The value of a dollar was a weight of silver from 1894 to the creation of the Federal Reserve. The price of silver fluctuated regularly which created problems. There were booms and busts caused by the discovery of gold and silver deposits. In theory the US didn't come off the gold standard until 1971, but there was already some inflation in the works before this act.

Before the US dollar, many people traded using the milled Spanish Dollar (aka a Piece of Eight). The problem was that the coins in the US tended to be more worn (usually from people shaving coins). The weight of the US dollar was set by weighing a pile of Pesos and taking the average.