An Ottoman Piatsre (Sultan Selim III, 1789) and a Maria Theresa Thaler (later restrike of the 1780 coin). Photo: James Dawson
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When it comes to coins, Isis is clearly not as good as gold

A plan by the terrorist organisation to issue its own currency – in gold – reveals a further attempt to play on the history of the early Caliphs.

A cynic may say that what the leader of terrorist organisation Isis, Abu-Bakr Al-Baghdadi, and Winston Churchill have in common that they have attacked the Kurds but another thing may be the gold standard. It was recently reported that Isis plans to introduce its own currency, issued in gold, silver and copper. Though – unlike Churchill, who shortly will appear on the new £5 note and appears on the still legal tender 1965 five Shilling coin – Baghdadi won’t appear on his currency. The designs, in accordance with Islamic artistic traditions of not showing humans or animals, will apparently depict Arabic writing, mosques, palm trees, crescents and even a world map.

The plan seems to be a currency based on the bullion value of the metals in the coins, in contrast to all present world currencies which merely have a (widely accepted) token value. It is based on Isis’s interpretation of Sharia law and financial systems and deliberately emulates the currencies – the gold dinar and silver dirham – established by the early Caliphs.

The early Islamic Empire initially relied on Byzantine coins or copies of pre-Islamic Persian Sassanid coins. It was not until nearly 60 years after the death of Prophet Mohammed that they started to introduce their own coins. The Byzantines had pointedly placed the image of Christ on their latest issues and so the Umayyad Caliph of Damascus, Abd al-Malik, introduced a new standardised Islamic silver dirham in 691AD. The original coins, flouting any ban on human images, depicted the Caliph himself. It was not until 697AD that coins minted with only Arabic calligraphy were produced. These provided the pattern for most subsequent Islamic coinage. Though as the Islamic Empire fractured local rulers started producing their own money. Italian renaissance coins, issued to more exacting standards, started replacing local monetary systems in the late 1400s. Later silver dollars (Austrian thalers and Spanish pieces of eight) became widely circulated. The most popular Middle Eastern coin became the Maria Theresa thaler, the buxom image of the Holy Roman Empress being more popular with traders than Arabic calligraphy. The coin had a trusted weight set in 1754 at one-tenth of a Cologne Mark and continued to be produced following her death in 1780, its use for trade purposes being confirmed by the Vienna Currency Treaty 1857 (it is still minted today). The alternative coinage of the Turkish Ottoman emperors, who had assumed the title Caliphs of Islam could not keep up. It became debased, produced from billon, an alloy with less than 50 per cent silver. The Ottomans were also late in adopting Western scientific advances – they continued to produce imprecise hammered coins until 1844, only then introducing Western-style mechanically milled coins. Despite still ruling the Middle East, further decline led to the Ottoman Empire defaulting on its debt. In 1881 Ottoman finances were taken over by Western governments and corporations under the Ottoman Public Debt Administration.

Precious metals on the face of it sound like an ideal material for money, something durable that holds its value over time. But experience has proved this wrong, all world currencies now use base metal or paper. Bullion values are dictated by supply and demand, based on the usefulness or desirability of a commodity. Gold and silver do not have many practical uses, beyond jewellery or a perhaps tarnishable sets of cutlery. Their value is not intrinsic and is susceptible to great fluctuations. If the ratio between the value of gold and silver changes then bad money drives out the good as people spend the devalued coins but keep the increased value ones. The amount of coins in circulation is also just a fractional amount of money in an economy, the rest is in bank balances, debts owed or other commodities.

Problems with the gold standard include the finding the metal: greater availability leads to inflation; scarcity leads to deflation, which limits demand and cuts investment. The coins themselves are subject to clipping, people cutting small bits off the edges, and hoarding, as Germany experienced in the lead up to its hyper-inflation in the early-1920s. Harsh punishments will not help bolster the currency as people become wary of handling clipped coinage, avoid all but the most essential transactions or resort to barter. Sooner or later gold and silver currencies have to be debased.

Precious metal was commonly used in all pre-modern currencies but coins were relatively rare only circulating amongst the few. To have a wider cash-based economic system required a different approach. It was Sir Isaac Newton (scientist and habitué of the Bank of England’s last one pound note) who formally established the gold standard, whereby paper currency was backed by gold reserves, in 1717. Other European countries adopted the gold standard in the 1800s, the recently united Germany being one of the last to do so in 1872. However, countries left the gold standard in the First World War. Churchill, as Chancellor of the Exchequer, put Britain back on the gold standard in 1925. Criticised for the deflation that led to 1926’s General Strike and for the disastrous consequences of Britain’s inability to respond to the Wall Street Crash, the National Government took Britain off the gold standard for good in 1931. The Bretton Woods financial system established in 1946 left the American dollar as the only currency backed by gold, with all other major currencies pegged to the dollar. This persisted until the Nixon Shock 1971 when draws on US gold reserves, mainly from France, and the costs of the Vietnam War took America (and the world) off the gold standard.

British coins continued to contain silver for many years after leaving the gold standard. The original 0.925 quality silver in half-crowns, florins, shillings and sixpences was cut to 0.500 in 1920, just enough to still merit the name silver, and our coins stayed this way until the dollar became the world’s reserve currency in 1946. The First World War, Great Depression and Second World War had largely forced other countries to abandon silver earlier. Switzerland continued minting in silver until 1969, but if you visit today you won’t find any 5 Franc coins older than the first cupro-nickel coins issued in 1968. Gold and silver coins are generally only found in commemorative coins issued for collectors.

Coins, as well as a means of exchange, convey historic value. They are metal, mass-produced and therefore survive. The designs portray the issuer’s political and artistic views. If the Isis coinage is produced the best that could be hoped for is that it becomes, after sufficient passage of time to let its memories of its crimes fade, a numismatic foot note. Though it is to be hoped that, like the disgusting zinc coins that were all the Third Reich could afford to produce in the Second World War, they are viewed with as much disdain by collectors.

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Inside a shaken city: "I just want to be anywhere that’s not Manchester”

The morning after the bombing of the Manchester Arena has left the city's residents jumpy.

On Tuesday morning, the streets in Manchester city centre were eerily silent.

The commuter hub of Victoria Station - which backs onto the arena - was closed as police combed the area for clues, and despite Mayor Andy Burnham’s line of "business as usual", it looked like people were staying away.

Manchester Arena is the second largest indoor concert venue in Europe. With a capacity crowd of 18,000, on Monday night the venue was packed with young people from around the country - at least 22 of whom will never come home. At around 10.33pm, a suicide bomber detonated his device near the exit. Among the dead was an eight-year-old girl. Many more victims remain in hospital. 

Those Mancunians who were not alerted by the sirens woke to the news of their city's worst terrorist attack. Still, as the day went on, the city’s hubbub soon returned and, by lunchtime, there were shoppers and workers milling around Exchange Square and the town hall.

Tourists snapped images of the Albert Square building in the sunshine, and some even asked police for photographs like any other day.

But throughout the morning there were rumours and speculation about further incidents - the Arndale Centre was closed for a period after 11.40am while swathes of police descended, shutting off the main city centre thoroughfare of Market Street.

Corporation Street - closed off at Exchange Square - was at the centre of the city’s IRA blast. A postbox which survived the 1996 bombing stood in the foreground while officers stood guard, police tape fluttering around cordoned-off spaces.

It’s true that the streets of Manchester have known horror before, but not like this.

I spoke to students Beth and Melissa who were in the bustling centre when they saw people running from two different directions.

They vanished and ducked into River Island, when an alert came over the tannoy, and a staff member herded them through the back door onto the street.

“There were so many police stood outside the Arndale, it was so frightening,” Melissa told me.

“We thought it will be fine, it’ll be safe after last night. There were police everywhere walking in, and we felt like it would be fine.”

Beth said that they had planned a day of shopping, and weren’t put off by the attack.

“We heard about the arena this morning but we decided to come into the city, we were watching it all these morning, but you can’t let this stop you.”

They remembered the 1996 Arndale bombing, but added: “we were too young to really understand”.

And even now they’re older, they still did not really understand what had happened to the city.

“Theres nowhere to go, where’s safe? I just want to go home,” Melissa said. “I just want to be anywhere that’s not Manchester.”

Manchester has seen this sort of thing before - but so long ago that the stunned city dwellers are at a loss. In a city which feels under siege, no one is quite sure how anyone can keep us safe from an unknown threat

“We saw armed police on the streets - there were loads just then," Melissa said. "I trust them to keep us safe.”

But other observers were less comforted by the sign of firearms.

Ben, who I encountered standing outside an office block on Corporation Street watching the police, was not too forthcoming, except to say “They don’t know what they’re looking for, do they?” as I passed.

The spirit of the city is often invoked, and ahead of a vigil tonight in Albert Square, there will be solidarity and strength from the capital of the North.

But the community values which Mancunians hold dear are shaken to the core by what has happened here.

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