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The currency of the United States has a rich and complicated history, as does the effect the dollar has on business and commerce around the globe.
Director: Alain Lasfargues
Director: Alain Lasfargues
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00:02Visually, the dollar is everywhere. In fact, it is the epitome of a global brand.
00:08A $20 bill anywhere in the world will immediately be recognized for what it is.
00:14Psychologically, it represents much more than a means of payment.
00:17It's become a universal symbol of enrichment, of making it big.
00:21Just think of all the books and movies with the word dollar in the title.
00:26Economically, of course, the dollar is the key to everything.
00:29For some, it symbolizes the economic efficiency of the United States.
00:33For others, it symbolizes American imperialism.
00:36The strength of a nation's currency is based on the strength of that nation's economy.
00:41In short, when the dollar sneezes, the whole world catches a cold.
00:45In one of the most extraordinary economic sagas of the modern world,
00:49told here by the people who study it, contribute to it, or are its spectators,
00:53this is the story of the dollar's rise to power to become, in less than two centuries,
00:59the currency of the world.
01:00With one question, however, will it keep rising forever?
01:04Or is the world, in fact, changing?
01:07And along with it, the fate of the American dollar.
01:30America's greatest brands are Microsoft, General Electric, Harvard University, and the U.S. dollar.
01:37In a restaurant conversation, you'll hear the word dollar in every other sentence.
01:42It's very present. It's more than just a kind of money here. It's an obsession.
01:48Whenever you see protests against the United States,
01:51you might see someone kicking in a McDonald's store window or burning an American flag.
01:56You will never see anyone burning an American dollar.
01:59I know people who walk around Paris wearing jeans that have a little leather dollar bill on them,
02:03but I don't know anyone who walks around the U.S. wearing jeans with a euro on them.
02:08To get the story of the American dollar, the best people to talk to are the historians,
02:13or in this case, the new Miss Mattists.
02:16This is where it's happening, at the biggest money show in the United States, in Memphis, Tennessee.
02:24Designs were unique and were engraved like Picasso's and Monet's.
02:31They're remarkable dollars.
02:34What kind of price do you like?
02:37Eight dollars.
02:42When you start a brand new country, you have to set up a monetary system.
02:47And for the United States, that also meant setting up one that was different than others,
02:52where paper money was going to be very important.
02:54And you can watch how our countries change by watching the design changes on currency.
03:01And hopefully a lot of them collect it because they think it's going to go up in value.
03:04Now 95, 95, I have now 10.
03:0618,000.
03:07No.
03:0817,000.
03:09Here's the new bidder.
03:1018,000, 19,000.
03:1120,000, 22,000.
03:1330,000.
03:15I would expect that from the entire sale, it'll probably be about 6.5 or 7 million U.S. dollars.
03:25When the young American republic was just starting out in life after signing its Declaration of Independence on July 4th,
03:321776,
03:33it immediately found itself strapped for cash.
03:36Since the British were refusing to relinquish their colonies, the country had to go to war to throw them out,
03:43an endeavor which required a lot of money.
03:45So to finance the war, the country's leaders came up with a brilliant idea.
03:51Issue paper currency.
03:59When we make war against Britain, we issue this stuff, which is called continental currency.
04:05The individual colonies began issuing paper money and the Continental Congress did as well.
04:11We can see the word dollar written on these bills for the first time, but where does it come from?
04:17It doesn't start in America.
04:19It starts of all places in Central Europe, where a large amount of silver mining was going on in the
04:2615th century.
04:27And because of the origin of the silver, they were called Joachim's Tollers.
04:31And that got shortened later on from St. Joachim's Toller to Joachim's Toller to Toller.
04:38It didn't start out meaning, it means valley for pizza, but eventually it became the generic name for any large
04:45silver coin of this type.
04:47And eventually it sprouted the name dollar.
04:51As for the dollar sign, it also seems to have come from far away.
04:56This again is a Spanish-American dollar.
04:59I'll show you something.
05:00You have the two globes of the two hemispheres.
05:04That means both worlds are one.
05:07And there's a pretty good possibility that that's where the dollar sign originated.
05:11The columns representing the pillars of Hercules, that curve snaking around the two vertical lines.
05:21After winning the war against the British, the Americans set to work organizing the country's administrative and political institutions.
05:28They wrote up the famous United States Constitution, and George Washington became the first president.
05:33His face has been stamped on every one dollar bill since then.
05:37George Washington chose a former banker, Alexander Hamilton, to be his first Secretary of the Treasury.
05:43He now gets to have his picture on the ten dollar bill.
05:47Hamilton wanted to create a centralized federal bank that would be the only institution authorized to issue dollars,
05:53such a bank he believed was necessary for the development of commerce and industry.
05:59Not at all, argued Thomas Jefferson.
06:02Today, his face appears on the two dollar bill.
06:06In Jefferson's opinion, a central bank was unnecessary because he envisioned the country as remaining decentralized and agrarian.
06:13To better understand this debate, why don't we bring back the protagonists themselves?
06:19Gentlemen, thank you for being with us today. Can you hear me?
06:21Yes, yes, I'm getting you now.
06:23Mr. Jefferson?
06:24My pleasure, indeed. Good day.
06:27So, Mr. Secretary of the Treasury, why create a central bank?
06:30We are 80 million dollars in debt. I know, an extraordinary sum.
06:34The establishment of a national bank will support and stabilize our currency and give us loans in time of need.
06:41It also brings the eyes of the world upon us in a more respectful manner.
06:48You know, I find it a strange perversion of ideas, an idea as novel as it is strange,
06:54that men should be deemed corrupt and criminal for wanting to become proprietors in the welfare of their country.
07:00I'm not advocating that indeed we have a poor citizenry.
07:04I believe that the money should be more equally distributed and therefore be greater in its utilization by the common
07:11man rather than a select few.
07:15The affair ended in a compromise.
07:17In 1791, the First Bank of the United States was established in this building in Philadelphia.
07:23As a central bank, however, it left much to be desired.
07:26For one thing, it did not have the power to issue dollars.
07:29And its adversaries, who were opposed to the whole idea of centralized banking, were able to get it closed down
07:3520 years later.
07:36In short, when the conquest of the American West began, the country had no central bank.
07:41And all the federal government did was to authorize private local banks to print their own dollars.
07:48So the question is, what kind of money did cowboys use to pay for their shots of whiskey?
07:53And when bandits held up trains, what did they find in the bags and coffers?
07:56Answer?
07:58In terms of coins, a whole hodgepodge of different pieces.
08:01Gold and silver coins produced in Mexico, for example.
08:04In terms of bills, it was even more complicated.
08:07For the first half of the 19th century, the U.S. didn't have a nationwide currency.
08:14You had hundreds of private and state banks that could print thousands of different currencies.
08:19So what happens is, for 8,000 banks, who were issuing eight different denominations, and you get hundreds of thousands
08:28of possible denominations.
08:29If you've got a population which never sees anything in printed documents, besides maybe a Bible, how are they going
08:37to know which ones are good?
08:39By 1860, constituted about 10,000 different kinds of dollars that were floating around in circulation.
08:46It was a great time to be a counterfeiter.
08:50It was also a great time to be an innovative counterfeiter.
08:53Today, when you counterfeit a note, you create an imitation.
08:57But when you have thousands of different banks, the smart counterfeiters very quickly realized that the thing to do was,
09:06why bother imitating notes?
09:08Why not just simply create new banks that were fictional? And that's what many counterfeiters did.
09:14And to complicate things even more, banks and counterfeiters weren't the only ones in the business.
09:20Railroad companies, hotels, and even stores printed their own dollars.
09:25You went into a store in, say, Philadelphia, or any city, or any place, and you took out a note,
09:32and it was a note on a bank in Tennessee.
09:35And so, at that moment, you and the storekeeper would have an argument about how much that note was worth.
09:42You know, you might say it's worth a dollar, and they would say, no, no, no, no, that's not worth
09:47a dollar.
09:47That bank's no good. That bank's only worth 50 cents on the dollar.
09:50Can you imagine what this would be like today if every time you went into the Walmart, you know, you
09:56had a dispute and an argument about the currency that you were offering?
10:00You were preposterous.
10:02The situation was thus out of control when the Civil War broke out, with the Unionists in the North fighting
10:08against the Confederates in the South.
10:12The Union was out of cash. It had to pay all of its soldiers. It had to resort to some
10:18other kind of funding.
10:19The easiest solution, when you're short of money, is to make it yourself. So like George Washington a century earlier,
10:26in 1863, Lincoln decided to reorganize the whole system.
10:30Hi, yes, I can hear you, sir, and it's a great pleasure to be with you today.
10:36The days when anyone could issue dollars were over.
10:39No, I think we have to have a standardization of our currency in this country. It has to be done
10:45with a central government and a central bank.
10:49The only way we can do that is to establish a believable bank note for the people of America, with
10:57a great seal of the United States, with that eagle printed on there, to show the people that we have
11:03one standard and that it can be a believable note.
11:07From now on, there will be only one issuing authority of paper money in the country, and it will be
11:15the federal government.
11:16And they issued a note that was very quickly called the Greenback.
11:20The name Greenback comes from the fact that the first of these new federal issues had green printed backs.
11:28And the reason they had green printed backs was because green was impossible to reproduce by counterfeiting methods.
11:36A green back on it. That will discourage the counterfeiters.
11:41So, whereas in 1859 you had 10,000 different kinds of currency, by 1866 you had only a handful. And
11:51that was it.
11:52Abraham Lincoln is thus the father of the Greenback as we know it today.
11:57After Lincoln, all dollars would basically have the same look.
12:03They're fascinating. They're beautiful.
12:05Now look at the artwork on the back.
12:10Show him the treasury note.
12:12That's my favorite note. This is number two, that's number one.
12:16If you look closely at these dollars from the 19th century, you'll see there is always a reference to gold
12:22on them.
12:25That's what is called the gold standard, which means that the central bank will exchange any dollar bill for its
12:32value in gold.
12:33In other words, the total value of all the bills in circulation must never exceed the total value of the
12:40bank's gold reserves.
12:42So, in theory, that should keep the government from succumbing to the temptation of keeping the money machine running.
12:49By the turn of the century, by 1900, the US had become the largest economy in the world, surpassing China
12:55and all those of Europe.
12:56And yet the dollar was nowhere to be found abroad.
12:59Industry was booming, the stock exchange was on the rise, and people were borrowing more and more money in order
13:06to buy more and more stock.
13:07The government kept printing more dollars without any consideration for whether there were enough gold reserves to back them up
13:14or not.
13:14What is nowadays called a speculative bubble was forming.
13:19In terms of financial responsibility, the Americans did not yet have an international outlook,
13:25and their monetary policy, which focused exclusively on the domestic situation,
13:32increasingly perturbed the circulation of capital.
13:35And this, in turn, adversely affected the pound sterling, which was still the dominant currency at the time.
13:42So, US monetary policy had negative repercussions, and in the end, this led to the depression.
13:50The speculative bubble burst on Thursday, October 24th, 1929.
13:55The stock exchange collapsed.
13:58People rushed to the banks to exchange their dollars for gold.
14:02After all, they were entitled to it. It was written on the bills.
14:06Naturally, the banks couldn't pay everyone, and they had to close down.
14:09In just a few weeks, the country sank into economic chaos, and the Great Depression began.
14:15Millions of Americans would lose their jobs.
14:20If you leave markets, financial markets, to themselves, they always go to extremes.
14:28And in the 1930s, the financial system totally broke down.
14:36One joker out in Oregon was up to the situation with genuine, handmade depression dollars.
14:46Dollars designed for inflation, guaranteed to go a long way.
14:51Oddly enough, these bouncing dollars were actually accepted by local merchants.
14:55Elsewhere, even in New York City, the barter system was revived.
15:00In 1933, things began looking a little brighter when the Democrat Franklin D. Roosevelt was elected President of the United
15:06States.
15:07The economic machine was starting to pick up again.
15:10That very same year, however, another leader was elected.
15:14Adolf Hitler in Germany.
15:18After the war was over, the victors got down to the business of rebuilding the world.
15:22As a result, they created the United Nations in 1945.
15:26To deal with monetary issues, a conference was convened in Bretton Woods.
15:32In 1944, a certain number of people got together in Bretton Woods, a small town on the east coast of
15:37the United States,
15:38with the idea that, although they weren't the only cause, uncontrolled economic practices, currency wars, constituted one of the causes
15:46of World War II.
15:47And so, in order to prevent that, a sort of financial UN needed to be established.
15:53And it decided that one of the key spoils of the war would be that it would have the dollar
15:59now as the central currency in the global financial system.
16:03The major currencies had been wiped out by the war, and we were all indebted to the United States, because
16:12it was financing the reconstruction of our countries.
16:15The pound sterling was dead or almost, the French franc as well.
16:19Forty-four countries signed this agreement, basically all the major countries of the free world.
16:25The Soviet Union was invited but elected not to sign.
16:29This was really an unprecedented act.
16:32Bretton Woods set up what is called a system of fixed exchange rates.
16:36The value of the dollar was set at $35 per ounce of gold, which meant that the U.S. government
16:42was committed to giving one ounce of gold to any central bank that presented it with $35.
16:47The exchange values of other national currencies were also fixed more or less permanently in relation to the dollar.
16:54Having become the international exchange currency, the dollar is the currency of currencies.
16:59Being the country that issues the money that other countries use is a great privilege.
17:03Why is that? Because this allows the U.S. to have a large deficit in its balance of payments.
17:08Why? How does it finance its deficit?
17:11Like all countries, with its own money, first of all.
17:14But when that runs out, the other countries have to finance it with dollars, with gold, which they may have
17:19more or less of.
17:20And when that's gone, well, then they're forced to limit the deficit.
17:24So all countries have this sort of built-in mechanism that limits the deficit when they can no longer pay
17:28for it.
17:29Except the United States, because it finances the deficit entirely with its own money.
17:34Thus, we could almost say, using a well-known image that's a little misleading, but it gets the point across,
17:38that since it runs the money machine, it's easy for the U.S. to finance its deficit.
17:44In the 50s, the United States showered the world with dollars, as part of its program for the reconstruction of
17:50Europe to begin with, the famous Marshall Plan.
17:54...of the Western European nations finally affixed their signatures to a significant document.
17:59The Marshall Plan had received the green light.
18:05Reduced to its simplest form, the bulky Paris report meant that America must again send ammunition overseas.
18:12Ammunition for peace, in the form of food, machinery, skills, and dollars.
18:17Figures quoted reached 17 billion dollars.
18:20Then, in the 60s, the United States began buying up the world.
18:24They invested massively abroad, while at the same time, supporting the military costs of the war in Vietnam.
18:32Everything was paid for in dollars, of course.
18:34We were investing abroad more than the rest of the world was investing in the United States.
18:39So, in the overall accounts, we had a deficit.
18:41It was a few billion dollars. It was miniscule compared to what we have now, but it excited people.
18:51President de Gaulle was among the first to publicly criticize this.
18:56As he said in the 60s, America having the main currency is an exorbitant privilege.
19:02This event is an exorbitant.
19:08It is an exorbitant.
19:10It is an exorbitant.
19:12It is an exorbitant.
19:15It is an exorbitant,
19:16because they use it to pay them with dollars that they don't give them to.
19:37by the winter of 1964, France had taken a more aggressive stance, which it continued
19:44to pursue after 1965, by acting to convert its dollars into gold.
19:54Well, France was quite public about what it was doing, but the Germans were doing the
19:58same thing, without saying anything. So, the U.S. gold stock began to fall.
20:05By that point, we had printed so many dollars that we only had about 20 percent coverage
20:11in gold for all the dollars held by central banks. And the fear was, if they lost faith
20:18in the U.S. economy, it could be the equivalent of a run on a bank. They would all demand
20:22gold
20:23for their dollars at once, the U.S. would not be able to do it, and it would be a
20:26global
20:26financial calamity.
20:29General de Gaulle decided to repatriate France's gold reserves from the Federal Reserve Bank.
20:36It was nothing more than a simple technical matter, but it caused a big stir politically.
20:47General de Gaulle said to me, is the gold on its way back? Yes, sir, we're bringing it
20:51back. Then he said, we need to speed things up. Listen, there needs to be a decision to
20:57send the Colbert, which was our only cruiser at the time. We'll just send the Colbert over
21:02to Fort Knox, load up the gold, and bring it back. Sir, that's out of the question.
21:08If you send a French warship over to the United States to fetch our gold, you'll create a
21:13major diplomatic incident. And so, we gave up on that plan.
21:19No, the Americans wouldn't have taken it very well, especially since they felt they were
21:23providing a necessary service to the rest of the world. We Americans are the ones who
21:27create international liquidity for the entire world. We provide the financial intermediation.
21:33We enable the global financial system to function because we have the financial competitiveness
21:39that others don't have. It's a service. And if the dollar is a problem, then it's
21:44everyone else's problem, not ours. This is an allusion to the famous remark made by Treasury
21:49Secretary John Connolly to a delegation of Europeans who are complaining about his monetary
21:55policy. The dollar is our currency, but your problem.
22:02The decisions that are made by the Secretary of the Treasury and those who implement America's
22:06economic policies for the benefit of their own country have an impact on the rest of the
22:11world, which is reflected in what Connolly was saying. It's our money. We manage it in our
22:16own best interests, and if the decisions we make don't suit you, it can become your problem.
22:23John Connolly wasn't an expert on the subject. He was a politician, a Texan. As you know,
22:30he was in President Kennedy's car when he was assassinated. A six-foot, four-inch giant,
22:38and he was a bit glib. He thought the financial world could be dealt with in an offhand way.
22:45And he was a real arm-twister in the sort of Texas tradition. And he told them, look,
22:50if you want to continue to get U.S. military support with the Soviet Union breathing down
22:54your neck, you guys are the ones who are going to have to make your currencies weaker. And that's
22:59how it's going to happen, and that way we can reduce our balance of payments.
23:03The Bretton Woods system collapsed after the blow dealt by Nixon on August 15, 1971, when
23:11he decided to remove the gold backing from the dollar and turn it into a floating currency.
23:20A system of floating exchange rates is a completely different system. The rates for each currency
23:26on the international market are determined by supply and demand.
23:32America today has the best opportunity in this century to achieve two of its greatest ideals,
23:40to bring about a full generation of peace, and to create a new prosperity without war.
23:48I have directed Secretary Connolly to suspend temporarily the convertibility
23:52of the dollar into gold or other reserve assets. The effect of this action, in other words,
23:58will be to stabilize the dollar. This action will not win us any friends among the international
24:05money traders.
24:07We've been living with the idea of stable currencies, that the major currencies were stable. If there
24:12were fluctuations, they were unfortunate fluctuations that affected minor or secondary currencies.
24:18But the supreme currency, the dollar, was completely stable. That was the dominant way of thinking.
24:24It was a big surprise, even to people that were close to the process, like myself. It had been kept
24:30very quiet.
24:32Only a very few people in the government were involved. Kissinger, in fact, was not involved. He was off negotiating
24:37about Vietnam at the time. So it was a very small circle of people. It was a big shock. The
24:44private
24:45markets were totally caught unaware.
24:48And the Europeans and the Japanese expressed great shock.
24:57You mean you really want to change the exchange rates? I mean, what are you talking about, 2%?
25:02We said, look, forget about 2%. Let's talk about 10, 15%.
25:08And that was it. The world of fixed exchange rates had become a thing of the past. From
25:12now on, the value of the dollar would change every morning, and not just a little.
25:18Let us imagine that the dollar's fluctuations since 1971 have been converted into a rollercoaster
25:23ride. The peaks and the valleys of our virtual coaster reproduce the dollar's actual highs
25:28and lows. Fasten your seat belts. Hold on tight. It's going to be a hell of a ride.
25:34It starts out nice and smooth. This is the era of fixed rates. The value of the dollar
25:39is stable. Then at the beginning of the 70s, here we go. The first evaluation, 12%, a slight
25:44mechanical rise, the end of its convertibility, and hang on, it plunges 25%. Then President Carter
25:52appoints Paul Volcker as Chairman of the Federal Reserve Board. He pushes interest rates up to over
25:5820%. The dollar's value begins to rise, higher and higher. Up 25%, up 50%, up 100%, 150%, 200%.
26:06It becomes too expensive for everyone. The dollar has to be brought down. That's the goal of the
26:11Plaza Accord in 1985. In less than two years, the dollar falls and keeps falling. Whoa, it's going too
26:17far. So reverse operation in 1987. The major powers signed the Louvre Accords in Paris, whose purpose is to
26:24stabilize the dollar, which works pretty well for the next 10 years. Then comes the prosperous years
26:29of the Clinton era, which push it back up until 9-11 in 2001. The war in Iraq and low
26:34interest rates drive it back down again. Oof. Okay, let's take one of these mountains and try to explain
26:40how it came about. The highest one of all, this one. The year is 1979. The American economy is in
26:46a bad state.
26:47The dollar is at an all-time low and inflation at an all-time high, with prices increasing nearly 15
26:52%
26:52per year. Something has to be done. So President Carter names Paul Volcker to take over the Federal
26:58Reserve, the central bank of the United States, to wipe out inflation.
27:04In the early 80s, Paul Volcker came in at a horrible period, a period in which several central bankers had
27:11failed
27:11to stop inflation. They would raise interest rates and hope it would be high enough, and then it would start
27:16to cut,
27:18and inflation would come back again. And it was like a doctor prescribing an antibiotic to a patient but not
27:24giving him
27:25enough. So you would kill the disease momentarily, but then it would come back even stronger, and you needed an
27:31even
27:31bigger dose of the antibiotic the next time. And the Federal Reserve had to push interest rates to what Helmut
27:38Schmidt
27:38called the highest level since Jesus Christ.
27:41Central bankers have one big weapon for killing inflation, and that's the base rate, the minimum
27:46interest rate for lending money in a given country. Low interest rates stimulate the economy, but this also
27:53increases inflation. On the other hand, when interest rates are very high, this slows down the economy
28:00and inflation decreases. The trick is figuring out exactly where to put the cursor.
28:08The predominant thing then was the high and rising rate of domestic inflation. So when you ask what my
28:15priority was, it was to deal with the domestic inflation. But by dealing with the domestic
28:21inflation, you would also deal with the weakness of the dollar.
28:24So from 1981 to 1985, the dollar kept rising and rising while inflation kept falling and falling and
28:32the economy kept shrinking and shrinking. Meanwhile, people were suffering. No one could
28:38afford to pay the 20% interest rates.
28:42Homebuilders were particularly upset. We had this great period when the homebuilders, they weren't always
28:49serious, I think, but they would saw up two by fours, the basic piece of homebuilding material.
28:56And they chopped them up and sent them into my office.
28:59Saying, we're never going to get to put these to work. You take them. People still stop them in the
29:04street,
29:05put a finger in his chest and say, you're the reason my father lost his job. You're the reason we
29:10couldn't sell our house.
29:13In 1984, the dollar was so high that governments decided it was time to intervene. An international meeting
29:20was convened at the Plaza Hotel in New York. Europeans were finding that inflation was getting too high
29:26and buying Nike running shoes or caterpillar tractors or even a barrel of oil, which of course was priced
29:32in dollars, was becoming exorbitantly expensive. The only solution possible was either a monetary
29:39agreement or protectionism. Faced with the threat of a protectionist movement, the Americans said,
29:47OK, this is a deal we need to try and work out together with everyone.
29:52The world powers agreed to intervene and weaken the dollar because it had become too strong.
29:57There would be other peaks, but the roller coaster would never climb as high again. Most would coincide
30:02with major international crises. The Mexican debt crisis, the Asian financial crisis, the economic collapse
30:08of Argentina, the dot-com bubble crash. Given all this turbulence and such a rough ride for the passengers,
30:16we might wonder, is anyone at the wheel here? That is, who is in charge of the dollar in the
30:22United States?
30:24The Fed is the central bank of the United States. So our role is comparable to the European Central Bank's
30:31role,
30:31or the Banque de France role before EMU, in some sense. So our job is to, by law, is to
30:38promote price stability
30:40and maximum sustainable growth and to keep the financial system as stable as possible.
30:50The Fed is made up of twelve regional Federal Reserve banks whose stockholders are the successors
30:55to those big local banks in the 19th century that were allowed to print their own dollars.
31:00This makes the Fed quite unique in that it's practically the only central bank in the world that is not
31:07public,
31:07but in fact, private. The reserve banks, such as the one, New York one we're in now,
31:12are actually owned by commercial banks, owned by the members of the Federal Reserve System.
31:17However, their governments, the way they're organized, is under strict, pretty strict government oversight
31:22and control. The term that's sometimes used, it's a technical term I hear the lawyers use,
31:27we are instrumentalities of the Federal Government. So in effect, we are very technically private corporations,
31:33but very, very closely supervised by the Federal Government.
31:38To manufacture its banknotes, the Fed has its own historic printer,
31:42the Bureau of Engraving and Printing in Washington, which is a public agency.
31:49We produce about eight billion notes annually, which is about $750 million in terms of face value on a daily
32:00basis.
32:02This place is so significant for the American people that there is a walkway overlooking the production floor
32:07to accommodate visitors. As for the machines, they look like they've been around for a while,
32:14which really isn't very surprising given the fact that the dollar hasn't changed in size or color since 1929.
32:28The Bureau of Engraving and Printing produces 22 tons of crisp new bills every day
32:34that are distributed throughout the country via a network of carriers and district banks.
32:41The United States is a country that is particularly cash-oriented.
32:46Practically one out of every ten dollars is an actual physical banknote.
32:52The nine others are just numbers sitting inside computers in the banks.
32:58One out of ten might not seem like a lot, but that's double the British pound, the yen or the
33:04euro,
33:04whose banknotes have never represented more than five percent of their national money supply.
33:10Moreover, contrary to what one might think, the number of bills in circulation is not decreasing, but increasing,
33:18despite the advent of credit cards.
33:20One inch.
33:33The guards.
33:36especially when he takes 30 point.
33:52There's a constant cycle of transport and processing going on.
33:57In a given month, in the tens of billions of dollars would flow through our system.
34:04There are two main reasons for this particularly intensive use of American paper currency.
34:10The first one is purely domestic.
34:15It's something like 15% of the American households are unbanked.
34:21They deal only in cash.
34:23So for many of those people, it's the only means they have to make a payment.
34:29So cash, for a variety of different purposes, still is just very, very important and it's
34:35something that everybody needs.
34:37The second reason for the huge mass of bills in circulation comes from the dollar's status
34:42as an international currency.
34:46There are over 777 billion notes in circulation, of which over 512 billion circulates outside
34:58its borders in terms of value.
35:00The vast majority of the notes that circulate outside its borders are primarily notes that
35:07are used as a stored value for people who look to have an emergency fund.
35:14Which is why one must be very cautious and not make any hasty alterations.
35:19The banknote design process is a very complicated process.
35:23And so we start with a security parameter.
35:27We do add complexity to the design by layering features over each other.
35:32We then go to the artist to render an aesthetic drawing incorporating each and every one of
35:40these security features.
35:41The process is very, very long.
35:43When we redesigned our 5 recently, it took a little bit more than a year and that was
35:48a remarkably, very rapid kind of a design.
35:52Indeed, it was nothing short of revolutionary, for the green back isn't totally green anymore.
35:58A bit of color has been added.
36:00We're at the launching ceremony for the new $5 bill.
36:03The cottage in the background belonged to Abraham Lincoln, the father of the dollar bill.
36:08Hold the bill up to light.
36:11We began introducing the new Color of Money series in 2003.
36:15The new $5 bill combines some new security features.
36:19As always, there's no need to trade the old design $5 bills for new ones because the Federal
36:25Reserve has never recalled any of its bills and has no plans to do so this time.
36:31In just a few minutes, it'll be my honor to spend the first new $5 bill and officially
36:37enter it into circulation.
36:39I'd like to purchase a book of great speeches.
36:41Okay, well, we just happen to have a book right here and it's full of great speeches.
36:46I think I have a new $5 bill.
36:49It's right here.
36:52New security features.
36:53Yes.
36:54Very good.
36:54Hold it up to light.
36:55Okay, let's give them a break.
36:57They're just government officials, not professional actors.
37:00The man in the foreground is a Fed representative.
37:03The man right behind him belongs to the Secret Service, an ultra-specialized police force that
37:08has two very specific missions, to protect the President of the United States and the dollar.
37:14In other words, to defend it against counterfeiters.
37:18The woman on the left is from the Department of the Treasury.
37:20She's the Treasurer of the United States and her signature is on all of the new $5 bills.
37:26And so, for the children, and especially for the cameras, here's a quick lesson on counterfeit
37:32detection.
37:33The people out front, who's our first line of defense for stopping counterfeiters?
37:37You.
37:38You.
37:40What is the first thing you're going to do to make sure this is a real bill?
37:43Put it in the light.
37:44Put it in the light, right.
37:46In Hamlin's face, right there.
37:49Now, in the new one, in the new one, we have two watermarks, right?
37:53A big five, no face anymore, and a column of little fives.
37:58You saw that when it came around, right?
38:00The level of counterfeiting that was successfully passed was right at $61.4 million.
38:08Now, that sounds like a lot.
38:10In the totality of the picture, that actually amounts to one hundredth of one percent.
38:15What kind of material is money made out of?
38:19That's a great question.
38:20It's a secret formula.
38:21But essentially, though, it's a fabric more than anything else.
38:24That's why it lasts so long.
38:26But even then, it's got a short lifespan, probably somewhere between two and five years,
38:30depending on the denomination.
38:32Like all great international stars, the dollar has its own unique look, its own style.
38:38But in fact, why is it so striking to the eye, so visually effective?
38:41What is its secret?
38:45First of all, the color is very important.
38:47And then there are all the symbols on it.
38:50It's almost like having a live history of the United States and of American philosophy
38:55on each and every dollar bill.
38:58Yes, indeed, American bills strike the imagination because they are covered with the mysterious
39:03symbols that are supposedly Masonic and date back to the beginning of the American Revolution.
39:10The back of the dollar bill is what most people think about when they think about the symbolism
39:15of the dollar bill.
39:16At the front, you have George Washington, the first leader of the nation, and in fact, Freemasons.
39:22So in that sense, there is a Freemason on the dollar bill there.
39:26The back of the bill seems so much more mysterious, even to Americans.
39:30On the back, both sides of the Great Seal of the United States are featured.
39:36The seal was designed in the 18th century by a committee that included Thomas Jefferson,
39:40John Adams, and Benjamin Franklin.
39:43There's a huge kind of feeling on the part of people that these seals and these symbols
39:49have deeper kinds of meanings, and enormous numbers of people count the number of feathers
39:55in the eagle.
39:57There are actually 33 of them, which conspiracy theorists say 33, that's exactly the number
40:04of the Scottish Rite degrees.
40:07And so a 33rd degree Mason is fairly well known in America.
40:12And here, if you count them up, you find it there.
40:14So many right-wing Americans have seen this as something sinister, even a sign of a great
40:21conspiracy for the taking over of the world by sinister kinds of elites.
40:28However, among the 56 men who signed the Declaration of Independence, only nine were Freemasons.
40:34George Washington and Benjamin Franklin, for example, but not Thomas Jefferson or John Adams.
40:40And I think the link there is not that Masons conspired, plotted to create the revolution,
40:49but it's that the ideals of the revolution come out of the same sort of enlightened values as Freemasonry.
40:59So we should see the dollars' aesthetic design as inspired by a common interest,
41:03which these 19th century men apparently shared, in esotericism, Christian symbolism,
41:09and even Egyptology, as attested to by the front side of the Great Seal.
41:14So the pyramid, the ancient Egyptian symbol, lasted for thousands of years.
41:19That's what the American nation is going to be.
41:22So that's the one part.
41:23Then above it you have the eye, which is the all-seeing eye of God,
41:28and sort of very long-lasting symbol, which goes back for hundreds of years before then.
41:35And the idea of that eye is that God has been watching over the new American nation.
41:43Indeed, the dollar is so closely linked to God that it is the only currency in the Western world
41:48that is explicitly placed under His protection.
41:52It displays the famous motto,
41:55In God We Trust, which so greatly intrigues non-Americans.
42:00The American people have always been a religious people.
42:04And the government has always in some way acknowledged that.
42:09In 1861, at the very beginning of the American Civil War,
42:14a minister in Pennsylvania very famously wrote a letter to the Secretary of the Treasury,
42:20a man named Solomon P. Chase.
42:21And this minister said that,
42:24Look, the country is engaged in this terrible war with itself.
42:29Clearly, we need divine providence.
42:31We need God's help.
42:33This minister implored the Secretary of the Treasury to put the name of God somewhere.
42:38The director wrote a couple of simple mottos,
42:42none of which, by the way, were In God We Trust,
42:45and sent them off to Chase, who then fiddled around with them a little bit,
42:50changed one of them around, and came up eventually with In God We Trust.
42:54In the 1930s, the late 1930s, it began to appear on all American coins.
43:00And in 1957, it began to appear on American paper currency.
43:07First the $5 bill, and then all of our paper currency.
43:10So now, a little more than 50 years after it first began appearing on our paper currency,
43:16it is on all of our coins, it's on all of our paper currency.
43:20It's also our national motto.
43:22One person said to me once,
43:24Mr. Lincoln, In God We Trust, and the rest pay cash.
43:31The real dollar, however, the one that has the most influence,
43:34is not the dollar bill.
43:35The real dollar is the electronic dollar,
43:38the one that only exists virtually in bank computers,
43:41and that can also be transferred instantaneously
43:44to anywhere on the planet from trading rooms like this one.
43:50These computers are used to buy and sell dollars 24 hours a day,
43:54seven days a week, for huge corporations, financial institutions,
43:59individuals, or even mere speculators.
44:02Okay.
44:04So we're bidding, alright, you got two at 45 over there.
44:08Can you book to Gary Trading, whatever I am?
44:13I need to sell two at 50.
44:15Yeah, I got that on there.
44:16Oil just hit the $10 limit.
44:19Euro's bid beyond belief right now.
44:21Are you still interested in taking some profits, Will?
44:27Alright, we'll work it at 75 if we can get there.
44:31Alright, good till three. Okay, bye.
44:34Those buttons with buy and sell written on them
44:36are what determine the price of the dollar.
44:38The broker's job is to press or not to press.
44:41But how is this decision made?
44:43You got them.
44:44What people look at is the difference in interest rates between countries.
44:47That's what attracts the capital.
44:49That's where money flows in or out of,
44:51or what causes money to flow in or out of different countries.
44:55So what we look for is indications of what's going to change
44:58that interest rate difference between, for example, Europe and the U.S.
45:03So that's the basic principle.
45:05Today, however, the foreign exchange market has grown to such colossal proportions
45:09that $2,000 to $3,000 billion dollars are bought and sold every day
45:14across the entire planet.
45:16And in order to keep up, the brokers have long since switched to automatic pilot.
45:22Automatic trading machines will allow you to make transactions
45:26where you don't ever touch them.
45:29It's called straight-through processing, STP.
45:32You know, all the computers talk to each other and the trade is done.
45:35You can move hundreds of millions of dollars in a few seconds.
45:39It's amazing.
45:41And now you get to know what we do all day.
45:42We sit around and look at TV screens.
45:46And the fact that everyone is looking at the same screens at the same time
45:50is something that radically influences the way the market behaves.
45:55It used to be that not everyone would get the same information at the same time.
46:00Now, with the Internet, with everything being instant,
46:04everyone's looking at the same charts.
46:06Everyone's looking at the same news releases, the same statements by officials.
46:12And everyone, because they get the information at the same time, tends to react at the same time.
46:19There's one last factor that might explain the dollar's extreme volatility on the currency exchange market.
46:26The movement of the currency, at least in the short term, is almost totally driven by the market's feelings, its
46:37expansiveness or its fear.
46:39It's only, how does the world feel when it gets up in the morning?
46:43Is it happy?
46:45In which case, often sells dollars when it's happy.
46:50Or is it scared?
46:52In which case, it's going to buy dollars.
46:56It is totally irrational.
46:58Totally irrational in the short term.
46:59It's one of the reasons why nobody can manage it.
47:03In the early years, the International Monetary Fund and the World Bank and the central banks were the biggest factors
47:14in the market.
47:16But then, as the market grew, their influence shrunk.
47:23So, in the early days, governments could intervene in currency markets, buy the currency or sell the currency, and determine
47:38the price that way.
47:39But as the market grew, they couldn't do it anymore.
47:44And nowadays, the US government has even less control over the value of its currency, since out of $100, only
47:52$30 are in the hands of Americans.
47:55The other $70 belong to foreigners, mainly central banks and investment funds.
48:01The countries with the biggest dollar holdings are China, first of all, followed by the Gulf oil monarchies, and then
48:08Japan.
48:09Europe is much further behind, along with Russia, India, etc.
48:13This is Bahrain, a country located in the Persian Gulf.
48:17It is estimated that in their vaults, the oil-rich countries of this region hold a good 25% of
48:24all the dollars on the planet.
48:26Today, Sheikh Mohammed Al Khalifa is inaugurating an exhibition conference with a very special theme,
48:32the dollar or the euro, what is the best choice for the region?
48:35The exhibitors are representatives of big brokerage and investment firms from London and New York.
48:41The visitors, their potential clients, are local government officials, CEOs, and even a few wealthy individuals.
48:50The dollar has a much greater importance in this part of the world than anywhere else.
48:54And this is the direct result of the famous meeting between King Ibn Saud of Saudi Arabia and President Franklin
49:02D. Roosevelt on board an American warship near the Suez Canal in 1945.
49:07Whether this was a negotiation between equal partners or pure imperialism, the outcome was an agreement that the United States
49:15would protect the Arabian Peninsula in exchange for access to the Saudi oil resources.
49:20Ever since then, the price of oil has been set in dollars and the Gulf state currencies have been pegged
49:26to the dollar.
49:28So it's hardly surprising that in conjunction with the exhibition, a conference has been arranged with American economists who have
49:36been invited to speak on the dollar's fluctuations.
49:39The U.S., since the Second World War, has been the largest economy in the world, and its currency, which
49:47has been forever talked about as the world reserve currency.
49:50And we're going to look at a little bit about what that means and how that may be changing.
49:53The dollar has been measured but steady decline.
50:00It's a market that is so big, nobody can control it.
50:05This is a world market, especially now.
50:09Is there the question, will Qatar, Bahrain, the UAE, will they continue to peg their currency against the dollar, or
50:18will they let it float?
50:19It's very difficult, really. We have lost already 40 percent of our currency.
50:25Thank you very much.
50:26Thank you very much. Thank you.
50:29People are really getting worried. What's happening with the dollar?
50:34The governments in the Gulf region are going to be making a lot of top-level decisions in the next
50:39few months.
50:41Kuwait, as we've already seen, has basically de-pegged its currency from the U.S. dollar.
50:49And it's possible that other countries will follow Kuwait's example.
51:00This is the end of the U.S. dollar. It was a good father for the region.
51:04And you know how painful it is to lose a good father.
51:07But it doesn't mean that we have to leave the dollar.
51:11So market forces, in the end, it will show us that maybe use another euro or dollar, another currency, or
51:19commodity.
51:20I'm always fond of saying that the dollar has been the dominant world currency for about a century for one
51:28simple reason.
51:29There was no competition.
51:31That has all now changed, of course, with the creation of the euro.
51:35Has what has been going on in Frankfurt, the headquarters of the European Central Bank, in the last ten years
51:41really changed the monetary picture of the world?
51:44Is the almighty dollar, king dollar, about to be dethroned by the euro?
51:50I think that the euro has the potential to become the equivalent of the dollar as a world reserve currency,
51:57or even to surpass it.
51:59For Europeans, it's a phenomenal success.
52:03If the euro were more militant, or were to try to be more militant, it would probably dethrone the dollar
52:09in very little time.
52:10The euro wasn't created against the U.S. dollar. It wasn't created against any currency, or anyone at all.
52:18The ambition of the United States, and what I'm saying isn't an oversimplification, is basically imperialistic, being the superpower of
52:27the world.
52:28That's not our ambition. We don't want to govern the world. We did in part in the 19th century, but
52:34that's not our mission anymore.
52:36And so, since the euro rivals the dollar without wanting or being able to replace it completely, what does that
52:43mean for the future of the planet?
52:45I think we're heading for a situation in which there will be a big North American bloc, a big Chinese
52:52bloc, a big Indian bloc, and perhaps a big European bloc.
52:58I think over time, it is likely the system will evolve to the point where the dollar's rule is less
53:07exceptional.
53:08And I think that would be a perfectly natural, healthy thing for the world economy.
53:15And the final word goes to Paul Volker, who has taken out his crystal ball for the occasion.
53:20I want to make two statements.
53:24One is that the world will be well off in time with a world currency.
53:31Statement number two, it's not going to happen in my lifetime.
53:38I'm not even sure it's going to happen in your lifetime.
53:40I'm not.
53:51This here, we have a dollar sign beanie.
53:55This is a dollar sign money clip.
53:58This is a bandana, you know, while you're bike riding or jogging.
54:03And this just goes to show that literally head to toe, people in America, we're obsessed about the dollar, we're
54:10obsessed about money, and we wear it.
54:12This here, we have a dollar sign.
54:13And if you want to make me money.
54:19This is something making detail a little.
54:20They know you're rabbit I mad with.
54:21Boy, I guess that way.
54:25This is real fiction.
54:26Absolutely, not genuine.
54:26How se finds a light and light the light line
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