It must be wonderful to be so desirable at age 100.

Yes, it was in late 1914 that the U.S. Federal Reserve note, the official incarnation of the U.S. dollar, first shot from the U.S. Treasury’s Bureau of Printing and Engraving.

There’s been little official fanfare. But the dollar itself has spent its centenary year pulverizing the competition and turning global markets upside down.

This is all the more remarkable given the dire warnings about the dollar’s health over the last few years. Economists and financial talking heads—mostly of a conservative, monetarist stripe—have continually cautioned that the Federal Reserve’s efforts to resuscitate the U.S. economy by creating loads of money from thin air and using it to buy bonds would ultimately undermine the dollar, set off a wave of inflation, spook global investors, unhinge interest rates, saddle the Treasury with crippling interest payments, and cause the U.S. economy to once again stall.

These folks—here are some of the leaders among them—have been completely wrong. But to understand why, you really have to understand the history of American money. And what better time for that than the dollar’s 100th birthday?

Of course, the U.S. had paper currency before 1914. The earliest, the continental dollar, was printed to keep the lamps lit in the first days of the republic. But it collapsed amid hyperinflation in the 1780s.

For nearly a century after that unsightly episode, the U.S. currency system was a mishmash of private banknotes issued by state-chartered banks, specie coins issued by the Treasury, and foreign coins and banknotes. It didn’t work particularly well. Private banknotes were fine in the general vicinity of the issuing bank, but they were only accepted at a discounted rate further afield.

It wasn’t until the 1860s, in the midst of the U.S. Civil War, that the federal government gave printed money another full-fledged try. But until the Federal Reserve Act of 1913, the system was still a bit of a mashup, with individual banks also printing their own currencies.

The system still had a lot of problems. Foremost was its tendency to go spectacularly bust—see 1873, 1884, 1890, 1893 and 1907—and sink the U.S. economy into sometimes deep recessions. After J.P. Morgan organized a massive bailout during the panic of 1907, the government decided that relying on the kindness of private bankers probably wasn’t the best policy. A few years later, the Federal Reserve Act of 1913 created the U.S. central bank, and endowed it with the ability to “furnish an elastic currency.” (Essentially, that meant the central bank could expand the money supply as needed to prevent creeping doubts about the availability of cash from turning into destructive runs on the banks.)

Still, that didn’t immediately make the dollar the reserve currency—the default for international transactions—that it is today. The pound sterling had held that spot since 1821, when Britain reinstated the gold standard at a fixed rate after the Napoleonic wars. Countries using the gold standard agreed to make the value of their currency equal to a fixed amount of gold. The U.S. didn’t join the gold standard until 1870s.

Thus, though the U.S. economy had overtaken Britain’s around 1870, London remained the center of world finance in 1914. Corporations and governments flocked to the City’s banking houses to raise money. Brazilian coffee farmers shipped their products to Spanish restaurants, and took payment in pounds by calling at the London offices of their bankers. Japanese importers of Henry Ford’s cars paid for them in London with bills of exchange.

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The Number of U.S. Dollars per British Pound

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It took the First World War to bring the dollar to preeminence. In wartime, countries would typically abandon the gold standard, and pay military expenses with freshly printed paper money, usually resulting in a spiral of inflation. When the war hit Europe in 1914, most of the warring countries abandoned the gold standard.

Britain held on, reasoning that going off gold would devastate the City of London. But since the U.S. didn’t enter the war until 1917, it had more money to lend than the U.K., where the war effort was devouring every scrap of spare capital. Countries like Canada, Chile, Argentina, and Switzerland began to borrow in the U.S., by selling dollar-denominated bonds designed to appeal to U.S. investors.