Inflation and riba

THE PROHIBITION OF RIBA IN THE QUR’AN AND SUNNAH

What misguided Muslims who use the inflation argument to justify riba should do, is to calculate the value, in gold, of the sum borrowed from a bank, then calculate the equivalent value, in gold of the sum which is to be repaid to the bank. If there is any difference between the two such that the sum to be repaid is greater than the sum borrowed, that would be evidence of the riba which Islam prohibits.

We may also note that when the Prophet (s) ordered gold for gold and equal for equal the implication is that the lender who lends 100 gold dinars in 1984 is entitled to the return, in 1994, of no more than the same 100 gold dinars (i.e. an equal amount of gold) from the borrower. But the value of one hundred gold dinars lent in 1989 may change by 1994 so relation to the quantity of wheat, for example, which can be bought with it. The price of wheat may increase by 1994 because of a shortage of wheat in the market. The same 100 gold dinars can no longer purchase in 1994 the amount of wheat which could have been bought in 1989. Despite that, the law would still remain unchanged; ‘gold for gold - equal for equal’! Finally it is time for us to understand that inflation is itself a form of riba. It is, in fact a creeping riba which robs us of our wealth without our being even aware of the fact that we are being robbed. The "smart-men’ in the economy, who know how to use the system for their advantage make windfall profits, through inflation. at the expense of the dumb innocent ‘suckers’ who keep on working harder and yet harder for less and less as artificial paper money continuously loses its value.

It is a matter of absolutely critical importance that Muslims should carefully study the prophecy of the Prophet (s) in which he has prophesied the collapse of artificial secular currency (i.e. paper. plastic and electronic money, etc.):

Abu Bakr bin Abu Maryam reported that he heard the Messenger of Allah say: A time is certainty coming over mankind in which there will be nothing (left) which will be of use (or benefit) save a dinar and a dirham (gold and silver coins).

(Ahmad)

That prophecy of Prophet Muhammad (s) is about to be fulfilled. Today’s monetary system uses paper to make gold. That is fraudulent! Paper-money is riba. Let us explain.

Suppose your grand-father died in 1971 and left an estate of 100 gold coins which you inherited. And suppose further, that since you wore a baby the money was kept securely stored away for you. Twenty-five years later, in 1996, you asked for your money. The box in which it was stored was opened and you were given the 100 gold coins. Your money had neither increased nor decreased. It remained the same. Gold had functioned successfully as money! It had succeeded in performing one of the most important functions of money, i.e. to be a store of value! It has faithfully performed this function for all of recorded human history.

And now, let us suppose that in 1971 those who were entrusted with the 100 gold coins decided to convert them from real money into artificial money. They fell that paper was a more appropriate and reliable form of money than gold. They were highly impressed by the strength of the American dollar. And they trusted because the American dollar itself proclaimed: In God We Trust. And so they converted the 100 gold coins (i.e. 100 ounces of gold) into American dollars and obtained US$3,500. That was 1971. They put the money away very securely. It could not have been invested because your grandfather had left specific instructions prohibiting such.

In 1996 you asked for your money and they then brought you the American dollars. You declared that you wanted the money which your grand-father had left for you. They then went to the market to reconvert the dollars, to gold and, of course, they continued to believe in the dollars since it declared: In God We Trust. But, to their great surprise, the market gave them only 8 gold coins for the US $3,500. A great tragedy had occurred during those 25 years. 92% of your wealth had been lost. Paper had failed miserably as money. It did not function as a reliable store of value. In fact your low was someone else’s gain. Predators had struck. They had tipped you off by deception. That is riba.

Artificial money is quite different from real money. Real money has intrinsic value, paper money has none. Its only value is that conferred upon it by market forces. The market value of paper-money will last only for as long and to the extent that there is demand for it in the market. Demand is based on confidence. The currency market is now controlled by the most vicious of all speculative forces, forces fueled by compelling greed with no loyalties and no patriotism. Anything which seriously disturbs market confidence will cause the speculative stampede which will fulfill the prophecy of the Prophet (s).

Here is an example: If Muslims gain control over their oil resources and demand that they be paid for their oil sports with gold rather than dollars made of non-redeemable artificial paper money, there will be significant loss of confidence in paper currency. Why should this be so? Non-redeemable paper, plastic or electronic money has value only to the extent that people are prepared to recognize it as possessing value. When public confidence in a currency is shaken, its value will collapse. A demand for gold, as payment for oil, will have the effect of shaking confidence in paper money. Speculative forces in the currency market will greedily seize that opportunity to make the killing of a lifetime. That in turn can cause the collapse of today’s fraudulent international monetary system based on non-redeemable paper money. Money is the very foundation of capital. The collapse of money in what may best be described as a money melt-down, will witness the collapse of riba-based capitalism. Those who have real money will survive while those speculators who successfully exploit the collapse will make the greatest profits ever. The masses will lose their wealth. They will be caught with worthless paper parading as money. That is a financial holocaust which is just waiting to occur. And it has been predicted by others as well, besides the Prophet (s). 

Judy Shelton, for example, uses the term: ‘Money Meltdown’ as the very title of an excellent book which she has written in international monetary economics..

We should not forget, nor allow the world to forget, the dramatic ominous and unprecedented collapse of the US dollar in January 21, 1980, when the value of the dollar relative to gold fell to $850 an ounce! In 1970 it was $35 an ounce. Its present value is about $380 an ounce. This collapse of the dollar look place in the immediate wake of the successful anti-western Islamic revolution in Iran which gave control of the vast oil resources of Iran to an anti-systemic Islamic government. Iran’s government is anti-systemic since It is based on non-secular foundations and it challenges the secular model of society and the political and economic world order produced by modem Godless European secular civilization. The stabilization of the price of gold at its present level is the result of the success of policies were designed to contain the Islamic revolution to Iran.

Why should an Islamic revolution in Iran threaten a collapse of the international monetary' system? The experts in international monetary economics are silent! The predatory speculative forces which precipitated that collapse are even more silent. This is because they are aware of the prophesy of the Prophet (s). They feared that the prophesy was about to be fulfilled. In fact, it was not the moment. It was only the first whiff of smoke from the fire which is coming!

There is perhaps, no other medium through which more of mankind are touched by riba today than through paper currency issued by corrupt unscrupulous governments. Today's paper currency no longer functions as receipts redeemable for gold and silver, i.e., precious metals which were created by Allah, the Most high, to serve as currency (among other things). Paper currency is entirely artificial wealth and as such, is most certainly fraudulent. And fraudulent transactions which damage the entire structure of the free and fair market are a form of riba! It is through the universal prevalence of fraudulent paper currency today (i.e. paper currency which cannot be redeemed for real value) as well as through the fact that tending and borrowing, on interest constitute the very foundation of the capitalist economy which now dominates mankind, that the prophesy of the Prophet (s) regarding riba has now been fulfilled. In fact it has been fulfilled within the lifetime of some who are still alive today:

Abu Hurairah reported that the Messenger of Allah said: A time will come over mankind when not a single person will remain who does not consume riba, and if one does not consume it, its vapor (or alternatively its dust) will reach him.

(Ahmad, Abu Daud, Nasai, Ibn Majah)

The world of Islam was still largely free of riba and of fraudulent artificial paper currency up to the moment when the Ottoman Caliphate was abolished. The abolition of the Caliphate in 1924, and its replacement with secular nation States all over the Muslim world, opened the floodgates for the wholesale incorporation into the body of the Ummah of all the evils of secular western capitalist economy including the total corruption of the free market. The Islamic Movement will have to take the initiative, wherever it is possible to do so, to try to restore the free market, and this requires the reintroduction of gold and silver coins as the medium of exchange. We should not only recall but also deliberate seriously over the prophecy of the Prophet (s) quoted above:

Miqdam bin Ma’adikarib said that he heard Allah's Messenger say: A time is certainly coming to mankind when only the dinar and the dirham will be of use.

(Ahmad)

This indicates a prophecy of Prophet Muhammad (s) of truly momentous importance to the effect that the entire monetary system of artificial money in the form of paper, plastic and electronic money will collapse one day. On that day and henceforth all paper currency will be worthless paper.

Source: IMRAN N. HOSEIN

to be continued . . . . 

The Prohibition of Riba (Interest) by Imran Hosein

The Prohibition of Riba (Interest) (Q&A) by Imran Hosein

The Prophet, artificial money, inflation and riba

THE PROHIBITION OF RIBA IN THE QUR’AN AND SUNNAH

THE PROPHET - ARTIFICIAL MONEY - INFLATION AND RIBA

There are some so-called Islamic scholars who adopt the curious position that ‘bank interest’ is justified since it makes up for losses sustained through inflation. This is manifestly false! In the first place ‘interest’ or riba is itself one of the causes of that modem economic curse which is known as inflation. Inflation is the creature of the modem interest-based capitalist economy. It did not exist prior to the emergence of modem capitalism based on riba.

Secondly, interest does much more than simply make up for anticipated inflation. Banks anticipate inflation and still operate for profit. Also, banks are assisted by institutions such as the Federal Reserve Bank which intervene to ensure that inflation does not ruin the banking industry. Indeed banks make more profit that most businesses. And they get most of their income from interest payments made by long-term borrowers. The economic philosophy which permits this is one which claims that money itself must have a cost. Therefore money can, independently of any human effort or struggle, earn more money. The Qur’an provides a completely different economic philosophy which proclaims that reward (economic and otherwise) is always linked to effort and struggle:

And that man shall have nothing except that for which he strives.

(Qur’an: al-Najm:-53:39)

Thirdly, inflation is directly related to the money supply in an economy and to the demand for goods and services. Where previously it was Allah the Most High, Who determined rizq (money supply) and Who delivered real money as the store of value (i.e. gold dinars, silver dirhams, wheat, barley, dates, even salt etc.), in the modern interest-based capitalist economy if is bankers and governments who determine money-supply. They have achieved this by secularizing money through creating artificial money in the form of paper currency with no convertibility to real money, and then persuading a woefully ignorant humanity to accept that artificial money as an acceptable stone of value. That is deception. It is gharar. It is riba!

But they have now been trapped by the creature they themselves invented. They attempt to do a better job of money supply than Allah the Most High, Himself did (and we seek protection with Allah the Most High, from such).

If money can be created by governments (for example) then the quantity of such artificially created money in an economy can be controlled and indeed, must be controlled. It is seldom, perhaps never, controlled as it ought to be controlled. Therein lies the origin of the curse of inflation. Milton Friedman, the monetary economist, agrees:

It follows . . . that inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.

Not only does the US dollar no longer have a specific assigned value, it has been printed so excessively that it is now entirely dependent on the extraordinary foreign demand for dollars from averting collapse in the form of inflation.

Thomas Jefferson, the American statesman scholar and visionary, condemned banks in 1816 for doing what the US government has now done: I sincerely believe . . . that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

He demanded a specific assigned value for the dollar. He did this in 1784 in a debate on the proper monetary role of the US government:

If we determine that a dollar shall be our unit, we must then say with precision what a dollar is.

As late as the 1920s the US government did honor that imperative of precision. Paper money in the form of gold certificates stated;

This certifies that there had been deposited in the Treasury of the United States of America twenty dollars in gold coins payable to the bearer on demand.

Anyone could go to any bank and redeem paper money for real money in the form of gold coins. Later this inscription was changed. It stated:

Redeemable in lawful money at the United States Treasury, or at any Federal Reserve Bank.

The new inscription Mounted to a curtailing of the rights of paper currency holders to freely convert such to gold at a precise conversion. Today US currency states:

This note is legal tender for all debts, public and private.

It may be legal, but it is manifestly immoral, because it cannot be redeemed for real value (i.e. gold or silver etc.). No bank, not even the US Treasury or the Federal Reserve Bank would redeem US dollars for gold. If the paper dollar has any real value, it now resides in the paper itself. In effect, it resides in the value which the market wishes to assign to it. That is a hoax. It is false. It is fraudulent? It is riba!

Artificial paper, plastic and electronic money (i.e. fiat money) cannot but be susceptible to instability since, for example, it is vulnerable to speculation. The European Community took the courageous decision to attempt to adopt a single currency for the entire Community. This, if achieved, would have constituted a step in the right direction. And it would have taught a lesson to Muslims who claim to follow the Prophet (s). It would have laid the foundation for the second stage in which that single currency would have had its convertibility to gold restored. Europe has not succeeded, and is unlikely to succeed, because the power of speculative transactions in the world currency market is now beyond the capacity of governments to resist.

Hence inflation and speculation, which have largely imprisoned mankind, are creatures of our own sin of abandoning that currency which was created by Allah, the Most High. Only that currency is immune from instability. Thus to argue that modern economic credit is justified since it makes up for losses suffered through inflation is to display a dangerously shallow understanding of the subject.

Source: IMRAN N. HOSEIN

to be continued . . . . 

The Prohibition of Riba (Interest) by Imran Hosein

The Prohibition of Riba (Interest) (Q&A) by Imran Hosein