The “Islamic State of Iraq and the Levant” (ISIL) are apparently about to issue their own currency based on precious metals. But surely it’s time for digital dinars isn’t it? I mean come on, just how conservative are these guys?
Seven years ago, I wrote a blog post that mentioned some comments from Ben Steil, then Director of International Economics at the influential Council on Foreign Relations (CFR) who had said that Governments “must let go of the fatal notion that nationhood requires them to make and control the money used in their territory” and that “in order to globalise safely, countries should abandon monetary nationalism and abolish unwanted currencies, the source of much of today’s instability”. As I said at the time, that’s what I call thinking out of the box. Ben is, I suspect, of conservative bent, as he also said that:
As radical and implausible as it may sound, digitising the earth’s 2,500-year experiment with commodity money may ultimately prove far more sustainable than our recent 35-year experiment with monetary sovereignty.[From Gold opportunity]
Let’s return to Ben’s comments in a moment but first look at the concept of supra-national money — money that is not connected with national borders — through a conservative lens. The European Union is an obvious case study, where the conservative perspective might be that the currency can be argued to be failing, but there is another supra-national trading bloc of interest at the moment, the new Caliphate. They are not using the euro, but the spawn of the Great Satan.
“In order to remain anonymous, ISIL may most likely be settling transactions for smuggled oil in U.S. dollars or the local currency of a cash-intensive economy,”[From Islamic State to Mint Gold Coins – MoneyBeat – WSJ]
The local currency of every “cash-intensive economy” is nine times out of ten the US Dollar as far as I know, so you can’t help but wonder why on Earth US regulators are chasing their tails on Bitcoin when it is actually US Federal Reserve banknotes that are wreaking havoc wherever they go? I noted in an article about corruption in Afghanistan that
Washington made the problem worse by inundating Afghanistan with more cash than it could absorb in legitimate channels to undertake needed reforms;[From Joint Chiefs report admits U.S. military made Afghanistan’s corruption worse: Graft, not the Taliban, defeated the U.S. campaign.]
In a newspaper story like this, “cash” is usually a simple word inserted to mean money of a variety of forms (bank-created credit, central bank-issued currency and so on). But in that particular case, when they said “cash” they meant it absolutely literally. Flipping great wodges of Yankee dollars. I wrote about this several years ago.
Interestingly, when he says “bags of cash” he isn’t speaking metaphorically: they actually do give him bags of cash[From Cash means a lot of baggage – Tomorrow’s Transactions]
All of which leaves me wondering why the US chose to work in cash. M-PAISA went live in Afghanistan years ago, and the US could (I’m pretty sure) have simply insisted that all contractors were paid by mobile money so that they had a rudimentary audit trail as, indeed, they would have with Bitcoin. But I digress. Back to the Caliphate. Remember my new tattoo, “cuius regio, eius pecunia” or “whose region, his money”? It turns out that it’s their motto too and as they appear be of a reactionary mindset, the money in their region will not be of the kind subject to quantitative easing.
The “Treasury Department” of the jihadist group that is now occupying large portions of Syria and Iraq announced Thursday that it plans to mint its own currency out of gold, silver and copper.[From Islamic State to Mint Gold Coins – MoneyBeat – WSJ]
The group say that their goal is to break away from the “satanic usury-based global economic system”, and I’m sure we’d all support them in this noble aim. Hence their desire to
use a currency that’s “based on the inherent value of the metals”[From Islamic State to Mint Gold Coins – MoneyBeat – WSJ]
They sound as conservative as Ben and in their declaration I hear a faint mimetic echo of my “back to the future” theory on the impact of new technology on money. But I’m not as conservative as them in every respect, hence I can’t help but ask: why bother minting coins or notes at all? As I suggested in the run-up to the Scottish independence referendum,
As I will say in Edinburgh tonight, there is no need for notes and coins (except as post-functional cash) and Consult Hyperion’s experiences ranging from chip and PIN to M-PESA and from Mondex to MPOS can help the new Scottish government to design and build money for the 21st century while remembering the 19th![From McPESA]
What’s wrong with an Islamic Au-PESA? On hearing news of the new currency, incidentally, I turned immediately to my copy of “A Monetary History of the Ottoman Empire” by Sevket Pamuk of the LSE to look for suggestions for the denominations, names and styling of the new coins. In case you are wondering why I have a “A Monetary History of the Ottoman Empire” by Sevket Pamuk in reach on my bookshelf, it’s because a couple of years ago I did some work for a financial services customer who was thinking of launching (in essence) an Islamic payment card. The idea was to have an account something like e-gold but with a decoupled debit card front-ending it. So, you go into Harrods and spend $X, it looks to Harrods like a debit transaction in the £ but it is actually an F/X transaction that is converted to Y grams of gold on your account. Thus, you have can a Gold Card that actually uses gold.
This is not to imply, incidentally, that digital gold is just for the Islamic community or that gold is the only commodity that may be used as a store of value. It may well be that digitised commodity money is in the future for all of us.[From Gold opportunity]
I remember the feasibility study being quite positive, but the customer decided not to go ahead for other reasons. Maybe it’s time to dust off the idea again and launch an Islamic e-Dinar electronic money issuing institution with gold as the unit of account and a gold 100% reserve. What’s wrong with a little competition in currency?
And finally, if the Treasury Department of the Caliphate is looking for an inspirational figure to show them a vision of how life could be, I suggest that they strike their first new Dinar with the head of Alec Baldwin on it.
Back to the future, guys.