By Darren Smith, Weekend Contributor
Though as further evidence ISIS is establishing a form of structuralized government, ISIS claims it will undermine Western currency markets with its minted bullion coins. It is using such to establish internal payments and as a hard currency to fund its black marketeering in illegal trade items. Since ISIS lacks a recognized currency, gold provides an intrinsic value in trade in foreign commerce.
However its reliance on bullion coinage can also make it vulnerable to economic countermeasures.
ISIS released on August 29th a propaganda film touting its return of the gold dinar, claiming it will displace the United States from international financial transactions by replacing dollars with bullion coins such as gold, silver, and copper. The film titled “The Rise of the Caliphate: Return of the Gold Dinar” describes how the United States created the Federal Reserve, promising to make payments in gold upon demand accompanied by surrendering dollars. However, the United States then deceived the world by switching to a fiat currency with paper dollars and eventually removing the dollar as payable in gold. The US then maintained dollars in a “satanic way” by using oil, forcing other countries to buy and sell oil in dollars through the petrodollar system.
A site dedicated to the ISIS coinage makes the following claim:
Declaration of the Islamic State launching its own currency
In the name of Allah, the Most Gracious, the Most Merciful! Praise be to Allah, Lord of the Worlds, and peace be upon Muhammad and his family and companions…
Under decree of caliph Ibrahim (May Allah bless him!), ruler of all faithful Muslims of the Islamic State, proclaiming the Islamic State to produce its own currency to prevent blind and tyrannical monetary system that was imposed on the Muslims and was a reason for their enslavement, impoverishment and the wasting of national wealth, making it easy prey in the hands of the Jews and Christians. For this purpose the Islamic Financial House has examined the issue and developed a project (Praise be to Allah!) dedicated to minting gold and silver coins according to the domestic value of these metals.
This site (ISIS-Coins.com) tracerouts to a hosting company in Luxembourg, and has its domain registration made private by a company in Russia. It might be proxied.
The ISIS now claims replacing dollars with gold will cause major economies such as Russia and China to sell US T-bills, leading to a collapse of the economy in America.
Al-Monitor reports during an interview with a former jihadist and Islamic commentator Najeh Ibrahim who stated:
“The fact that [ISIS] is monetizing its currencies carries more than one message. The first message is addressed to the world, in which IS confirms that it has become a [legitimate] state. The second is addressed to Muslim youth, in which IS asserts that the Muslims’ dignity and economic power, lost since the era of the caliphate, have returned.
Each coin has its own connotation. The first is a 1-dinar coin of pure gold weighing 4.25 grams [0.15 ounces], and this is the same weight as the first gold dinar of Umayyad Caliph Abd al-Malik ibn Marwan. On its reverse side, the 1-dinar coin has a symbol of seven wheat stalks, representing the blessing of spending in the path of Allah. The second coin is the 5-dinar coin and weighs 21.25 grams [0.75 ounces]; it is imprinted with a map of the world, representing the extent of territory [the Prophet] Muhammad’s reign would reach.”
There are economic, political and scientific relations between the countries [that cannot be overlooked]. To be recognized as a state, [ISIS] must be accepted by others. There are 192 countries in the world and none of them recognizes [ISIS] as a state, and therefore its currency will not be recognized.” He added, “Any currency must be accepted by the transaction parties. The holder of a currency must not feel threatened by using this currency. An Egyptian worker in Libya working in an area controlled by [ISIS] will not accept his salary in [ISIS] gold dinar, because he knows that he cannot transfer this amount to his children in Egypt. If this worker is caught carrying this dinar in Egypt, he may be subject to legal prosecution. People will not use this currency, even if [it is] made of gold.”
The ISIS arguments fail on many macroeconomic fronts. Any given national currency is backed by local governments and the gross domestic product of that nation, goodwill, and economic strength; not just the holding of precious metals. ISIS coinage lacks any recognition by other states and therefore other than its intrinsic metal value fails in the ability to convert it to other currencies. It likely also will be a closed system in with regard to international black market trade because those engaging in illicit trade with ISIS can only return such currency to those recognizing the ISIS. Nations also can ban possession and trade in this currency, severely limiting its demand and encouraging its devaluation.
The metal value of these coins will fluctuate and will be inversely proportionate in many ways to rises in economies of other nations, as investors sell gold abandon a traditionally perceived safe haven during bear markets. The copper coins are for practical purposes entirely valueless due to the value of copper and the small quantities for which the coins are available.
Yet another worrying factor is where ISIS obtains its gold. With the raping of important historical artifacts and world heritage sites it only seems logical ISIS will turn to extracting gold from irreplaceables and robbing citizens of gold held privately.
One method that the West can engage in economic warfare against ISIS could be found in a similar front prosecuted against Great Britain during the Second World War by the Nazis–See Operation Bernhard for more information.
In the operation the Nazi Government attempted to crash the British Economy by forging millions of pounds of banknotes and releasing these counterfeits into the world economy. While it did lead to disruptions, failures to fully execute the plan and other factors made the operation largely unsuccessful. It did however force the Bank of England to deprecate the notes subject to counterfeiting and reissue new banknotes.
A similar approach could be taken against ISIS currency. The coinage is easier to forge, save for weight. The West could dump large quantities of counterfeit coins having no intrinsic bullion value in an effort to undermine confidence in the currency and lead to inflationary pressures. Whether such actions would can have a positive cost / benefit remains to be seen however.
By Darren Smith
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