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Originally Posted by Thymeclock
That was based on a gold standard - where you could take a genuine gold coin, cut it into pieces, and it would still hold its value, fractionally: a tangible, indisputable, divisible standard of value.
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In fact it was based on a silver standard: that's what the Spanish dollars (and similar coins) were minted from. See e.g. the Wikipedia article here
Spanish dollar - Wikipedia, the free encyclopedia Gold's just not really practical for a widely-used coinage, for a lot of reasons, but mainly because it's just too valuable. A 1/10 ounce gold coin is quite a bit smaller than a dime, yet is worth about $150 at today's gold price.
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The American dollar is nothing more than fiat currency.
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Gold has its own problems, though. It's subject to wild swings in price that're driven by speculation & hysteria. Nice if you bought at a low point, but I knew several people who lost significant sums by buying near the top of the last "gold rush" back in the '80s. Same with the current bubble: the "value" of gold has gone up by half or more, yet the price of most goods bought with dollars (or Euros, Francs, British pounds, etc) hasn't changed much at all. So if we were using gold as currency, we'd be seeing an extreme deflation.