The idea of using Islamic gold dinar was first mooted in 2001 by Malaysia's ex-premier (Tun Dr Mahathir Mohammed). He proposed a new currency that would be used initially for international trade between Muslim nations, i.e., the islamic gold dinar and it was defined as 4.25 grams of 24 carat (100%) gold. He promoted the concept on the basis of its economic merits as a stable unit of account and also as a political symbol to create greater unity between Islamic nations. The purported purpose of this move would be to reduce dependence on the United States dollar as a reserve currency, and to establish a non-debt-backed currency in accord with Islamic law against the charging of interest.
The return to the gold standard is supported by many followers of the Austrian School of Economics, Objectivists and libertarians largely because they object to the role of the government in issuing fiat currency through central banks.
Few lawmakers today advocate a return to the gold standard, other than adherents of the Austrian school and some supply-siders. However, many prominent economists have expressed sympathy with a hard currency basis, and have argued against fiat money, including former US Federal Reserve Chairman Alan Greenspan (himself a former Objectivist). Greenspan famously argued the case for returning to a gold standard in his 1966 paper "Gold and Economic Freedom", in which he described supporters of fiat currencies as "welfare statists" hell-bent on using monetary printing presses to finance deficit spending. He has argued that the fiat money system of today has retained the favorable properties of the gold standard because central bankers have pursued monetary policy as if a gold standard were still in place.
The current global monetary system relies on the US dollar as a reserve currency by which major transactions, such as the price of gold itself, are measured. Currency instabilities, inconvertibility and credit access restriction are a few reasons why the current system has been criticized.
Taking the 1997 Malaysian economic and financial crisis as an example, it shows that the fundamental cause of business cycles, unemployment and inflation is rooted in some of the features of the present day financial system, namely fiat money, fractional reserve requirements and interests rates. It then shows how these features also indirectly bring about many social problems to such an extent that they threaten the culture and sovereignty of nations. Even Islamic banks cannot truly operate on Islamic principles in the present system.
Most Islamic financial products are tied to the market interest rate - the very thing they are supposed to avoid. A return to a gold payment system - like the Islamic dinar - could solve many of the woes of today's economic system. The return is not only desirable from the economic, political, social and religious perspectives, but also urgent in the present era of globalization and existing world recession, besides providing a conducive environment for Islamic economics, banking and finance to flourish.
The following articles are important to strengthen our understanding on the issues at hand :
1) Seriousness of Gold Dinar
2) Gold, Paper..Or Is There A Better Money?
The return to the gold standard is supported by many followers of the Austrian School of Economics, Objectivists and libertarians largely because they object to the role of the government in issuing fiat currency through central banks.
Few lawmakers today advocate a return to the gold standard, other than adherents of the Austrian school and some supply-siders. However, many prominent economists have expressed sympathy with a hard currency basis, and have argued against fiat money, including former US Federal Reserve Chairman Alan Greenspan (himself a former Objectivist). Greenspan famously argued the case for returning to a gold standard in his 1966 paper "Gold and Economic Freedom", in which he described supporters of fiat currencies as "welfare statists" hell-bent on using monetary printing presses to finance deficit spending. He has argued that the fiat money system of today has retained the favorable properties of the gold standard because central bankers have pursued monetary policy as if a gold standard were still in place.
The current global monetary system relies on the US dollar as a reserve currency by which major transactions, such as the price of gold itself, are measured. Currency instabilities, inconvertibility and credit access restriction are a few reasons why the current system has been criticized.
Taking the 1997 Malaysian economic and financial crisis as an example, it shows that the fundamental cause of business cycles, unemployment and inflation is rooted in some of the features of the present day financial system, namely fiat money, fractional reserve requirements and interests rates. It then shows how these features also indirectly bring about many social problems to such an extent that they threaten the culture and sovereignty of nations. Even Islamic banks cannot truly operate on Islamic principles in the present system.
Most Islamic financial products are tied to the market interest rate - the very thing they are supposed to avoid. A return to a gold payment system - like the Islamic dinar - could solve many of the woes of today's economic system. The return is not only desirable from the economic, political, social and religious perspectives, but also urgent in the present era of globalization and existing world recession, besides providing a conducive environment for Islamic economics, banking and finance to flourish.
The following articles are important to strengthen our understanding on the issues at hand :
1) Seriousness of Gold Dinar
2) Gold, Paper..Or Is There A Better Money?
No comments:
Post a Comment