This fabulous history of currencies was written by our very own “secret” investment advisor. Who graciously allowed us to reprint it here for you.
(If you missed Part 1, then check that out first here: A Short History of International Currencies: Part 1 )
A Short History of International Currencies: Part 2
Honest Money Returns
But more importantly, the Greek ideals of sound money were never completely forgotten in that part of the world, even though by that time nearly 500 years had passed since Greek power declined into Roman.
This had enormous implications and these ideals were resurrected. So adamant were the authorities that no monetary debasement would take place that a tough series of laws were passed. In the Book of the Prefect, all would-be bankers had to swear they would never file down or clip the precious metals out of the coins, or would not issue false coins with base metals inside. If they broke this law they had their hand cut off. To keep watch on the bankers, all moneychangers were required to immediately denounce any banker who issued false money. If they failed to do this they were whipped, had their property confiscated, and last but not least, had their hair and beards shaved off which was the very symbol of their manliness.
They went even further. Realizing that debt and the siren song it sang was the ruin of the average Roman, put them into economic slavery and, most importantly, caused the inflation and ultimate destruction of money, they took a radical view on charging interest. Here the old Aristotelian philosophy was in accord with the newer Christian economics. Debt and interest were regarded as abominations, and only tolerated occasionally for commercial transactions. And even in this area, debt played a very small role. People learned to pay with cash or not at all. In this way, the story mirrors what happened in America from the 1920s (when margin loans were all the rage) to the 1930s when debt was hated.
However, in 4th century Byzantium, these lessons were learned for much longer. The solidus started to become the world currency and was popularly called the “bezant”. In a very short time, the bezant became the currency of choice all over the known world. It was found as far away as Scandinavia and Sri Lanka in Asia. As Western Europe fell into the Dark Ages, bezants became the only money worth believing in. In England, even into the Middle Ages, we learn from the taxpayer records that bezants were the money used to make payments.
I’m not saying that the Byzantine Empire was a paradise. Indeed, as its power increased, so did its arrogance. Just 101 years after Constantine died, in 438, Theodocius II started persecuting the Jews and destroyed all the synagogues in Constantinople. Those who had endured so much persecution themselves all too quickly began to persecute others when they got power. This same Emperor instituted what the 20th century would call “thought crimes” that brought any unconventional thinking under heel.
Say what you will in other areas, Byzantium remained true to its founding as far as honest money and sound economics were concerned. In fact, they might have gone to extremes. Anastasius, who ruled from 491 to 518, was the one who made Greek the official language. He also reduced taxes, which had been creeping up. He reasoned that more money would flow into the Treasury if taxes were low and trade healthy. He was right. By the time he died, there were a record 3.34 million ounces of gold. This was more than had ever been held at one place and was equal to fully 20 years of all the known global production at that time.
This hoard and the economic power it symbolized created the glories of Byzantine art that came soon afterwards.
Obsessed with Gold?
From Anastasius’ death, the gold supply started to fall. The Church began to melt gold coins to make ornaments for the one artistic achievement the Byzantine Empire is remembered for: mosaics.
The massive Hagia Sophia (Church of the Holy Wisdom) began soon after Anastasius died. While still tremendously impressive today, the huge amounts of gold used, as well as its four acres of gold-tinged mosaics, were looted by Venetian Crusaders in 1204. (In a later chapter, we’ll be hearing more about Venice and how through her, Europe regained the world currency.) If you really want to see the glories of Byzantine art, as well as seeing how gold was used, you have to go to the sleepy Italian city of Ravenna, 90 miles south of Venice. Its unpretentious red brick buildings do not prepare a visitor (and there aren’t many of them) for the brilliant richness of the mosaics within.
Inside the Basilica di San Vitale gold is seen everywhere. From the dome where golden stars glitter, to the mosaics on the walls themselves where gold is used both in portraits and as background, you are hit by a sea of gold. Even when actual gold is not used, the color of gold is venerated to nearly an obsessive level. In the church of Sant’ Apollinare Nuovo, the left side was reserved for women and there is a golden scene of 22 virgins offering crowns to the Virgin Mary. The right side shows 26 men carrying the crowns of martyrdom, approaching a Christ surrounded by angels. Again, the overwhelming motif is Gold, with a capital G.
The guidebook, 1000 Places to See Before You Die lists all three of these churches. But whereas the Hagia Sophia in Istanbul is always crowded and much of the gold is gone, in the gold-rich mosaics of Ravenna you’ll have the places to yourself.
The Bezant Lost its Luster Too
All this gold took its toll on the Treasury. By 856, fully two thirds of the gold -over two million ounces– that Anastasius had amassed was gone. However, the weight of the bezant was kept for nearly two hundred years after that. But by the middle of the 11th century, around 1050, the bezant gradually lost its luster. By 1082 it contained only six carats of gold, down from the original 22. The Emperor of this time, Alexius Comnenus (1081–1118) again started up with the old tricks of the late Roman emperors. While he continued to demand that taxes be paid in the pure gold of the earlier times, he himself issued coins that were adulterated by base metals.
After that, it was pretty much over for Byzantium monetary supremacy. Trade and gold began to flow elsewhere, and by 1204 it had ceased to be a world center. It did not officially fall until the Ottoman Turks sacked it in 1453, but like Rome, when the world lost confidence in its money the final fall was only a matter of time.
That the world was shocked by Alexius’ devaluations is clear. After all, it ended a period of over 750 years of keeping the international money exactly stable. No money before or since has matched this record. And while Byzantium went out with a whimper and never shook the world with its cultural achievements the way Greece and Rome did, we should not forget they kept the ideal alive of honest and stable money during the nadir of civilization, and provided economic life to go on from Ireland to India.
The Pendulum Swings
Why did the Byzantine Empire succeed so brilliantly in having a stable monetary standard and an international currency which for centuries allowed trade from Sweden to Sri Lanka during what was otherwise the Dark Ages?
I’ve thought about this question for years and the best I can come up with is the following: It’s human nature and when things go too far in one direction, then you see the pendulum swing back in the opposite extreme. A few examples of this, from the ridiculous to the sublime, and working backwards in time.
Just last week, the 68 year old head of Boeing had to resign for having an affair with a woman who also worked there, but on the other side of the US. This woman had worked at Boeing for 25 years, so has to be around 50 years old.
A very few years ago, aging CEOs had public affaires with much younger women right in their offices, and the world tolerated it. Now it seems to be going to the other extreme.
Just a few years ago, if you asked, “How much does that stock pay in dividends?,” people laughed at you. No one bought stocks in the late 1990s for the yield, it was all about growth. These days, stocks paying dividends are very much in demand.
During World War II, it was common knowledge that around the “movers and shakers” in Washington D.C., you could make fun of the rest of America’s wartime Allies… Britain, France and China…. all you wanted, however, and in every possible way. Saying something bad about Stalin and the Soviet Union, however, would get you passionate defenses of the Russians and even Communism from these very same people. Vice President Henry Wallace was a particularly vociferous defender. But after 1948, when the Soviets invaded Czechoslovakia and (very probably) killed its hero Masaryk, US opinion turned and started going to the other extreme. In just a few years came the McCarthy “witch hunts” and persecutions of anyone who had attended a gathering where Communists might have been present. Again, from one extreme to the other and in just a few years.
The 17th century in Europe was made extremely bloody by religious wars between Catholics and Protestants that had seemingly no end. After generations of this, Europeans became fed up, and the following century, the 18th, became the most tolerant century that Europe –and maybe the entire world– has ever known. I’m sure you can think of many more examples of the same thing.
Going back further, by the time of Constantine the world had graphically seen what can happen to an Empire and its way of life when money loses its value over the centuries. Remember that by 325 AD, the world’s most important currency had been steadily losing its value for over 250 years, resulting in chaos and depression for over a century, since as far back as 215 AD.
So terrible were the memories of this that whatever else the Byzantines did, they were sure to prize a stable currency and prize it to the extreme. No other international money, indeed, no other currency at all has ever held its exact value for nearly 800 years. Remember that we call them the Byzantines, as somehow apart form the Greeks and Romans, but they considered themselves Romans. The history of the Roman currency collapse was their own history and they were resolved to not let it happen again, even going to the extreme of hoarding up to 20 years’ world gold production to make sure it didn’t.
So what, if anything, does this tell us about our future? The world’s main currencies–first the British pound and then the US dollar—have been steadily losing their values since 1914, when the pound went off the gold standard nearly a century ago. As things now stand, the world is in danger of rejecting its old reliance on the U.S. dollar as the world’s reserve currency, yet there is no clear substitute at the moment.
We could be on the verge of a virulent period of having a world currency breakdown into competing and even warring currency bloc factions: a dollar bloc, a euro bloc, a probable renminbi bloc and a possible Islamic dinar bloc. At the very least, the way things are heading, the world will continue to experience a global currency –the US dollar— that keeps losing its value.
At what point will the world become fed up, and have the pendulum start to swing in the other direction? After all, in just nine years from now, the world will “celebrate” a century of currency instability. It took the Roman world 110 years (215 to 325) of true currency chaos to utterly reject it and embrace honest money. So following this, can we expect an official embrace of gold in the global monetary system in 2024, 110 years after 1914? Or will our world have to wait the 271 years that lasted from the time Nero first devalued the Roman currency in 54 AD to the ‘solidus’ birth in 325? In that case, we are looking at the year 2185.
My bet is that since things move so much faster today, the pendulum will start swinging sooner rather than later.
My working scenario? I’m looking for things to come to a head around 2020, give or take a few years. By that time, the era of currency debasement that the world has experienced, and even tolerated and encouraged for a century, will become very much out of fashion. The world will then start to go to the other extreme of rigidly stable monetary values. When that time comes, I would want the vast majority of my wealth to be in gold and silver.
The Old Islamic Gold Dinar… And the Future One? Part 3 in the History of International Currencies Plus, Safe in a Cash Bunker Wearing a Full Metal Jacket
The World of Mohammad
In 600, the world was not in great shape. The old Roman Empire in the West had collapsed and most of Europe was ruled by a collection of ruthless barbarians of various tribes, Huns, Vandals, Goths and Visigoths: the names changed, but all of their regimes spelled “Dark Ages” (that is, they would have if these rulers could have spelled at all!). In the East, in Byzantium, things were better; at least the remnants of civilization remained. But 300 years later, the Empire that had started with such promise in 325, had become a static and bureaucratic place with ornate rules and –too often— stultifying taxes. There was at least one good thing about the static nature of the place: the content of the gold bezant never changed. At least the world had money it could count on.
When the “gold hoarding” Emperor Anastasius died in 518, the treasury in Constantinople contained a huge amount of gold. But from then on that gold drained away: slowly at first, but in retrospect we can say that the century just after this represents the high water mark of the Byzantine Empire in terms of world power and artistic creation.
By the early 600s, cracks were beginning to appear in the Empire. Even at its strongest, Constantinople had never been able to conquer the Persian Empire, at least not for very long. Most of the time, they were in “peaceful coexistence”. Trade flowed through Persia (modern-day Iran) to India and China, with all traders using the reliable gold bezant.
But Persia had been cut back in size over the years and longed to regain lost colonies. Just after 600, the Persians made their moves. First they advanced into Syria. In 613 they took Damascus. In 614 Jerusalem, the very cradle of Christianity fell to them. In 616 they took Egypt.
Byzantium was in crisis. The Emperor Heraclius stroke back, and after bloody wars, Jerusalem is finally retaken in 630.
Emerging Arabian Tribes
As these great powers fought, no one noticed the poor tribes of the Arabian peninsula. Though they were just a few hundred miles from Jerusalem, they might as well have been on another planet. Sand alone was abundant and the motley collection of tribes fought over the little water there was. They still believed in pagan gods, and some made idols of stones and worshiped them.
And yet, within a scant 100 years after 630, these very people were united by a simple idea and went on to control most of the world -from France down to Spain- into Africa and across to the Holy Land, Persia, into India and even beyond.
How this happens is among the most extraordinary stories in history. And most historians to this day have never been quite able to explain it. One of them, Thomas Carlyle put it this way: It was “as if a spark had fallen, one spark on what seemed a world of black unnoticeable sand; but lo! the sand proves explosive powder, blazes high from Delhi to Granada!”
Soon, a new currency is found trading in all these lands and well beyond. The gold bezant of the static Byzantine Empire has a dynamic new competitor. And the light that first blazed around 630 is blazing again today.
But we are getting way ahead of our story. To understand Islam and its lure, you have to understand Mohammad.
(This fabulous history of currencies was written by our very own “secret” investment advisor, who graciously allowed us to reprint it here for you.
Note: Want to learn more about who our “secret” investment advisor is? And how you could benefit from his uncanny ability to enter and exit not just the precious metals markets but many other markets too, at just the right time? Then go here to learn more now.)
Islam and the Re-Discovery of Freedom
Picture a poor boy, pretty much left to fend for himself and with very little, if any,
formal schooling. He soon develops, however, quite a talent for business, specifically trading. He’s sharp, he’s smart, he’s personable, and most of all, he’s honest. In fact, he becomes known as Mohammad the Trustworthy (Mohammad is his birth name, the other part was to set him apart from the other Mohammads in the town.)
At the age of 25, he marries his boss, a 40 year old widow. After a few more years of relative prosperity —their trading firm probably makes about $300,000 a year in today’s money, a solid if not spectacular success— they retire to a place in Arabia akin to South Florida today.
He finally had time to read and to think. He came up with ideas that were completely revolutionary, going entirely against the established religion of his world. They held “get togethers” for their friends and neighbors, and little by little, when he felt he could trust his listeners he told them his ideas: There is only one God, the God of Abraham. Further, all men are free by birth. They control themselves: no priest, no bureaucrat, no one else should get in the way of their relationship with God.
Bit by bit, this idea (we’ll call it Islam) spread. But the local priests, who direct the tribes in the worship of idols, view Mohammad’s ideas as a direct affront. They came to kill him, but he escapes.
This happened in the year 622: he was 52 years old and only 10 years are left to him. His life work had begun.
The tribes came after him, and Mohammad proved himself a military genius. He did not invent trench warfare, but he introduced it to Arabia. So when the tribes —-which greatly outnumber his followers— came to attack Medina, where he had fled, they were utterly surprised and defeated by the arrows coming out of the ground from all around them. After a few battles, he returned to Mecca in triumph. Though he died a couple years later, in 632, his ideas spread fast.
By 639, all the land from Syria to Egypt was won. Just 21 years later, all of Persia, which had never been really conquered by anyone, was Islamic. 60 years after that, all the land from Spain to India was won. A person could travel from the one to the other with no passport or visa, and a new trading empire was quickly born. As the years passed, lands from Southern France to modern-day Indonesia were also won over.
Of course, some of what the Islamists did was outright hostile, especially in the centuries after Mohammad died. In 846 a naval expedition sailed from Islamic Sicily up the Tiber and looted once-proud Rome itself. To protect itself against this happening again, Pope Leo IV built a wall around St Peter’s and the Vatican palace; this wall became the boundaries of Vatican City today. But at least for the first century after Mohammad’s death, his ideas and soldiers swept easily across much of the world.
How did this happen? People speak of lands being “conquered”, but I wonder if this is the right word for most of what took place. Much of this land had been controlled by the Byzantine Empire, which by this time had become overly rigid and intolerant of any religion aside from the Orthodox one. By 600, any non-believers were crushed.
This was something new: the old Roman Empire, like the Greeks before them, had their gods, but they did not interfere with any of their conquered people who did not share them.
To be sure, the Romans may have smiled at the Egyptian’s worship of their animal-like gods, or the Jew’s belief in one god, but so long as they did not threaten the Empire politically, they were left alone. It was not so much the different nature of religious worship that made the late Roman Empire persecute the Christians, it was the fear that they represented a threat to an increasingly corrupt and despotic Roman rule.
But the Orthodox Christian Church in Constantinople soon began to persecute others who did not believe as they did. At first they turned on each other. Huge fights broke out about the exact nature of the trinity for instance. Then they turned on the Jews and anyone else who did not share their view of the correct religion.
They also began to crack down on independent thought in science as well. By 650, any independent thinker who could leave, left Byzantium. Most of them went to Persia. This is the “backdrop” for the tremendous success of Islam. The early followers of Mohammad proclaimed his message that all people were to be left alone to worship or think as they pleased. Of course, there were powerful incentives to become Islamic. No Muslim had to pay taxes. Christians, Jews, or anyone else were left free, but they had to pay a tax.
Further, no Muslim could be a slave. And in a world which had always known slavery, this was also a powerful draw. Finally, Mohammad specifically said that no black man was any better or worse than any white man and as we will see, this had a vital effect on the Islamic supply of gold.
When looked at this way, the enormous success of Islam during the few years after Mohammad’s death does not seem so strange. The nations were not so much conquered as liberated.
The virtual complete freedom of thought had immediate consequences. First of all, came the universities in the modern sense of the word. (One in Cairo is still in existence.) There was a near-complete lack of structure or formality, at least at first. If you knew anything (or thought you did) and wanted to teach it, you advertised for students. If you were a good teacher, you were successful.
But unlike anything seen in the past, at least for 900 years, students did not so much want to study religion or philosophy, as they wanted to study science. For the first time in centuries, the works of the Greeks were taken seriously. Plus, the Mohammadans proved adept at learning from the people they had “liberated”. For instance, in the West until then, when you wanted to number anything, you used Roman numerals. But because this method had no zero, it was very limited. The Hindus in India had discovered the idea of zero, the lack of a number was in effect a number too.
This idea was freely accepted by the new rulers, and what we now call “Arabic” numbers –the ones we use– are actually the result of this amazing openness for new ideas. Without the concept of zero, no real mathematics is possible and it is no surprise that algebra is an Arabic name.
When I say “Arabic”, it should be understood that Arabs were only one group of several who started to work together and learn from each other. Not just Hindus, but Jews and Christians lived together in peace.
This “living together” (or “convivienca” as they called it) had its most brilliant result in Spain. In modern day Andalusia (also an Arabic name), the cities of Toledo, Cordoba and Granada, among others, were the world’s most advanced places for centuries. Cordoba, a city of nearly a million, had street lights, sewage, and paved streets fully 700 years before London or Paris did. It’s doctors were performing surgery (forceps were invented there, for instance) at a time when northern Europeans were hanging dead spiders around their necks to ward off evil spirits.
Denarius becomes Dinar
There has been a debate for centuries on whether the Islamic civilization was basically derivative or actually original. Both sides have good arguments. Certainly Islam took good ideas wherever it found them –that very openness was one of its attractions. It revived classical Greek learning and even kept alive texts which almost certainly would have been lost by a West that had long stopped prizing them.
On the other hand, the confluence of different races, religions and cultures led to great advances in science, and one could make a very good case that the Spanish discovery of the New World was directly due to the great contributions made by Jews, Christians and Moslems working together in Spain during the centuries before 1492….the very year when both Jews and then Moslems were expelled from Spain.
But certainly, Islam copied the best of many cultures. We’ve seen India’s influence on its mathematics and the Greek influence on its science and philosophy. But the very religion used Christian and Jewish religion traditions in formulating its own (Abraham, Moses and Jesus were all highly esteemed).
Finally, from Persia Islam it took ideas on administration, although with some changes and refinements. (Not enough, in my view: in centuries to come Islam’s power was to wane the more it began to ape the despotic aspects of ancient Persian political workings, a curse that continues in too many Islamic countries to this day.)
But our focus here is on money, and here you can definitely say that Islam copied the best. In the British Museum’s Money Gallery, you can see two coins side by side. One is a bezant minted by Emperor Heraclius from no later than 641 and the other is an Islamic dinar, minted by the Umayyad Caliph Abd-el-Malik in either 691 or 692. They are exactly identical, except that all overtly Christian symbols are removed. Just a few years later, in 696 only Islamic inscriptions were allowed on the money: you never see any pictures of rulers or even mint information from then on.
This was to be Islam’s money: the weight (65 grains of gold) and the quality (.979 fine) was the same as the bezant. As for the name, the Moslems took the name of the ancient Roman denarius, which was itself a copy of the Athenian drachma, except that the Islamic coin was gold, not silver. Denarius became dinar. They also had a silver coin for average people to use. This was the dirhem containing 43 grains with fineness between .960 and .970.
Africa, Islam and the Flow of Gold
Mohammad’s message of freedom and equality between races was soon to bear unforeseen and fortunate fruit. Gold had been discovered in West Africa, around present- day Ghana. It had been going to Constantinople, mined and transported by black slaves with no love for their masters.
But as Islam spread, it’s message found eager converts. Muslims were free. Black and white were equal. None could be a slave. So it should be no surprise that after 700, almost all of the gold was mined by West African Muslims, and transported by camel caravan to the mints of the Islamic world. So much gold came that a new mint was established at Tripoli to add to the older ones at Damascus and Baghdad.
With the dynamic new ideas and trade routes through the new Islamic world, the Byzantine Empire soon found itself shut out of the flow of new gold. Since almost none of the new gold came to Constantinople after this time, in retrospect, this can be seen as the start of its decline. Granted, a couple of centuries were to pass before the bezant was obviously questioned as the international store of value, but at least some of the seeds can be seen with the change in the flow of African gold starting around 700.
Who knows what would have happened if the Christian world of the Eastern Roman Empire embraced the dynamic ideas of freedom and equality before God that Mohammad proclaimed? Certainly the world would have been a very different place. As it was, the static and heavy handed Byzantine Empire began a slow decline.
This change in the pattern of the flow of gold lasted for 500 years until about 1200, and the rising power of the Italian city states. The first sign of the change was that African gold began to flow to Sicily, and from there to the Italian mainland specifically to Genoa and Venice. But that is for another chapter. However, by that time the Byzantine world was pretty much finished, the bezant devalued and Constantinople itself was attacked and robbed of much of its gold.
To see how dramatic this cut-off of the flow of new gold was to Byzantium, remember that by 856 the treasury in Constantinople had just one-third the amount of gold it had at the peak about 350 years before. In other words, 150 years after Islam won over Africa and gold, and became the most dynamic center of the world, most of Byzantium’s gold was gone.
450 Years of Currency Stability
Islam copied the best from the Greeks in another important way. They continued to maintain the basic gold and silver content of their coins for centuries. Exactly 1000 years ago, over 300 years after the first dinar was minted, Spanish mints were coining dinars of no less than 64.5 gold grains. For a further 150 years, until 1144, the weight never fell below 60 grains.
Islam’s Downfall
What happens after that is a sadder story. Islam’s power begins to break up for many reasons. Internal divisions between Sunnis and Shiites, among other groups, cause the followers of Mohammad to turn on each other. Many local rulers decide to set themselves up as virtual despots.
In Andalusian Spain, which was more advanced than most of Islam, fully 23 different and often bickering sheikdoms are formed. At the same time, Christianity becomes more powerful and starts a series of Crusades against Islam. They are able to benefit from the internal divisions and begin to re-conquer important parts of Europe. Some of the great Christian rulers, like the Norman French Roger II of Sicily, continue the tolerant policy of having Jews, Moslems and Christians live together. In 1139, he commissioned what comes to be known as the Book of Roger, where the brightest minds of the day describe in a book of world geography how the world is actually round. Columbus was to rely on this book 350 years later.
But all too soon, in most places the best that Islam gave to the world is replaced by intolerant and narrow-minded institutions like the Spanish Inquisition. But that’s another story, and one outside the realm of monetary history.
It’s New… It’s Easy…It’s Paper Money!!!
There is another aspect of the downfall of Islamic money that should not be ignored. Islamic traders went all over the world, including China. At some point –we still don’t know exactly when, but likely around 1150– they brought back news of an amazing Chinese innovation: paper money. Like all the innovations it stumbled on, Islam gave it a try.
For the first time in history, a ruler didn’t need to actually rely on hard-to-mine gold and silver. He could slap on ink on a piece of paper and have that become money. It was great! It was revolutionary! And it was a disaster.
First those Islamic sheiks closest to China began to issue paper, then most others did. But the result was always the same. They couldn’t control themselves. The ability to print paper money was too great a temptation.
I don’t have to tell you what happened. But combined with all Islam’s other problems around this time, the introduction of paper money helped destroy Islamic world power. The Christian countries resisted the use of paper money and instead started to copy the classical Islamic dinar. From 1142 to 1214, the Christian states nearest to the Islamic world (Castile, Sicily, and Jerusalem) even used Arabic engravers as the “gold standard” of great money. By 1250 monetary power had clearly passed back to Western Europe for the first time in 1000 years, via the Italian city-states. Exactly five years before this, in 1245, the last Islamic gold dinar was minted. Then the Islamic world began to fall into a period of despotism, intolerance, division and misery that much of it is still in.
But while it lasted, Islam kept the ideals of civilization and stable money alive. It was a ray of light in an otherwise dark world. Dinars and trade flowed all over the known world. From Africa to India to England, dinars are still being dug up. The Vikings were the great traders of Northern Europe starting around 700. But they never really had a sound monetary system of their own. They mostly used dinars, since they traded heavily with the Islamic world, exchanging fish and other resources for gold and silk. Not many years ago in Yorkshire, England, the so-called “Goldsbourough Hoard” was found. Dating from about 920, it is filled with Islamic dinars and dirhems. It shows how, within three centuries of Mohammad’s flight to Medina, the civilization he imagined made a profound impact on lands far away.
Islam Stirs Again and the Gold Dinar is Reborn…Or Is It?
As recently as the start of World War 2, the Islamic world was, from Morocco to Indonesia, European colonies or puppets. But after 1945, nation after nation gains their independence.
And for the first time in 1000 years, Islam is on the move making converts in the West and showing new strength at home. Though still beset by many of the problems of the past, there are signs of a new pride in Islam. This extends to the monetary arena. In 1991, the idea of a new Islamic gold dinar was first raised, and since then the Islamic Mint in Malaysia has minted them. (Go to google.com and type in Gold Dinar and Islamic Mint and you’ll even see photos of them.)
Part of this rebirth of interest comes from an effort to wean Islam away from Western money; some from all paper money, and some to hopefully re-capture the lost glories of Islamic money. However, there is little agreement on how to proceed. Most of the Islamic world still tie their currencies to the US dollar and this includes such enemies of America as Syria and North Korea (not that this one is an Islamic country, but you get the picture… some surprising countries are still pegged to the greenback).
Rising anti-American sentiment, coupled with a falling US dollar would appear to give this policy a shaky future. But what would follow a tie to the dollar is far from clear. Former Malaysian president Matihir wants a gold-based Islamic money, but the oil-rich Gulf states like the United Arab Emirates have been talking of tying their currencies to the euro.
65.6 Grains: The Tradition Continues
But I do find it fascinating that the new Islamic gold dinars which have been minted are exact copies of the old one, which further means that they are copies of the bezant. And this also means that they are indirectly copies of the silver Athenian drachma and the early Roman denarius, both of course, containing like amounts of silver rather than gold.
Specifically, the new gold dinar contains exactly 65.57 grains of gold. Or to put it in more modern measurements, 3.25 grams or .1366 troy ounces. At a price of $450 per troy ounce of gold, this means that the new gold dinar would be worth $61.47. And knowing that this sum is too large for most people to use in daily life, the Islamic Mint has resurrected the silver dirham. This coin is 3 grams of silver, or .096 of an ounce. At a silver price of $7.50 an ounce, the dirham is worth 72.34 US cents.
So is the idea of stable gold and silver money first practiced in ancient Greece 2500 years ago about to be continued in the Islamic world today? Who can tell for certain now, but what we can say is that the next generation of money and currency will be extremely interesting.
Here are some links you might find of interest:
http://www.islamicmint.com/islamicdinar/history.html
http://islamic-world.net/economics/dinar.htm
http://www.moneyfiles.org/goldwar.html
(This fabulous history of currencies was written by our very own “secret” investment advisor, who graciously allowed us to reprint it here for you.
Note: Want to learn more about who our “secret” investment advisor is? And how you could benefit from his uncanny ability to enter and exit not just the precious metals markets but many other markets too, at just the right time? Then go here to learn more now.)