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.
to be continued . . . .
