The Rise of the Dollar

From the establishment of the gold standard in Britain soon after the end of the Napoleonic Wars until the beginning of the First World War sterling’s supremacy as the world’s leading currency was uncontested. The pound enjoyed universal confidence all over the five continents and served as the principal international reserve currency apart from gold, vehicle currency for international trade, and international standard of value. Compared with sterling the dollar played a secondary role before the First World War. Indeed it ranked even behind some of the leading continental currencies, for it took a long time to overcome the effects of the Civil War and of the frequent major economic crises in the United States. Nevertheless, in spite of the absence of an efficiently organised banking and currency system — the Federal Reserve did not come into being until 1914 — the importance of the dollar increased during the late 19th century and the early 20th century, simultaneously with the spectacular economic growth achieved by the United States.