The Islamic State Meets The Laws Of Economics
By Felix Imonti
October 23, 2015 "Information
Clearing House" - The Caliphate
faces an enemy more deadly than the bombs being dropped upon it. It
has not been able to construct a viable economy to provide all of
the necessities that a society requires and people will not wait
forever to fill their stomachs or for the lights to work.
A film released at the end of August by the
Islamic State heralds the coming of a new gold Dinar currency. Najeh
Ibrahim, a former member of the Islamist Gamaa Islamiyah says that
this tells the world that the Islamic State is a sovereign state and
tells Moslems that their dignity and economic power is being
restored.
In November of 2014, the idea of the gold Dinar
was first announced. There was a debate within the leading circles
of the Islamic State if it was a sound economic plan. In spite of
the doubts by some, the accumulation of gold and silver for the
coins was undertaken, but little more was said of the new currency,
until the film The Rise of the Caliphate: The Return of the Gold
Dinar presented the issue as a part of the strategy of the Islamic
State to destroy the United States and the West and to create an
independent caliphate economy.
“Return of the Gold Dinar” continues the IS
practice of tying every action to the Abbasid Caliphate that ruled
much of the Middle Eastern region from 750 to the middle of the
thirteenth century. What was an Islamic Empire not much different
from the Persian and Egyptian Empires before it minted its own
coinage. The new coins are to display religious symbols like those
on the original coins. Baghdadi would like his followers to imagine
that they are a continuation of the long ago caliphate with only a
mere seven hundred and fifty years disruption.
The idea is not new. The proposal to create a gold
Dinar was advocated in 2002 when Prime Minister Dr. Mahathir bin
Mohamad of Malaysia presented it at the Organization of the Islamic
Conference. The problems in the economies of Moslem societies were
attributed to foreign domination and a gold currency was to be the
means of escaping dollar domination by creating a Moslem economic
community.
Daesh’s monetary problem is not domination by the
USD. Rather, it is that the erasing of the borders between Iraq and
Syria did not change the line drawn by two separate economies using
two different currencies.
If Daesh intends to create a single economy, it
must create a common currency that will enable buyers and sellers to
agree upon a price for goods and services without having to first
decide upon an exchange rate.
The obvious solution is for Daesh to create its
own currency that will circulate throughout the caliphate; but
getting the public to accept the new colored pieces of paper from a
government that may not exist in a few years makes conversion a near
impossibility. The other choice is for people to conduct business in
a currency that can be trusted, such as the USD or the Euro. The
Turkish Lira is preferred in many cases over the local currencies,
but using foreign currencies requires people to have access to
them. How can people acquire sufficient foreign funds to finance
their daily needs when the economy is isolated from the surrounding
countries?
What commerce does occur is of a criminal nature.
How much the caliphate acquires from the exporting of historical
treasures or human organs or oil is all a guess. Contributions from
wealthy supporters in Saudi Arabia or the Gulf States or ransom
money from kidnap victims provides only a few drops in a desert that
is consuming vast amounts of money to finance an ongoing war.
Much of the wealth of the caliphate comes from
taxation of its citizens and sale of grain or petroleum that are
kept as caliphate monopolies. Exploiting these resources, though, is
finite. Farmers will not plant if they cannot expect a reasonable
price for their crops and factories will not manufacture if the
owner cannot acquire fuel or materials that he can afford or gain a
profit that makes the effort
worthwhile.
Getting fresh investment is a near impossibility
and the economy is in decline which is making the acquisition of a
new medium of exchange a serious issue that cannot be delayed too
much longer. Before the rise of the Islamic State eleven million of
Iraq’s thirty-five million people were engaged in
agriculture. They farmed twelve million acres of land.
In spite of the domestic production, Iraq imported five billion
dollars in food stuffs much of which was used to provide food
packages to the impoverished Sunni in the provinces now under Daesh
control.
Since the seizure of large areas of Iraq by the
Islamic State, the amount of acreage under cultivation had been cut
in half with no possibility of supplementing the loss food stuffs
with imports, while Syria is in worse condition. Half of the
population of twenty-two million has been displaced and no longer
contributes to the economy. If the caliphate cannot provide food
and essential services to the people under its control, it faces an
insurrection.
The solution chosen by the caliphate is to turn to
the gold Dinar that has as much symbolic value as is does as a means
of financing the society. While gold speaks of wealth and security
in the minds of most people, there is a hazard in adopting a gold
currency. The value of the gold coins comes from the quality of
gold metal and not from the quality of the issuer. Anyone doubting
the longevity of the caliphate will be inclined to horde the coins
under a rock somewhere or smuggle the coins outside. The loss of
money from the economy will translate into an overall deflation as
the scarcity of money raises its value; and that is likely to
depress the economy even further.
Return of the Gold Dinar is a declaration of
economic warfare upon the United States for reneging upon its pledge
to preserve the gold standard and imposing the dollar standard upon
the world. The caliphate assures its believers that it will exact
its revenge by breaking the dollar and by bringing back the use of
gold to finance world commerce.
Egyptian Finance Minister Fayyad Abdel Money, a
former professor of economics, points out that there is not enough
gold in the world to finance the more than 75 trillion dollar global
economy. The U.S. represents a quarter of the total, a power
somewhat beyond that of the caliphate.
After all of its talk about the mystical powers of
gold, it is their own economy that is a serious weakness in the
survival of the caliphate. The caliphate is consuming itself and
needs a fresh infusion of wealth.
That means acquiring a commodity that can be
marketed outside of the caliphate. The caliphate is targeting for
that purpose opium from Afghanistan that produces 90 percent of the
world supply and has the extra advantage of being the largest grower
of cannabis. It is focusing on The Badakhshan Province which saw a
77 percent increase in opium production during 2014 and has a minor
Taliban presence. The mountainous province extends into Pakistan,
Tajikistan and the Xinjiang Province of China. The Russian Federal
Drug Control Service estimates that the opium trade is worth a
billion dollars.
The move of the Islamic State into Afghanistan is
bringing it into conflict with the Taliban that also relies upon
opium as a source of revenue. As the Islamic State forces strengthen
in the North, it is likely to spread deeper into the Taliban’s
tterritory as both organizations battle to control the illegal drug
trade.