The origin of the almighty dollar is in what is now the Czech Republic. In 1519, a silver mine near the town of Joachimstal (literally “Joachim’s valley,” from the German Tal, meaning valley) began minting a silver coin called, unimaginatively, the Joachimstaler. The coin, which was circulated widely, became better known by its clipped form, the taler. In Dutch and Low German, the initial consonant softened to become daler. English adopted this form, eventually changing its spelling to the modern dollar. From a 1553 letter by R. Morysin and Sir. T. Chamberlayne:

The Duke of Wirtemberg...shall have for his charges 66000 dalers.

In the American colonies, there was no standard currency. The coin that was in widest use was the Spanish Peso, known also as “Pieces of Eight.” The English colonists informally assigned the name dollar to this coin. From Barnaby Rich’s His Farewell to Miltarie Profession of 1581:

Their beardes sometymes cutte rounde, like a Philippes doler.

Philippe here is a reference to King Philip II of Spain.

In 1785, when the Continental Congress established U.S. currency, they adopted dollar as name for the standard unit of currency. This was the suggestion of Governeur Morris and Thomas Jefferson. From Jefferson’s 1782 Notes on a Money Unit for the U.S.:

The unit or dollar is a known coin and the most familiar of all to the mind of the people. It is already adopted from south to north.

And from the Resolution of the Continental Congress of the U.S., 6 July 1785:

Resolved, that the money unit of the United States of America be one dollar.

The United States was the first nation to adopt an official currency named the dollar. In 1797, the Bank of England began minting “dollar” coins as bank-issued currency. Other nations that have adopted the name dollar for their currency have done so in emulation of either the U.S. or this short-lived Bank of England practice.

(Source: Oxford English Dictionary, 2nd Edition)

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