 billion - or an amount equal to 33.3%

of America's gross domestic product (GDP). By 1990, that number had more

than tripled to $3.2 trillion - or 55.9% of GDP. In 2001 the national debt was

$5.7 trillion; however, the debt-to-GDP ratio remained at 1990 levels. Debtlevels rose quickly in the following decade, and on January 28, 2010, the US

debt ceiling was raised to $14.3 trillion dollars. Based on the 2010 U.S.

budget, total national debt will grow to nearly 100% of GDP, versus a level of

approximately 80% in early 2009. The White House estimates that the

governments tab for servicing the debt will exceed $700 billion a year in

2019, up from $202 billion in 2009.


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The U.S. Treasury statistics indicate that, at the end of 2006, non-US citizens

and institutions held 44% of federal debt held by the public. China, holding

$801.5 billion in treasury bonds, is the largest foreign financier of the record

U.S. public debt.

The U.S. economy maintains a relatively high GDP per capita, with the caveat

that it relies partly on extensive borrowing and a low to moderate population

growth rate; during periods of higher economic growth rates, this combination

has made the nation attractive to immigrants worldwide.

Overview


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United States wealth compared to the rest of the world in the year 2000

Year-on-year change in total net worth of US households and nonprofit

organizations 1946-2007, unadjusted for inflation or population

change.

A central feature of the U.S. economy is the economic freedom afforded to theprivate sector by allowing the private sector to make the majority of economic

decisions in determining the direction and scale of what the U.S. economy

produces. This is enhanced by relatively low levels of regulation and

government involvement, as well as a court system that generally

protects property rights and enforces contracts. From its emergence as an

independent nation, the United States has encouraged science and invention.

The United States is rich in mineral resources and fertile farm soil, and it is

fortunate to have a moderate climate. It also has extensive coastlines on boththe Atlantic and Pacific Oceans, as well as on the Gulf of Mexico. Rivers flow

from far within the continent, and the Great Lakesfive large, inland lakes

along the U.S. border with Canadaprovide additional shipping access. These

extensive waterways have helped shape the country's economic growth over


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the years and helped bind America's 50 individual states together in a single

economic unit.

The number of workers and, more importantly, their productivity help

determine the health of the U.S. economy. Throughout its history, the United

States has experienced steady growth in the labor force, a phenomenon that is

both cause and effect of almost constant economic expansion. Until shortly

after World War I, most workers were immigrants from Europe, their

immediate descendants, or African Americans who were mostly slaves taken

fromAfrica, or slave descendants. Beginning in the early 20th century,

many Latin Americans immigrated; followed by large numbers

of Asians following removal of nation-origin based immigration quotas. The

promise of high wages brings many highly skilled workers from around the

world to the United States. Over 13 million people entered the United Statedduring the 1990s alone.

Labor mobility has also been important to the capacity of the American

economy to adapt to changing conditions. When immigrants flooded labor

markets on the East Coast, many workers moved inland, often to farmland

waiting to be tilled. Similarly, economic opportunities in industrial, northern

cities attracted black Americans from southern farms in the first half of the

20th century, in what was known as the Great Migration.

In the United States, the corporation has emerged as an association of owners,known as stockholders, who form a business enterprise governed by a complex

set of rules and customs. Brought on by the process of mass production,

corporations, such as General Electric, have been instrumental in shaping the

United States. Through the stock market, American banks and investors have

grown their economy by investing and withdrawing capital from profitable

corporations. Today in the era of globalization, American investors and

corporations have influence all over the world. The American government is

also included among the major investors in the American economy.Government investments have been directed towards public works of scale

(such as from the Hoover Dam), military-industrial contracts, and the financial

industry.

While consumers and producers make most decisions that mold the economy,

government has a powerful effect on the U.S. economy in at least four areas,


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as the government uses a capitalist system. Strong government regulation in

the U.S. economy started in the early 1900s with the rise of the Progressive

Movement; prior to this the government promoted economic growth through

protective tariffs and subsidies to industry, built infrastructure, and established

banking policies, including the gold standard, to encourage savings andinvestment in productive enterprises. On June 26, 2009, Jeff Immelt, the CEO

of General Electric, called for the United States to increase its manufacturing

base employment to 20% of the workforce, commenting that the U.S. has

outsourced too much in some areas and can no longer rely on the financial

sector and consumer spending to drive demand.

Education

Education in the United States

There are 4,352 colleges, universities, and junior colleges in the United States.

In 2007, Americans stood second only to Canada in the percentage of 35 to 64

year olds holding at least two-year degrees. Among 25 to 34 year olds, the

country stands tenth. The nation stands 15 out of 29 rated nations for college

completion rates, slightly above Mexico and Turkey. According to government

data, one-tenth of students are enrolled in private schools. Approximately 85%of students enter the public schools.

Immigration

Immigration to the United StatesAs of 2009, the United States received 4.31 immigrants per 1000 people,

ranking 25th globally. In fiscal year 2009, 1.1 million immigrants were

granted legal residence.


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Employment

List of U.S. states by unemployment rate

Unemployment rate as a percentage of the labor force in the United

States according to the U.S. Bureau of Labor Statistics.

In May 2009, the unemployment rate was 9.4%. A broader measure of

unemployment (taking into account marginally attached workers, those

employed part time for economic reasons, and discouraged workers) was

15.9%. In 2009 and 2010, following thefinancial crisis of 20072010, the

emerging problem of jobless recoveries resulted in record levels of long-term

unemployment with over 6 million workers looking for work longer than 6

months as of January, 2010. This particularly affected older workers.

In April 2010, the official unemployment rate was 9.9%, but the governments

broader U-6 unemployment rate was 17.1%. In the period between February

2008 and February 2010, the number of people working part time for


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economic reasons has increased by 4 million to 8.8 million, that is a 83%

increase in part time workers during the two year period.

Female unemployment continued to be significantly lower than male

unemployment (7.5% vs. 9.8%). The unemployment among African-

Americans continues to be much higher than white unemployment (at 14.9%

vs. 8.6%). The youth unemployment rate was 18.5% in July 2009, the highest

July rate since 1948. 34.5% of young African American men were

unemployed in October 2009. Officially,Detroits unemployment rate is 27%,

but Detroit News suggests that nearly half of this citys working-age

population may be unemployed.

Income and wealth

Income in the United States and Wealth in the United StatesPersonal income in the United States, Household income in the United

States, Income inequality in the United States, Poverty in the United

States, Affluence in the United States, and Homeownership in the United States

According to the United States Census Bureau, the pretax median household

income in 2007 was $50,233. The median ranged from $68,080 in Maryland to

$36,338 in Mississippi.

In 2007, the median real annual household income rose 1.3% to $50,233,

according to the Census Bureau. The real median earnings of men who worked

full time, year-round climbed between 2006 and 2007, from $43,460 to

$45,113. For women, the corresponding increase was from $33,437 to

$35,102. The median income per household member (including all working

and non-working members above the age of 14) was $26,036 in 2006.

The recently released US Income Mobility Study showed economic growth

resulted in rising incomes for most taxpayers over the period from 1996 to

2005. Median incomes of all taxpayers increased by 24 percent after adjusting

for inflation. The real incomes of two-thirds of all taxpayers increased overthis period. Income mobility of individuals was considerable in the U.S.

economy during the 1996 through 2004 period with roughly half of taxpayers

who began in the bottom quintile moving up to a higher income group within

10 years. In addition, the median incomes of those initially in the lower


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income groups increased more than the median incomes of those initially in

the higher income groups.

Between June 2007 and November 2008, Americans lost an estimated average

of more than a quarter of their collective net worth. Since peaking in the

second quarter of 2007, household wealth is down $14 trillion. The Fed also

said that at the end of 2008, the debt owed by nonfinancial sectors was $33.5

trillion, including household debt valued at $13.8 trillion.[64]

Sectors

Economy of the United States by sector

Sales and employees by sectors of the United States economy in 2002.

Energy

Energy in the United States

The United States is the largest energy consumer in terms of total use, using

100 quadrillion BTUs (105 exajoules, or 29000 TWh) in 2005. The U.S. ranks

seventh in energy consumption per-capita after Canada and a number of other

countries. The majority of this energy is derived from fossil fuels: in 2005, it

was estimated that 40% of the nation's energy came from petroleum, 23%


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from coal, and 23% from natural gas. Nuclear power supplied 8.4%

andrenewable energy supplied 6.8%, which was mainly from hydroelectric

dams although other renewables are included.

American dependence on oil imports grew from 24% in 1970 to 65% by the

end of 2005. At the current rate of unchecked import growth, the US would be

70% to 75% reliant on foreign oil by the middle of the next decade.

Transportation has the highest consumption rates, accounting for

approximately 68.9% of the oil used in the United States in 2006, and 55% of

oil use worldwide as documented in the Hirsch report.

Agriculture

Agriculture in the United States

Fishing industry in the United States, Beekeeping in the UnitedStates, and United States Department of Agriculture

Agriculture is a major industry in the United States and the country is a net

exporter of food. The United States controls almost half of world grain

exports.

Products include wheat, corn,

other grains, fruits, vegetables, cotton; beef, pork, poultry, dairy

products; forest products; fish.

Manufacturing

Manufacturing in the United States

The United States is the world's largest manufacturer, with a 2007 industrial

output of US$2.69 trillion.

Main industries include petroleum, steel, motor vehicles, aerospace,

telecommunications, chemicals, electronics, food processing, consumer goods,

lumber, and mining. A total of 3.2 million one in six U.S. factory jobs have

disappeared since the start of 2000.Finance

Finance in the United States, Banking in the United States, and Insurance

in the United States

The New York Stock Exchange is the largest stock exchange in the world

by value of its listed companies' securities. As of October 2008, the


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combined capitalization of all domestic NYSE listed companies was US$10.1

trillion.

NASDAQ is another American stock exchange. It is the

largest electronic screen-based equity securities trading market in the United

States. With approximately 3,800 companies and corporations, it has more

trading volume per hour than any other stock exchange in the world.

International trade

Foreign trade of the United States and Trade policy of the United States

The United States is the world's largest trading nation. Since it is the world's

leading importer, there are many U.S. dollars in circulation all around the

planet. The dollar is also used as the standard unit of currency in international

markets for commodities such as gold and petroleum (the latter sometimescalled petrocurrency is the source of the term petrodollar). Large foreign

economies such as China, Japan, Arab states of the Persian Gulf, and

the EU own huge dollar reserves (especially as the US is more in debt) so there

is a fear that they will move away from the dollar. China's reserves are more

than $2 trillion, the world's largest.[76]

China owns an estimated $1.6 trillion of

U.S. securities.

In 2008, the total U.S. trade deficit was $695.9 billion, which is $1.8 trillion in

exports minus $2.5 trillion in imports. The deficit on petroleum products was$386.3 billion. The trade deficit with China was $266.3 billion, a new record

and up from $304 million in 1983. The United States had a $144.1 billion

surplus on trade in services, and $821.2 billion deficit on trade in goods in

2008.

In order to fund the national debt (also known as public debt), the United

States relies on selling U.S. treasury bonds to people both inside and outside

the country, and in recent times a growing percent of buyers are international.

Economic predictions and forecasting

Predictions about the direction of the United States economy in the short term

and long term are crucial factors in determining federal government policies,

business decisions, and Federal Reserve decisions. Several institutions make

economic predictions, including: Global Insight, and the UCLA Anderson


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Forecast. Various state agencies, including the California Department of

Finance, also make predictions.

Currency and central bank

United States dollar and Federal Reserve System

United States historical inflation rate 16662004

The United States dollar is the unit of currency of the United States. The U.S.

dollar is the currency most used in international transactions. Several

countries use it as their official currency, and in many others it is the de facto

currency.

The federal government attempts to use both monetary policy (control of the

money supply through mechanisms such as changes in interest rates) and fiscal

policy (taxes and spending) to maintain low inflation, high economic growth,

and low unemployment. A relatively independentcentral bank, known as

the Federal Reserve, was formed in 1913 to provide a

stable currency and monetary policy. The U.S. dollar has been regarded as one

of the most stable currencies in the world and many nations back their own

currency with U.S. dollar reserves.

The U.S. dollar has maintained its position as the world's primary reserve

currency, although it is gradually being challenged in that role. Almost two-

thirds of currency reserves held around the world are held in US dollars,

compared to around 25% for the next most popular currency, the Euro. Rising

US national debt and the related rise of China have led to some, especially the


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Chinese, to call for replacing the dollar as the world's reserved currency, but

thus far this has been only speculation.

The dollar used gold standard and/or silver standard from 1785 until 1975,

when it became a fiat currency.

Government involvement

Regulations

The U.S. federal government regulates private enterprise in numerous ways.

Regulation falls into two general categories.

Some efforts seek, either directly or indirectly, to control prices. Traditionally,

the government has sought to prevent monopolies such as electric utilitiesfrom raising prices beyond the level that would ensure them extremely large

profits. At times, the government has extended economic control to other kinds

of industries as well. In the years following the Great Depression, it devised a

complex system to stabilize prices for agricultural goods, which tend to

fluctuate wildly in response to rapidly changing supply and demand. A number

of other industriestrucking and, later, airlinessuccessfully sought

regulation themselves to limit what they considered as harmful price cutting, a

process called regulatory capture.

Another form of economic regulation, antitrust law, seeks to strengthen market

forces so that direct regulation is unnecessary. The governmentand,

sometimes, private partieshave used antitrust law to prohibit practices or

mergers that would unduly limit competition.

Bank regulation in the United States is highly fragmented compared to

other G10 countries where most countries have only one bank regulator. In the

U.S., banking is regulated at both the federal and state level. The U.S also has

one of the most highly regulated banking environments in the world; however,

many of the regulations are not safety and soundness related, but are instead

focused on privacy, disclosure, fraud prevention, anti-money laundering, anti-

terrorism, anti-usury lending, and promoting lending to lower-income

segments.


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Since the 1970s, government has also exercised control over private

companies to achieve social goals, such as improving the public's health and

safety or maintaining a healthy environment. For example, the Occupational

Safety and Health Administration provides and enforces standards for

workplace safety, and the United States Environmental ProtectionAgency provides standards and regulations to maintain air, water, and land

resources. The U.S. Food and Drug Administration regulates what drugs may

reach the market, and also provides standards of disclosure for food products.

American attitudes about regulation changed substantially during the final

three decades of the 20th century. Beginning in the 1970s, policy makers grew

increasingly convinced that economic regulation protected companies at the

expense of consumers in industries such as airlines and trucking. At the same

time, technological changes spawned new competitors in some industries, suchas telecommunications, that once were considered natural monopolies. Both

developments led to a succession of laws easing regulation.

While leaders of America's two most influential political parties generally

favored economic deregulation during the 1970s, 1980s, and 1990s, there was

less agreement concerning regulations designed to achieve social goals. Social

regulation had assumed growing importance in the years following the

Depression and World War II, and again in the 1960s and 1970s. During the

1980s, the government relaxed labor, consumer and environmental rules basedon the idea that such regulation interfered with free enterprise, increased the

costs of doing business, and thus contributed to inflation. The response to such

changes is mixed; many Americans continued to voice concerns about specific

events or trends, prompting the government to issue new regulations in some

areas, including environmental protection.

Where legislative channels have been unresponsive, some citizens have turned

to the courts to address social issues more quickly. For instance, in the 1990s,

individuals, and eventually the government itself, sued tobacco companiesover the health risks of cigarette smoking. The 1998 Tobacco Master

Settlement Agreement provided states with long-term payments to cover

medical costs to treat smoking-related illnesses.

Taxation

Taxation in the United States


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Taxation in the United States is a complex system which may involve payment

to at least four different levels of government and many methods of taxation.

Taxes are levied by thefederal government, by the state governments, and

often by local governments, which may

include counties, municipalities, township, school districts, and other special-purpose districts, which include fire, utility, and transit districts.

The National Bureau of Economic Research has concluded that the combined

federal, state, and local government average marginal tax rate for most

workers to be about 40% of income. The Tax Foundation concluded that

government at all levels will collect 30.8% of the nation's income for 2008.

Tax Day, the day by which tax returns are due, is usually April 15.

Expenditure

United States federal budget and United States public debt

Fiscal Year 2009 U.S. Federal Spending - Cash or Budget Basis.


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Fiscal Year 2009 U.S. Federal Receipts.

The United States public sector spending amounts to about a third of the GDP.

Each level of government provides many direct services. The federal

government, for example, is responsible for national defense, backs research

that often leads to the development of new products, conducts space

exploration, and runs numerous programs designed to help workers develop

workplace skills and find jobs (including higher education). Government

spending has a significant effect on local and regional economiesand even

on the overall pace of economic activity.

State governments, meanwhile, are responsible for the construction and

maintenance of most highways. State, county, or city governments play the


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leading role in financing and operating public schools. Local governments are

primarily responsible for police and fire protection.

Overall, federal, state, and local spending accounted for almost 28% of gross

domestic product in 1998.

As of January 20, 2009, the total U.S. federal debt was $10.627 trillion (an

increase of 85.5 percent over the previous eight years). The borrowing cap

debt ceiling as of 2005 stood at $8.18 trillion. In March 2006, Congress raised

that ceiling an additional $0.79 trillion to $8.97 trillion, which is

approximately 68% of GDP. Congress has used this method to deal with an

encroaching debt ceiling in previous years, as the federal borrowing limit was

raised in 2002 and 2003. As of October 4, 2008, the "Emergency Economic

Stabilization Act of 2008" raised the current debt ceiling to US$ 11.3 trillion.

The federal government's debt rose by almost $1.4 trillion in 2009, and now

stands at $12.1 trillion. While the U.S. public debt is the world's largest in

absolute size, another measure is its size relative to the nation's GDP. As of

2009 the debt was 83 percent of GDP. This debt, as a percent of GDP, is still

less than the debt of Japan (192%) (the overwhelming number of owners

of JGBs are Japanese) and roughly equivalent to those of a few western

European nations, including Greece.


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History of the constitution of USA

THE WHITE HOUSE

Drafting and ratification requirements

The Articles of Confederation and Perpetual Union was the first constitution of theUnited States of America

In September 1786, commissioners from five states met in the AnnapolisConvention to discuss adjustments to the Articles of Confederation that wouldimprove commerce. They invited state representatives to convene in Philadelphiato discuss improvements to the federal government. After debate, the Congress of

the Confederation endorsed the plan to revise the Articles of Confederation onFebruary 21, 1787. Twelve states, Rhode Island being the only exception, acceptedthis invitation and sent delegates to convene in May 1787. The resolution calling

the Convention specified that its purpose was to propose amendments to theArticles, but through discussion and debate it became clear by mid-June that, ratherthan amend the existing Articles, the Convention decided to propose a rewrittenConstitutionThe Constitutional Convention voted to keep the debates secret, so thatthe delegates could speak freely. They also decided to draft a new fundamentalgovernment design. Despite Article 13 of the Articles of Confederation stating thatthe union created under the Articles was "perpetual" and that any alteration must


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be "agreed to in a Congress of the United States, and be afterwards confirmed bythe legislatures of every State," Article VII of the proposed constitution stipulatedthat only nine of the thirteen states would have to ratify for the new government togo into effect (for the participating states). Current knowledge of the drafting andconstruction of the United States Constitution comes primarily from the diaries left

by James Madison, who kept a complete record of the proceedings at theConstitutional Convention.

Work of the Constitutional Convention

A diagram by Thomas paine representing usa constitution

The Virginia Plan was the unofficial agenda for the Convention, and was draftedchiefly by James Madison, considered to be "The Father of the Constitution" for


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his major contributionsIt was weighted toward the interests of the larger states, andproposed among other points:

y A powerful bicameral legislature with a House and a Senate

y An executive chosen by the legislaturey A judiciary, with life-terms of service and vague powersy The national legislature would be able to veto state laws

The Philadelphia Convention

An alternative proposal, William Paterson's New Jersey Plan, includes the

following points that countered the previous proposal that favored the larger states,among others:

y A unicameral legislature with all states represented in equal numbers inorder to insure fairness

y An executive branch appointed by the legislaturey A judicial branch appointed by the executive.

Articles of the Constitution

The Constitution consists of a preamble, seven original articles, twenty-sevenamendments, and a paragraph certifying its enactment by the constitutional

convention.

Preamble: Statement of purpose

We the People of the United States, in Order to form a more perfect

Union, establish Justice, insure domestic Tranquility, provide for the

common defence, promote the general Welfare, and secure the

Blessings of Liberty to ourselves and our Posterity, do ordain and

establish this Constitution for the United States of America.

United States Constitution, Preamble


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Article One: Legislative Power

Article One describes the Congress, the legislative branch of the federalgovernment. The United States Congress is a bicameral body consisting of two co-

equal houses: the House of Representatives and the Senate.The article establishesthe manner of election and the qualifications of members of each body.Representatives must be at least 25 years old, be a citizen of the United States forseven years, and live in the state they represent. Senators must be at least 30 yearsold, be a citizen for nine years, and live in the state they represent.

Article I, Section 1, reads, "All legislative powers herein granted shall be vested ina Congress of the United States, which shall consist of a Senate and House of

Representatives." This provision gives Congress more than simply theresponsibility to establish the rules governing its proceedings and for the

punishment of its members; it places the power of the government primarily inCongress.


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Article I Section 8 enumerates the legislative powers. The powers listed and all

other powers are made the exclusive responsibility of the legislative branch:

The Congress shall have power... To make all laws which shall be necessary andproper for carrying into execution the foregoing powers, and all other powersvested by this Constitution in the government of the United States, or in anydepartment or officer thereof.


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Article I Section 9 provides a list of eight specific limits on congressional powerand

Article I Section 10 limits the rights of the states.

The United States Supreme Court has interpreted the Commerce Clause and theNecessary and Proper Clause in Article One to allow Congress to enact legislationthat is neither expressly listed in the enumerated power nor expressly denied in thelimitations on Congress. InMcCulloch v. Maryland(1819), the United StatesSupreme Court fell back on the strict construction of the necessary and properclause to read that Congress had the foregoing powers and all other powers..."

Article Two: Executive power

Section analysis

Section 1 creates the presidency. The section states that the executive power isvested in a President. The presidential term is four years and the Vice Presidentserves the identical term. This section originally set the method of electing thePresident and Vice President, but this method has been superseded by the Twelfth

Amendment.

y Qualifications. The President must be a natural born citizen of the UnitedStates, at least 35 years old and a resident of the United States for at least 14years. An obsolete part of this clause provides that instead of being a natural

born citizen, a person may be a citizen at the time of the adoption of the

Constitution. The reason for this clause was to extend eligibility to Citizensof the United States at the time of the adoption of the Constitution,regardless of their place of birth, who were born under the allegiance of aforeign sovereign before the founding of the United States. Without this

clause, no one would have been eligible to be president until thirty-five yearsafter the founding of the United States.

y Succession. Section 1 specifies that the Vice President succeeds to thepresidency if the President is removed, unable to discharge the powers and

duties of office, dies while in office, or resigns. The original text ("the sameshall devolve") left it unclear whether this succession was intended to be on


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an acting basis (merely taking on the powers of the office) or permanent(assuming the Presidency itself). After the death of William Henry Harrison,John Tyler set the precedent that the succession was permanent; this practice

was followed when later presidentsdied in office. Today the 25th

Amendment states that the Vice President becomes President upon thedeath or disability of the President.

y Pay. The President receives "Compensation" for being the president, and

this compensation may not be increased or decreased during the

president's term in office. The president may not receive other

compensation from either the United States or any of the individual states.

y Oath of office. The final clause creates the presidential oath to preserve,

protect, and defend the Constitution.

Section 2 grants substantive powers to the president:

y The president is the Commander in Chief of the armed forces, and of the

state militias when these are called into federal service.

y The president may require opinions of the principal officers of the federal

government.

y The president may grant reprieves and pardons, except in cases of

impeachment (i.e., the president cannot pardon himself or herself to

escape impeachment by Congress).

Section 2 grants and limits the president's appointment powers:

y The president may make treaties, with the advice and consent of the

Senate, provided two-thirds of the Senators who are present agree.

y With the advice and consent of the Senate, the President may appoint

ambassadors, other public ministers and consuls, judges of the supreme

Court, and all other officers of the United States whose appointments are

not otherwise described in the Constitution.y Congress may give the power to appoint lower officers to the President

alone, to the courts, or to the heads of departments.

y The president may make any of these appointments during a congressional

recess. Such a "recess appointment" expires at the end of the next session

of Congress.


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Section 3 opens by describing the president's relations with

Congress:

y The president reports on the state of the union.

y

The president may convene either house, or both houses, of Congress.y When the two houses of Congress cannot agree on the time of

adjournment, the president may adjourn them to some future date.

Section 3 adds:

y The president receives ambassadors.

y The president sees that the laws are faithfully executed.

y The president commissions all the offices of the federal government.

Section 4 provides for removal of the president and other federal officers. Thepresident is removed on impeachment for, and conviction of, treason, bribery, orother high crimes and misdemeanors.

Article Three: Judicial power

Article Three describes the court system (the judicial branch), including the

Supreme Court. The article requires that there be one court called the SupremeCourt; Congress, at its discretion, can create lower courts, whose judgments andorders are reviewable by the Supreme Court. Article Three also creates the right totrial by jury in all criminal cases, defines the crime of treason, and chargesCongress with providing for a punishment for it. This Article also sets the kinds ofcases that may be heard by the federal judiciary, which cases the Supreme Court

may hear first (called original jurisdiction), and that all other cases heard by theSupreme Court are by appeal under such regulations as the Congress shall make.

Article Four: States' powers and limits

Article Four describes the relationship between the states and the federalgovernment and amongst the states. For instance, it requires states to give "fullfaith and credit" to the public acts, records, and court proceedings of the otherstates. Congress is permitted to regulate the manner in which proof of such acts,records, or proceedings may be admitted. The "privileges and immunities" clause

prohibits state governments from discriminating against citizens of other states in


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favor of resident citizens (e.g., having tougher penalties for residents of Ohioconvicted of crimes within Michigan). It also establishes extradition between thestates, as well as laying down a legal basis for freedom of movement and travelamongst the states. Today, this provision is sometimes taken for granted, especially

by citizens who live near state borders; but in the days of the Articles ofConfederation, crossing state lines was often a much more arduous and costly

process. Article Four also provides for the creation and admission of new states.

The Territorial Clause gives Congress the power to make rules for disposing offederal property and governing non-state territories of the United States. Finally,the fourth section of Article Four requires the United States to guarantee to eachstate a republican form of government, and to protect the states from invasion andviolence.

Article Five: Amendments

An amendment may be ratified in three ways:

y The new amendment may be approved by two-thirds of both houses ofCongress, then sent to the states for approval.

y Two-thirds of the state legislatures may apply to Congress for aconstitutional convention to consider amendments, which are then sent to thestates for approval.

y Congress may require ratification by special convention. The convention

method has been used only once, to approve the 21st Amendment (repealing

prohibition, 1933).

Regardless of the method of proposing an amendment, final ratification requiresapproval by three-fourths of the states.

Today Article Five places only one limit on the amending power: no amendmentmay deprive a state of equal representation in the Senate without that state's

consent. The original Article V included other limits on the amending powerregarding slavery and taxation; however, these limits expired in 1808.

Article Six: Federal power

Article Six establishes the Constitution, and the laws and treaties of the UnitedStates made according to it, to be the supreme law of the land, and that "the judgesin every state shall be bound thereby, any thing in the laws or constitutions of anystate notwithstanding." It also validates national debt created under the Articles of


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Confederation and requires that all federal and state legislators, officers, and judgestake oaths or affirmations to support the Constitution. This means that the states'constitutions and laws should not conflict with the laws of the federal constitutionand that in case of a conflict, state judges are legally bound to honor the federallaws and constitution over those of any state.

Article Six also states "no religious Test shall ever be required as a Qualification toany Office or public Trust under the United States."

Article Seven: Ratification

Article Seven sets forth the requirements for ratification of the Constitution. TheConstitution would not take effect until at least nine states had ratified theConstitution in state conventionsspecially convened for that purpose, and it wouldonly apply to those states that ratified it

Amendments

The framers of the Constitution were aware that changes would be necessary if theConstitution was to endure as the nation grew. However, they were also consciousthat such change should not be easy, lest it permit ill-conceived and hastily passedamendments. On the other hand, they also wanted to ensure that a rigidrequirement of unanimity would not block action desired by the vast majority ofthe population. Their solution was a two-step process for proposing and ratifyingnew amendments.

Amending the Constitution is a two-part process: amendments must be proposedthen ratified. Amendments can be proposed one of two ways. To date, all

amendments, whether ratified or not, have been proposed by a two-thirds vote ineach house of Congress. Over 10,000 constitutional amendments have beenintroduced in Congress since 1789; during the last several decades, between 100and 200 have been offered in a typical congressional year. Most of these ideasnever leave Congressional committee, and far fewer get proposed by the Congressfor ratification.


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Alternatively, if two-thirds of the state legislatures demand one, Congress must callfor a constitutional convention, which would have the power to proposeamendments. As no such convention has been called, it is unclear how one wouldwork in practice. In two instancesreapportionment in the 1960s and a balancedfederal budget during the 1970s and 1980sattempts to use this process havecome extremely close to triggering a constitutional convention. The apportionmentdebate of the 1960s fell only one state short of the required number of states.

Regardless of how the amendment is proposed, it must also be ratified by three-fourths of states. Congress determines whether the state legislatures or special stateconventions ratify the amendment. The 21st Amendment is the only one thatemployed state conventions for ratification.

There are currently only a few proposals for amendments which have entered

mainstream political debate. These include the Federal Marriage Amendment, theBalanced Budget Amendment, and the Flag Desecration Amendment. All threeproposals are supported primarily by conservatives, but failed during periods ofRepublican control of Congress to achieve the supermajorities necessary forsubmission to the states. As such, none of these are likely to be proposed under thecurrent Congress, which is controlled by the more liberal Democratic Party.

Unlike amendments to most constitutions, amendments to the United StatesConstitution are appended to the body of the text without altering or removing

what already exists, although nothing prevents a future amendment from doing so.

Successful amendments

The Constitution has twenty-seven amendments. The first ten, collectively knownas the Bill of Rights, were ratified simultaneously by 1791. The followingseventeen were ratified separately over the next two centuries.

The Bill of Rights (Amendments 1 to 10)

United States Bill of Rights currently housed in the National Archives.

It is commonly understood that originally the Bill of Rights was not intended to

apply to the states; however, there is no such limit in the text itself, except where

an amendment refers specifically to the federal government. One example is the

First Amendment, which says only that "Congress shall make no law...", and under


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which some states in the early years of the nation officially established a religion.

A rule of inapplicability to the states remained until 1868, when the Fourteenth

Amendment was passed, which stated, in part, that:

No State shall make or enforce any law which shall abridge the privileges

or immunities of citizens of the United States; nor shall any State deprive

any person of life, liberty, or property, without due process of law; nor

deny to any person within its jurisdiction the equal protection of the

laws.

The Supreme Court has interpreted this clause to extend most, but not all, parts of

the Bill of Rights to the states, a process known as incorporation of the Bill of

Rights. The balance of state and federal power under the incorporation doctrine isstill an open question and continues to be fought separately for each right in thefederal courts.

The amendments that became the Bill of Rights were the last ten of the twelveamendments proposed in 1789. The second of the twelve proposed amendments,regarding the compensation of members of Congress, remained unratified until

1992, when the legislatures of enough states finally approved it; as a result, afterpending for two centuries, it became the Twenty-seventh Amendment.

The first of the twelve, which is still technically pending before the statelegislatures for ratification, pertains to the apportionment of the United StatesHouse of Representatives after each decennial census. The most recent state whoselawmakers are known to have ratified this proposal is Kentucky in 1792, duringthat commonwealth's first month of statehood.

y First Amendment:addresses the rights of freedom of religion (prohibiting

Congress from establishing a religion and protecting the right to freeexercise of religion), freedom of speech, freedom of the press, freedom of

assembly, and freedom of petition.y Second Amendment: guarantees the right of individuals to possess

weapons. The most recent Supreme Court decision interpreting the Second

Amendment is McDonald v. Chicago.

y Third Amendment: prohibits the government from using private homes as

quarters for soldiers during peacetime without the consent of the owners.


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The only existing case law directly regarding this amendment is a lower

court decision in the case ofEngblom v. Carey.However, it is also cited in

the landmark case, Griswold v. Connecticut, in support of the Supreme

Court's holding that the constitution protects the right to personal privacy.

y

Fourth Amendment: guards against searches, arrests, and seizures ofproperty without a specific warrant or a "probable cause" to believe a

crime has been committed. Some rights to privacy have been inferred from

this amendment and others by the Supreme Court.

y Fifth Amendment: forbids trial for a major crime except after indictment by

a grand jury; prohibits double jeopardy (repeated trials), except in certain

very limited circumstances; forbids punishment without due process of law;

and provides that an accused person may not be compelled to testify

against himself (this is also known as "Taking the Fifth" or "Pleading the

Fifth"). This is regarded as the "rights of the accused" amendment,otherwise known as the Miranda rights after the Supreme Court case. It

also prohibits government from taking private property for public use

without "just compensation", the basis of eminent domain in the United

States.

y Sixth Amendment: guarantees a speedy public trial for criminal offenses. It

requires trial by a jury, guarantees the right to legal counsel for the

accused, and guarantees that the accused may require witnesses to attend

the trial and testify in the presence of the accused. It also guarantees the

accused a right to know the charges against him. The Sixth Amendment hasseveral court cases associated with it, including Powell v. Alabama, United

States v. Wong Kim Ark, Gideon v. Wainwright, and Crawford v.

Washington. In 1966, the Supreme Court ruled that the fifth amendment

prohibition on forced self-incrimination and the sixth amendment clause on

right to counsel were to be made known to all persons placed under arrest,

and these clauses have become known as the Miranda rights.

y Seventh Amendment: assures trial by jury in civil cases.

y Eighth Amendment: forbids excessive bail or fines, and cruel and unusual

punishment.y Ninth Amendment: declares that the listing of individual rights in the

Constitution and Bill of Rights is not meant to be comprehensive; and that

the other rights not specifically mentioned are retained by the people.


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y Tenth Amendment: reserves to the states respectively, or to the people,

any powers the Constitution did not delegate to the United States, nor

prohibit the states from exercising.

Subsequent amendments (11 to 27)

Amendments to the Constitution after the Bill of Rights cover many subjects. The

majority of the seventeen later amendments stem from continued efforts to expandindividual civil or political liberties, while a few are concerned with modifying the

basic governmental structure drafted in Philadelphia in 1787. Although the UnitedStates Constitution has been amended 27 times, only 26 of the amendments arecurrently in effect because the twenty-first amendment supersedes the eighteenth.

y Eleventh Amendment (1795): Clarifies judicial power over foreign

nationals, and limits ability of citizens to sue states in federal courts andunder federal law.

y Twelfth Amendment (1804): Changes the method of presidential elections

so that members of the Electoral College cast separate ballots for presidentand vice president.

y Thirteenth Amendment (1865): Abolishes slavery and authorizes Congressto enforce abolition.

y Fourteenth Amendment (1868): Defines a set of guarantees for UnitedStates citizenship; prohibitsstates from abridging citizens' privileges or

immunities and rights to due process and the equal protection of the law;repeals the Three-fifths compromise; prohibits repudiation of the federaldebt caused by the Civil War.

y Fifteenth Amendment (1870): Prohibits the federal government and thestates from using a citizen's race, color, or previous status as a slave as aqualification for voting.

y Sixteenth Amendment (1913): Authorizes unapportioned federal taxes on

income.y Seventeenth Amendment (1913): Converts state election of senators to

popular electionEighteenth Amendment (1919): Prohibited the

manufacturing, importing, and exporting of alcoholic beverages (Prohibitionin the United States). Repealed by the Twenty-First Amendment.

y Nineteenth Amendment (1920): Prohibits the federal government and thestates from forbidding any citizen to vote due to their sex.

y Twentieth Amendment (1933): Changes details of congressional andpresidential terms and of presidential succession.


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y Twenty-first Amendment (1933): Repeals Eighteenth Amendment. Permitsstates to prohibit the importation of alcoholic beverages.

y Twenty-second Amendment (1951): Limits president to two terms.y Twenty-third Amendment (1961): Grants presidential electors to the

District of Columbia.y Twenty-fourth Amendment (1964): Prohibits the federal government and

the states from requiring the payment of a tax as a qualification for voting

for federal officials.y Twenty-fifth Amendment (1967): Changes details of presidential

succession, provides for temporary removal of president, and provides forreplacement of the vice president.

y Twenty-sixth Amendment (1971): Prohibits the federal government andthe states from forbidding any citizen of age 18 or greater to vote on accountof their age.

y Twenty-seventh Amendment (1992): Limits congressional pay raises

United States dollar-medium of exchange:OVERVIEW

United States dollar


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$1 Coin Federal Reserve Notes

Inflation 1.24%, July 2010

The Constitution of the United States of America provides that the United States

Congress shall have the power "To coin Money". As an exercise of that power,Congress enacted Section 5112 of Title 31 of the United States Code. Section 5112

provides that United States dollars shall be issued in two forms: (1) a coin made ofa copper alloy and (2) a coin made of pure silver. Those coins are both designated

in Section 5112 as "legal tender" in payment of debts. The Sacagawea dollar is oneexample of the copper alloy dollar. The pure silver dollar is known as theAmerican Silver Eagle. Section 5112 also provides for the minting and issuance ofother coins, which have values ranging from one-hundredth of one dollar to fiftydollars. These other coins are more fully described in Coins of the United States

dollar.

The word "dollar" is one of the words in the first paragraph of Section 9 of Article1 of the U.S. Constitution. In that context, "dollars" is a reference to the Spanish

milled dollar, a coin that had a monetary value of 8 Spanish units of currency, orreales. In 1792 the U.S. Congress adopted legislation titled An act establishing amint, and regulating the Coins of the United States. Section 9 of that act authorizedthe production of various coins, including "DOLLARS OR UNITSeach to be ofthe value of a Spanish milled dollar as the same is now current, and to containthree hundred and seventy-one grains and four sixteenth parts of a grain of pure, or

four hundred and sixteen grains of standard silver". Section 20 of the act provided,"That the money of account of the United States shall be expressed in dollars, orunits... and that all accounts in the public offices and all proceedings in the courtsof the United States shall be kept and had in conformity to this regulation". In otherwords, this act designated the United States dollar as the unit ofcurrency of theUnited States.

When currently issued in circulating form, denominations equal to or less than adollar are emitted as U.S. coins while denominations equal to or greater than a

dollar are emitted as Federal Reserve notes (with the exception of gold, silver andplatinum coins valued up to $100 as legal tender, but worth far more as bullion).Both one-dollar coins and notes are produced today, although the note form issignificantly more common. In the past, "paper money" was occasionally issued indenominations less than a dollar (fractional currency) and gold coins were issuedfor circulation up to the value of $20 (known as the "double eagle," discontinued inthe 1930s). The term eagle was used in the Coinage Act of 1792 for the


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denomination of ten dollars, and subsequently was used in naming gold coins. In1854, James Guthrie, then Secretary of the Treasury, proposed creating $100, $50and $25 gold coins, which were referred to as a "Union," "Half Union," and"Quarter Union," thus implying a denomination of 1 Union = $100.

Today, USD notes are made from cotton fiber paper, unlike most common paper,which is made of wood fiber. U.S. coins are produced by the United States Mint.U.S. dollar banknotes are printed by the Bureau of Engraving and Printing, and,since 1914, have been issued by the Federal Reserve. The "large-sized notes"issued before 1928 measured 7.42 inches (188 mm) by 3.125 inches (79.4 mm);small-sized notes, introduced that year, measure 6.14 inches (156 mm) by2.61 inches (66 mm) by 0.0043 inches (0.11 mm).

Dollar sign

The symbol$, usually written before the numerical amount, is used for the U.S.dollar (as well as for many other currencies). The sign's ultimate origins are notcertain, though it is possible that it comes from the Pillars of Hercules which flankthe Spanish Coat of arms on the Spanish dollars that were minted in the New

World mints in Mexico City, Potos, Bolivia, and in Lima, Peru. These Pillars ofHercules on the silver Spanish dollar coins take the form of two vertical bars and aswinging cloth band in the shape of an "S".

An equally accepted, and better documented, explanation is that this symbol forpeso was the result of a late eighteenth-century evolution of the scribalabbreviation "p

s." Thep and thes eventually came to be written over each other

giving rise to $.


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A fictional possibility suggested is that the dollar sign is the capital letters U and Styped one on top of the other. This theory, popularized by novelist Ayn Rand in

Atlas Shrugged, does not consider the fact that the symbol was already in usebefore the formation of the United States.

History

The first dollar coins issued by the United States Mint (founded 1792) were similarin size and composition to the Spanish dollar. The Spanish, U.S. silver dollars, andMexican silver pesos circulated side by side in the United States, and the Spanishdollar and Mexican peso remained legal tender until 1857. The coinage of various

English colonies also circulated. The lion dollar was popular in the Dutch NewNetherland Colony (New York), but the lion dollar also circulated throughout theEnglish colonies during the seventeenth and early eighteenth centuries. Examples

circulating in the colonies were usually worn so that the design was not fullydistinguishable, thus they were sometimes referred to as "dog dollars".

[25]

The U.S. dollar was created and defined by the Coinage Act of 1792. It specified a"dollar" to be based in the Mexican peso at 1 dollar per peso and between 371 and416 grains (27.0 g) of silver (depending on purity) and an 'eagle" to be between247 and 270 grains (17 g) of gold (again depending on purity). The choice of the

value 371 grains arose from Alexander Hamilton's decision to base the newAmerican unit on the average weight of a selection of worn Spanish dollars (andlater Mexican peso). Hamilton got the treasury to weigh a sample of Spanishdollars and the average weight came out to be 371 grains. A new Spanish dollarwas usually about 377 grains in weight, and so the new U.S. dollar was at a slightdiscount in relation to the Spanish dollar. The gold equivalent of the Spanish dollarin sterling was 1 = $4.80, whereas the gold equivalent of the U.S. dollar was 1 =4.86. This exchange rate with sterling remained right up until Britain abandonedthe gold standard in 1931.

The Coinage Act of 1792 set the value of an eagle at 10 dollars, and the dollar at1/10th eagle. It called for 90% silver alloy coins in denominations of 1, 1/2, 1/4,

1/10, and 1/20 dollars; it called for 90% gold alloy coins in denominations of 1,1/2, 1/4, and 1/10 eagles.

The value of gold or silver contained in the dollar was then converted into relativevalue in the economy for the buying and selling of goods. This allowed the valueof things to remain fairly constant over time, except for the influx and outflux ofgold and silver in the nation's economy.


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The early currency of the USA did not exhibit faces of presidents, as is the customnow. In fact, George Washington was against having his face on the currency, a

practice he compared to the policies of European monarchs. The currency as weknow it today did not get the faces they currently have until after the early 20thcentury; before that "heads" side of coinage used profile faces and striding, seated,and standing figures from Greek and Roman mythology and generic nativeAmericans. The last coins to be converted to profiles of historic Americans were

the dime (1946) and the Dollar (1971).

Silver and gold standards

From 1792, when the Mint Act was passed, the dollar was pegged to silver at371.25 grains, or 24.75 grains (1.604 g) of gold. Many historians

erroneously

assume gold was standardized at a fixed rate in parity with silver, however there isno evidence of Congress making this law. This has to do with AlexanderHamilton's suggestion to Congress of a fixed 15:1 ratio of silver to gold,respectively. The gold coins that were minted however, were not given anydenomination whatsoever and traded for a market value relative to theCongressional standard of the silver dollar. 1834 saw a shift in the gold standard to

23.2 grains (1.50 g), followed by a slight adjustment to 23.22 grains (1.505 g) in1837 (16:1 ratio).

In 1862, paper money was issued without the backing of precious metals, due tothe Civil War. Silver and gold coins continued to be issued and in 1878 the link

between paper money and coins was reinstated. This disconnection from gold andsilver backing also occurred during the War of 1812. The use of paper money not

backed by precious metals had also occurred under the Articles of Confederationfrom 1777 to 1788. With no solid backing and being easily counterfeited, thecontinentals quickly lost their value, giving rise to the phrase "not worth a

continental". This was a primary reason for the "No state shall... make any thingbut gold and silver coin a tender in payment of debts" clause in article 1, section 10of the United States Constitution.

The Gold Standard Act of 1900 abandoned the bimetallic standard and defined thedollar as 23.22 grains (1.505 g) of gold, equivalent to setting the price of 1 troy


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ounce of gold at $20.67. Silver coins continued to be issued for circulation until1964, when all silver was removed from dimes and quarters, and the half dollarwas reduced to 40% silver. Silver half dollars were last issued for circulation in1969.

Gold coins were confiscated in 1933 and the gold standard was changed to13.71 grains (0.888 g), equivalent to setting the price of 1 troy ounce of gold at$35. This standard persisted until 1968. Between 1968 and 1975, a variety of pegsto gold were put in place. The price was at $42.22 per ounce before August 15,1971

saw the U.S. dollar freely float on currency markets.

According to the Bureau of Engraving and Printing,The largest note it ever printedwas the $100,000 Gold Certificate, Series 1934. These notes were printed from

December 18, 1934 through January 9, 1935, and were issued by the Treasurer of

the United States to Federal Reserve Banks only against an equal amount of goldbullion held by the Treasury. These notes were used for transactions betweenFederal Reserve Banks and were not circulated among the general public.

Coins

Official United States coins have been produced every year from 1792 to the present.

y Half-cent 1792 - 1857y Penny 1793presenty 2-cent 18641873y 3-cent 1851-1873y Half Dime 1792-1873 (Not to be confused with the Nickel below also worth

5 cents)y Nickel 1866presenty Dime 1792presenty 20-cent 1875-1878y Quarter 1796presenty Half dollar 1794presenty Dollar coin (United States) 1794present

y Quarter Eagle ($2.5 gold coin) 1792-1929y Three-dollar piece 1854-1889y Half Eagle ($5 gold coin) 1795-1929y Eagle ($10 gold coin) 1795-1929y Double Eagle ($20 gold coin) 1850-1933

Collector coins for which everyday transactions are non-existent.


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Dollar coins

FLOWINGHAIR DOLLAR

The first United States dollar was minted in 1794. Known as the Flowing HairDollar, it contained 416 grains of "standard silver" (89.25% silver and 10.75%copper), as specified by Section 13

[27]of the Coinage Act of 1792. It was

designated by Section 9 of that Act as having "the value of a Spanish milleddollar".

Dollar coins have not been very popular in the United States. Silver dollars wereminted intermittently from 1794 through 1935; a copper-nickel dollar of the samelarge size, featuring President Dwight D. Eisenhower, was minted from 1971through 1978. Gold dollars were also minted in the 19th century. The Susan B.

Anthony dollar coin was introduced in 1979; these proved to be unpopular becausethey were often mistaken for quarters, due to their nearly equal size, their millededge, and their similar color. Minting of these dollars for circulation wassuspended in 1980 (collectors' pieces were struck in 1981), but, as with all pastU.S. coins, they remain legal tender. As the number of Anthony dollars held by the

Federal Reserve and dispensed primarily to make change in postal and transitvending machines had been virtually exhausted, additional Anthony dollars werestruck in 1999. In 2000, a new $1 coin, featuring Sacagawea, (the Sacagaweadollar) was introduced, which corrected some of the mistakes of the Anthony

dollar by having a smooth edge and a gold color, without requiring changes tovending machines that accept the Anthony dollar. However, this new coin hasfailed to achieve the popularity of the still-existing $1 bill and is rarely used indaily transactions. The failure to simultaneously withdraw the dollar bill and weak

publicity efforts have been cited by coin proponents as primary reasons for thefailure of the dollar coin to gain popular support. There are indications that thedollar coin's failure was also due to the reluctance of armored transport companies


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to make the necessary adjustments to handle the new coins, and the government'sreluctance to mandate it. The result of the armored carriers' unwillingness to handlethe new coins was that they virtually never reached merchants in quantitiessufficient to be given out as change on a routine basis, or for retail clerks to

become used to handling them.

In February 2007, the U.S. Mint, under the Presidential $1 Coin Act of 2005,introduced a new $1 U.S. Presidential dollar coin. Based on the success of the "50State Quarters" series, the new coin features a sequence of presidents in order oftheir inaugurations, starting with George Washington, on the obverse side. Thereverse side features the Statue of Liberty. To allow for larger, more detailed

portraits, the traditional inscriptions of "E Pluribus Unum," "In God We Trust," theyear of minting or issuance, and the mint mark will be inscribed on the edge of thecoin instead of the face. This feature, similar to the edge inscriptions seen on the

British 1 coin, is not usually associated with U.S. coin designs. The inscription"Liberty" has been eliminated, with the Statue of Liberty serving as a sufficientreplacement. In addition, due to the nature of U.S. coins, this will be the first time

there will be circulating U.S. coins of different denominations with the samePresident featured on the obverse (heads) side. (Lincoln/penny, Jefferson/nickel,Franklin D. Roosevelt/dime, Washington/quarter and Kennedy/half dollar.)Another unusual fact about the new $1 coin is Grover Cleveland will have twocoins with his portrait issued due to the fact he was the only U.S. President to beelected to two non-consecutive terms.

Early releases of the Washington coin included error coins shipped primarily fromthe Philadelphia mint to Florida and Tennessee banks. Highly sought after by

collectors, and trading for as much as $850 each within a week of discovery, theerror coins were identified by the absence of the edge impressions "E PLURIBUSUNUM IN GOD WE TRUST 2007 P". The mint of origin is generally accepted to

be mostly Philadelphia, although identifying the source mint is impossible withoutopening a mint pack also containing marked units. Edge lettering is minted in bothorientations with respect to "heads", some amateur collectors were initially dupedinto buying "upside down lettering error" coins. Some cynics also erroneously

point out that the Federal Reserve makes more profit from dollar bills than dollarcoins because they wear out in a few years, whereas coins are more permanent.The fallacy of this argument arises because new notes printed to replace worn outnotes which have been withdrawn from circulation bring in no net revenue to thegovernment to offset the costs of printing new notes and destroying the old ones.As most vending machines are incapable of making change in banknotes, they

commonly accept only $1 bills, though a few will give change in dollar coins.


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Mint marks

Most U.S. coins bear a mint mark as part of the design, usually found on the front

of the coin near the date although in the past it was more commonly found on thereverse. The Philadelphia Mint issues coins bearing a letter P (or no mark at all),while the Denver Mint uses a letter D. The San Francisco Mint uses an S, thoughno coins have been released from that mint for general circulation since 1980. Itdoes, however, continue to strike proof coins for collectors. The West Point Mintuses a W, though this is rarely seen as the West Point mint generally only makes

high denomination coins (with face values over $1.00) which are not meant foreveryday use. A CC mark, for the Carson City Mint, was used for a short time inthe mid-19th century, but the mint at that location was only a temporary

establishment. The New Orleans Mint used a mint mark O. It operated from the1830s until the American Civil War, and again from 1879 to 1909. The letter Dwas also used for coinage of the Dahlonega Mint from 1837 to 1861, and C wasused for the Charlotte Mint during the same timespan. The latter two mints struckgold coins only.

Banknotes

The U.S. Constitution provides that Congress shall have the power to "borrowmoney on the credit of the United States". Congress has exercised that power by

authorizing twelve private companiesthe Federal Reserve Banksto issueFederal Reserve Notes. Those notes are "obligations of the United States" and"shall be redeemed in lawful money on demand at the Treasury Department of theUnited States, in the city of Washington, District of Columbia, or at any Federal

Reserve bank." Federal Reserve Notes are designated by law as "legal tender" forthe payment of debts. Congress has also authorized the issuance of more than 10other types of banknotes, including the United States Note and the Federal ReserveBank Note. The Federal Reserve Note is the only type that remains in circulationsince the 1970s.

The largest denominations of currency currently printed or minted by the UnitedStates are the $100 bill and the $100 one troy ounce Platinum Eagle.

y $1 and $2 color: White and rich grayy $5 color: Gray and some purpley $10 color: Light yellow


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y $20 color: Light greeny $50 color: Deep blue and purpley $100 color: Rich light blue (Series 2009 redesign is scheduled for release on

February 10, 2011)

Currently printed denominations are $1, $2, $5, $10, $20, $50, and $100. Notesabove the $100 denomination ceased being printed in 1946 and were officiallywithdrawn from circulation in 1969. These notes were used primarily in inter-banktransactions or by organized crime; it was the latter usage that prompted PresidentRichard Nixon to issue an executive order in 1969 halting their use. With theadvent of electronic banking, they became less necessary. Notes in denominationsof$500, $1,000, $5,000, $10,000, and $100,000 were all produced at one time; seelarge denomination bills in U.S. currency for details. These notes are nowcollector's items and are worth more than their face value to collectors.

The design of the notes has been accused of being unfriendly to the visuallyimpaired. A U.S. District Judge ruled on November 28, 2006 that the American

bills gave an undue burden to the blind and denied them "meaningful access" to theU.S. currency system. The judge ordered the Treasury Department to beginworking on a redesign within 30 days

Means of issue

New dollars are issued when the Federal Reserve elects to fund the purchase of

debt, primarily U.S. Treasury Bonds, by creating new reserves rather thanfinancing the purchase with existing reserves. When the bond issuer spends themoney, new dollars enter circulation.

In theory, Federal Reserve Notes are like checks: liabilities drawn on the FederalReserve Bank. The Fed offsets these liabilities by holding U.S. Treasury Bonds asassets, which are backed by the U.S. Government's ability to levy taxes and repay.

When compared to hard money backed by gold or silver, this debt-based approachhas the advantage of making the currency elastic, giving the government a meansof expanding or contracting the money supply in response to changing economicconditions. The disadvantage of this approach is inflation. The money supply must

be continually expanded in order to finance interest payments on the debt by which

it is issued. This devalues the currency, causing inflation.


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Value

Buying power of one U.S. dollar compared to 1774 USD

Year

Equivalent

buying

power Year

Equivalent

buying

power Year

Equivalent

buying

power

1774 $1.00 1860 $0.97 1950 $0.33

1780 $0.59 1870 $0.62 1960 $0.26

1790 $0.89 1880 $0.79 1970 $0.20

1800 $0.64 1890 $0.89 1980 $0.10

1810 $0.66 1900 $0.96 1990 $0.06

1820 $0.69 1910 $0.85 2000 $0.05

1830 $0.88 1920 $0.39 2007 $0.04

1840 $0.94 1930 $0.47 2008 $0.041850 $1.03 1940 $0.56 2009 $0.04

International use


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Worldwide use of the U.S. dollar and the euro: United States External adopters of the US dollar

Currencies pegged to the US dollar Currencies pegged to the US dollar w/ narrow band

Eurozone External adopters of the euro Currencies pegged to the euro Currencies pegged to

the euro w/ narrow band Note that the Belarusian ruble is pegged to the Euro, Russian Ruble, and U.S. Dollar in

a currency basket.

The dollar is also used as the standard unit of currency in international markets for commoditiessuch as gold andpetroleum (the latter sometimes calledpetrocurrency is the source of the termpetrodollar). Some non-U.S. companies dealing in globalized markets, such as Airbus, list theirprices in dollars.

The U.S. dollar is the world's foremost reserve currency. In addition to holdings by central banksand other institutions, there are many private holdings, which are believed to be mostly in one-hundred-dollarbanknotes (indeed, most American banknotes actually are held outside the UnitedStates). All holdings of U.S.-dollar bank deposits held by non-residents of the United States areknown as "eurodollars" (not to be confused with the euro), regardless of the location of the bank

holding the deposit (which may be inside or outside the U.S.).

Economist Paul Samuelson and others (including, at his death, Milton Friedman) havemaintained that the overseas demand for dollars allows the United States to maintain persistenttrade deficits without causing the value of the currency to depreciate or the flow of trade toreadjust. But Samuelson recently has said he now believes that at some uncertain future periodthese pressures will precipitate a run against the U.S. dollar with serious global financialconsequences.[49]

The dollar as international reserve currency

Main article: Reserve currency

Percentage of global currencies


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The U.S. dollar is an important international reserve currency along with the euro. The euroinherited this status from the German mark, and since its introduction, has increased its standingconsiderably, mostly at the expense of the dollar. Despite the dollar's recent losses to the euro, itis still by far the major international reserve currency, with an accumulation more than doublethat of the euro.

In August, 2007, two scholars affiliated with the government of the People's Republic of Chinathreatened to sell its substantial reserves in American dollars in response to American legislativediscussion of trade sanctions designed to revalue the Chinese yuan.

[50]The Chinese government

denied that selling dollar-denominated assets would be an official policy in the foreseeablefuture.

FormerFederal Reserve Chairman Alan Greenspan said in September 2007 that the euro couldreplace the U.S. dollar as the world's primary reserve currency. It is "absolutely conceivable thatthe euro will replace the dollar as reserve currency, or will be traded as an equally importantreserve currency."

http://en.wikipedia.org/wiki/United_States_dollar

economy of the united states

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