The value of the U.S. dollar has fluctuated widely throughout its history, especially during the era before the formation of the Federal Reserve in the early 20th century, explains The Atlantic. After the creation of the Federal Reserve, the dollar's value generally fell over time, except during a period between the First and Second World Wars, states Infoplease.Continue Reading
Before the 20th century, private banks often issued their own currency that claimed to be exchangeable with real gold bullion or coinage, but often had no real backing, according to The Atlantic. During the Civil War, the federal government started printing its own paper money to finance the creation of the Union Army, causing inflation after the war and devaluation of the dollar. This was the precursor to the current Federal Reserve, which influences the value of the U.S. dollar through interest rates and money supply.
In 1944, major world economies decided to peg their currencies to the U.S. dollar, which remained pegged to the value of gold, states The Atlantic. This cemented the U.S. dollar's position as a world currency, even after the United States ended the gold standard in 1971. As of 2015, many countries have an interest in keeping the dollar's value relatively stable and often use it to pay their debts.Learn more about Currency & Conversions