NEW YORK (TheStreet) -- The murderous leaders of the Islamic State are minting their own currency.
Press reports picking up a video blog from Raqqa, Syria say the combatants who go by the name Daesh, ISIS or ISIL are reviving the gold, silver and copper dinars of the Caliphate of Uthman founded 1,381 years ago.Precious metals often are associated with bad guys. After all, Nazi war criminals, corrupt Chinese officials and tyrants like Colonel Moammar Gadhafi have held gold. In fact, history shows gold doesn't choose sides or morality. Its inert value often helps good people survive or escape wicked regimes.
If it's true that ISIS is minting its own gold coins, then it shows what little social currency its fanatics have in the areas they control.
Way back before the legend of King Midas appeared, money grew out of debt, which had begun as the favors exchanged and owed among people living in small communities. They struggled to keep score as society and the economy became more complex. Settling accounts instantly with little nuggets of commonly accepted value solved all kinds of problems.
Foreign trade has offered one "origin myth" for such bullion payments. But even if trading commodities directly for each other wasn't more profitable, bullion coins have continued to prove most useful where trust-based money can't work, most notably in places invaded by marauding warriors.
Occupying armies can't build social credit with the people they crush. Conquering kings can't pay their troops with paper or token money only recognized by shopkeepers back in the homeland. As economic historian David Graeber writes in Debt: The First 5,000 Years, "a heavily armed itinerant soldier is the very definition of a poor credit risk."
Bullion coins offer an answer. Because whatever intrinsic worth you might (or might not) put on physical gold and silver, any coin made of precious metal will surely hold some value no matter where you find yourself waving a sword.
Incredibly, lots of comments on newspaper Web sites and forum threads seem to mistake ISIL's new dinars with some kind of progress, a better way forward than the developed, decapitation-free world's use of paper cash and digital accounts.
But while bullion money might reduce inflation risk, it has never eliminated it. Kings have always clipped coins.
Using only physical metal as your monetary tokens, however, would destroy the credit, the liquidity and the lower transaction costs that civilization has managed to develop over the last 1,500 years or so.
So if ISIS does want to impose bullion coins on the poor subjects of its caliphate, it's really taking those parts of Iraq, Syria and Libya it has conquered straight back to the Dark Ages.
This is nothing to cheer here, least of all for gold-owning lovers of economic freedom.