Cool Video: CNN Interview on ISIS Funding and its Currency

ISIS says it will soon issue metallic coins. The early reports suggest there will be gold, silver and copper coins. ISIS is expected to announce shortly how their coins will trade. The indication being that they will trade according to the value of the metal of which they are made. Many critics of the fiat currency regime may be attracted to this new money.

I see some of the same problems that I saw with Bitcoins, though Bitcoins are fiat currency. Their "mining" may be on a gold-like pace, but Bitcoins are not backed by gold, nor does price appear to be tied closely to the price of gold. 

To the extent that the new money is perceived to be more sound that paper money, the coins will be hoarded. To the extent that they are hoarded, they will not provide a sufficient means of exchange. The monetary equivalent of hacking may be counterfeiting. The US and other countries work hard to prevent counterfeiters, though they still exist. The ISIS coins appear to be vulnerable to counterfeiting.

The ISIS money, like other foreign countries' coins and notes, are not generally acceptable as payment for one's liabilities outside of one's country. Just like you cannot pay the American grocer or British landlord in euro, yen or even gold nuggets, ISIS money will only be good where ISIS dominates, and even then the people living under its heel will find other means of transactions, if necessary.

Remember ISIS in not a country.  There is no enforcement of contracts.  There is no judicial system apart from the sword.  The utility of gold, unlike water or air, is not obvious.  It is an expression of social relationships.  It  requires elements of social trust which do not and cannot exist in the territory ISIS terrorizes.    As it said, trust in Allah, but tether your camel.  

This Cool Video from CNN was posted on You Tube.  Former US Treasury official, Jimmy Gurule explains how ISIS is funded, including illegal oil sales in a little less than four minutes.