Islamic Perspective of the Credit Crunch by Some Scholars

Some ‘Islamic’ scholar proposed that the credit crunch could have been avoided if only the banks had taken possession of the mortgage deeds before securitizing and selling the traunches to the investment community.  At best this would have slowed the problem but the problem would arise eventually due to inherent flaws in the monetary and financial system.
The problem with the credit crisis is much deeper than that.  It has political, financial and systemic dimensions.  One has to do root cause analysis to find the links between banking, central banking, currencies, financial markets, politics and military industrial complex – how warfare is financed through purchase of Treasury bills in slow economic times and the redeemed after contracts are given out to the favoured companies owned by wealthy individuals.  They are all interconnected and scratching each others back at the expense of the small guys and entrepreneurs.
The inherently flawed system is designed to benefit the rich who have much more information about markets than the lay investor.  This setup cannot be understood through achieving specialised degrees like Ph.D. in Finance either.  It needs much more in-depth root-cause analysis through systems thinking about how each component is linked to the other.
If you want to get a glimpse of the complexity please feel free to visit my blog:
Unfortunately, all this cry for global reserve currency through systemic crisis is only leading to monopoly over money which can only benefit the Multi-national corporations and their shareholders.  Small, Medium Enterprises (SMEs) gave to delink from this oppressive system and create their own currencies, contracts that are fair, exchanges/markets that are fair, and so forth.
There are local communities and markets that are developing around the world which is good for community building as well as sustainable for the environment because local growth does not assume perpetual economic growth model which can happen if we had infinite resources.  Now we are running into limitations on energy (peak oil), not to mention the impact of this growth model on the environment.
Ultimately, it is an issue of decent living standards which can only be achieved if we can live within our means of what the environment can sustain, and that can only happen if we have a mindset of sharing than accumulating which secular individualism has taught most of the people that self-interest is the only way to move ahead without regard to people or environment around us.
This can only be achieved if one takes a holistic approach and looks at Divinely inspired economic system in which humans are treated as having values and not as resources to be used, and these humans in turn conduct themselves in an honourable way and give back to society more than they take in.
We have to come to this model one way or the other – either we modify our living or we will first kill each other and then come to the realisation that we are no better off, and then come to some sort of understanding or negotiation.
In the meantime, God Almighty give us patience to live through the tough times that are coming that have been foretold 1,400 years ago. Ameen.
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US Dollar Hyperinflation is Nearer than You Think? Impact on Other Countries, and What to do about it?

Please read practical Economist John Williams’ latest update (Sept 14, 2010) of his Dec 2009 Hyperinflation Update Report at:

I will elaborate here as to what will be the impact on people in other countries?  How will their currencies and economies fair? And how to prepare for the coming disruption of normalcy?

For a start one should ask if there is any restraints on their governments from printing boat-loads of money to stave off depression.  The obvious answer is no unless the voters rebel and put a stop to loading the coming generations with debt (think freedom versus debt enslavement via future taxes) by replacing incumbent politicians with fresh, answerable/accountable/responsible cadre of new politicians.  This is very unlikely considering how many people are brainwashed to mainstream media, thinking and propaganda.

Now compare this paper money situation with commodities (rice, wheat, corn, barley, sugar, salt, dates, etc.).  They cannot be manufactured with a press of a computer button as currencies are manufactured (regardless of how beautiful the artworks are).  Therefore, commodities are the best hope for preserving one’s hard-earned savings because they cannot be increased ad infinitum or at moment’s notice.

Now think of Gold and Silver which have preserved wealth and liberty for mankind for over 5,000 years.  They are non-perishable unlike other commodities and divisible into smaller denominations that can act as unit of account and mediums of exchange.  Is it any wonder than mankind has chosen this form of money over others for 5,000 years?

According to John Williams we are 6 to 9 months away from US hyperinflation.  What this will mean is that there will be a sudden loss of confidence in the US economy with faltering economic data (stagflation – inflation with stagnant or no growth), while US Govt. tries to pile on more debt and bailouts for faltering large banking institutions.

As they say you can fool some people some of the time, and one can fool some of the people all the time, but you cannot all the people all the time.  Chances are that the foreign buyers of US Debt (China, Japan and other cash-rich countries) will stay on the sidelines, because they have been fooled many times in the last 40 years with broken promises such as US Dollar was as good as Gold.

Therefore, chances are these foreign Central Banks who have been fooled many times will not join the US Treasury Bond auctions this time around when the next QE II (Quantitative Easing) is announced.  In that scenario the only option will be for the US Central Bank (The Federal Reserve – which is a private entity owned by big banks) will have to put the printing press on high gear and print enough money to purchase most of the new US Govt. debt.

At that moment current holders of US Govt. debt will head for the hills by dumping their stocks and bonds which will lead to precipitous fall in the demand for US Dollar.  The beneficiary of all this turmoil will be precious metals and their mining stocks.

Being 25-27% of the global economy, if the US goes into a tailspin I can assure you that the rest of the world will end up in doldrums.  Then foreign governments will also go into high gear on money printing to protect their economies from imploding, leading to loss of their currency values against hard assets like gold and silver.

About 5 years ago I predicted that there will come a time in the not-too-distant future 600-700 million people (mainly middle-class) in the world will be chasing gold and silver, and I predicted gold price could rise to US$5,000 per troy ounce and silver prices of US$400 per troy ounce.  People around me could not believe such a preposterous forecast as they could not dream of such stable economies as US and UK going into twilight from their glorious past.

Being a student of Finance, I simply read history of debt and paper money and did some scenario analyses and came to those conclusions above.  I should also admit that I had some assistance from Prophetic predictions and realized that we are living in the age when the following prediction is coming true:

Abu Bakr ibn Abi Maryam (may Allah Most High have Mercy on his Soul) said that the Prophet (peace be upon him) that, “A time is certainly coming upon mankind when one who does not have the yellow (gold) or the white (silver) will not be able to meet his daily expenses”. (Musnad of Imam Ahmed ibn Hanbal (may Allah Most High have Mercy on his Soul).

Using all this information from history of debt and paper money, applying interest coverage ratio from corporate finance on government debt, and prophecies, I realized that the time to prepare was five years ago.  I would still say that there is still time to prepare in the precious metals complex, but more importantly being prepared for societal collapse, social unrest and knowing how to grow food.

There is another Prophetic prediction where the Prophet (peace be upon him) said, “A time is certainly approaching when the best property of a believer will be his sheep which he will take to mountain tops and places of rain to get away from the tribulations in the cities”.

Therefore, learn about permaculture, how to catch and store rainwater, aquaponics, and living off the grid with renewable energy.  To learn more about surviving the coming collapse of modern societies please visit:

And also refer to Professor Joseph Tainter’s book (1990) “The Collapse of Complex Societies” and Prof. Jared Diamond’s book (2005) “Collapse – How Societies Choose to Fail or Succeed”.  Also, please refer to Prof. Emeritus Alexander Tyler’s book (1850) “The History of Mankind from Creation to Early 18th Century”, and how mankind throughout history have gone from Spirituality and Freedom to Dependence and Bondage in 8 stages.  Lastly, to get a deeper understanding of mankind’s fate please refer to the Qur’an – the Ultimate History of Mankind revealed by none other than The Creator Himself.

We have been living unsustainably in the age of stupid (because of cheap oil) in the past 100 years.  Now we are entering the age of hardship for the next 10-20 years which create men out of boys, and then we will rise to the occasion of being upright and honorable humans as God Almighty had meant for us to be.  Hopefully, He (Most High) will also send some examples for us to emulate as in the return of Jesus (peace be upon him).

Welcome my Brothers and Sisters to the end of The Age of Stupid,  followed by The Age of Hardship, and then followed by The Age of Wisdom.  In the meantime please be kind and generous to your fellow beings so that we can realize our common humanity, and not sink to levels below animals and annihilate each other in search of food, water, shelter and security.

This is also the time to search for meaning of life in holy scriptures (Qur’an, Bible, Torah) to learn divine values so that we rise to the occasion to bring out the best in mankind, before we sink into economic cataclysm.  Let us not let this economic cataclysm define who we are as human beings, but rather rise above our carnal (physical) needs to image of that Higher Being, who is kind, merciful, generous, and all the good qualities that good men have exemplified around us in times of hardship.

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Is the US Bankrupt? Prof. Lawrence Kotlikoff on Al-Jazeera, Aug 24, 2010

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Top Trends Researcher Gerald Celente Predicts…

Economic Collision Course:

The “Crash of 2010”

KINGSTON, NY, 26 August 2010 — Following the “Panic of ’08” and the subsequent “Great Recession,” Washington, Wall Street and the media united to promote the belief that extreme crisis management measures enacted by governments had rescued the world, and staved off even worse disaster.

“Recovery” was in the air.  “Recovery” was the word on the public’s lips.  “Recovery” was fervently preached and endlessly pitched.

A very few argued that the measures could not work; that they would not live up to expectations.  But only Gerald Celente predicted, from the onset, that they would fail completely, leading to the “Crash of 2010” and an inevitable descent into the “Greatest Depression.”

Now, with the data catching up to Celente and the economic skies falling, the “Recovery Hawks” have turned “Chicken Little.”

Celente plotted out the collision course and provided strategies for both steering clear of the dead end “Road to Recovery” and following roads less traveled that would lead to safety and success.

As every driver knows, in the moment before a collision there’s a gap – a split second – between recognition of the crash to come and the impact.  In economic terms, that gap was the period between August 2007 (when we pinpointed an imminent financial crisis) and now … August 2010.

Now there is only the “split second.”  On the macro-level, and for those who invested everything they had in “Recovery,” there will be no avoiding the “Crash of 2010.”  On the individual level, there is still time to take both evasive action and proactive measures.

Be warned!  While we see a split second left to take evasive action, some of the biggest names in business still blindly persist in minimizing the danger:  Bloomberg, August 25 – “Durable-Goods Orders, Home Sales Signal Danger of Renewed U.S. Recession.”  Even Nouriel Roubini, the media’s pet pessimist, put the odds of renewed recession at only 40 percent.

“Renewed recession”?  Odds of recession?  It’s bogus bookmaking – odds spun out of thin air and fobbed off as economics.  The “Great Recession” never ended!  The $13 trillion lent, spent and guaranteed by Washington and the Federal Reserve didn’t put an end to the recession, it just put it into a brief remission.

And what about the Dow that’s rebounded from its 2009 low of 6,830 and currently trades around 10,000?  Touted as a recovery bellwether, in reality, the Dow was trading at 10,000 in 1999.  Moreover, when adjusted for inflation, Dow 10,000 of 2010 is really the equivalent of only Dow 8,200 in 1999.

But Wall Street and the media do an excellent job of concealing such facts from the public.  In their perpetually sunny financial skies, it is always, always, always a “buying opportunity.”

As Gerald Celente and The Trends Research Institute have been saying all along: insiders aside, investing in the stock market is a loser’s game.  Just to get back to its 1999 level in real, inflation-adjusted terms, the Dow would have to hit 13,460.

What was not a loser’s game was gold.  Trading at a $255 per ounce low in 1999, it trades at $1240 today.  That is close to a 500 percent gross increase.  Adjusted for inflation using the same rate applied to the Dow above, gold is currently worth around $880 in 1999 dollars… and heading higher.

We called the beginning of the “Gold Bull Run” in 2001, when gold was at $275 per ounce.  The next breakout point for gold is $1300.  From that point forward, depending upon which of a handful of wildcards get played, we forecast “Gold $2000” – and possibly higher.

Whatever your investment strategy may be, proactive measures taken now will minimize the impact of the “Crash of 2010” that, by the New Year, will be unmistakable and undeniable.  Rather than debating the probabilities of a double-dip recession, the business media will be glomming onto the financial body counts littering Wall Street as though it were another Katrina.

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What to Study in this Changing World?

Legendary investment manager Jim Rogers was recently interviewed by Breakfast Grill in Kuala Lumpur as to what will happen to the financial industry after this financial collapse.  Mr. Rogers replied these MBAs on Wall Street should trade in their finance degrees and enroll for farming degrees.  He also mentioned that Wall Street was a ghost town in the 1950s, 60s and 70s.  Only in the 1980s and 1990s did Wall Street come to life after the 1929 market collapse.  It will become a ghost town again for at least the next 10-20 years, if not more.
Likewise, any other financial system that mimicks credit-based financial system (including current practices in Islamic Finance) will also go the way of its host, unless the alternative systems can re-invent to create a more stable system using stable money, that takes the power credit creation away from people who can manipulate the markets. Credit-based monetary system is inherently unstable, and Wall Street knows that.  That is how one major investment bank put shorts on Real-Estate developer stock once they realized that the real-estate market had topped.  They made money by creating the securities and again made gobs of money on the way down.
Going forward the world is going to be a very different place because the world faces many converging constraints – Peak Oil, Peak Water, historically low food inventories and food shortages, Starvation, Social Unrest, rising crime rates.  These conditions are breeding grounds for Resource Wars, not to mention that there is agenda of the global elite to create a one-world government to enslave mankind now that they have all the wealth in their grip.
Islamic prophecies have not left anything out for the imagination, and when one reads and contemplates on them one will find many evidences of coming global despotic regime.  Many non-Muslims have done the analysis as well, even though they cannot provide a Just solution.  You can refer to the booklist on this blog.  As Muslims we owe a huge debt to our beloved Prophet (peace be upon him) for warning us about the hardship that would befall the Ummah at the end before the return of people to the Truth again.
Look how truth is portrayed as falsehood by the mainstream media (MM).  This was foretold by our beloved Prophet (pbuh) that the Imposter Christ will show two rivers one looking like Paradise and the other looking like Hellfire.  He (pbuh) said jump into the that looks like Hellfire for the Imposter, because that it True Paradise.
The MM are the tools for the elite which they use in the deluded minds that they can hang on to their hegemony/power forever, and they use their secularized minions to do their bidding for a paltry price.  The elite’s last obstacle are Muslims who are still true to their Way of Life, because deep down in their Souls they believe what was revealed to the beloved Prophet (pbuh).  These whom they cannot they secularize, they demonize or bomb them with their high-tech gadgets in a non-chivalrous.
Therefore, any future investment in education has to be seen with these changes in mind.  It is hard to change, but when it is forced upon us all we can do is accept the change, and educate other victims to cooperate with each other and build a counter movement to oppose the rule by the elite.  Therefore, the first thing we can do is to prepare ourselves mentally that change is coming, and the sooner we grasp that the sooner we are on our way to liberation and freedom.
This credit- and interest-based financial system is destroying the environment, and now these elite (johnny -come-lately) want to help the environment.  First they destroy and then they want to care.  Now there are discussions in the financial community to demolish the vacant McMansion homes in the US (2,300 sq ft. or above), that were built in the heyday of housing bubble, with the blame that these empty homes attract squatters and criminals.  The actual story is that these vacant home inventory is keeping the house prices depressed in the US, and will continue to do so for years to come.  Imagine all the raw materials and finished goods that went into these home that were imported from far-flung places on Earth using cheap oil.   What will happen to this way of live when Peak Oil crisis unfolds in the next couple of years.  Did their credit-money account for these resources?  And now they want to be the champions of the environment – what a joke?
Actually, the motive for the financial community and developers is to build new smaller homes (1,500 sq. ft.) to jumpstart the economy, because that is what US consumers can afford now with debt up to their eyeballs.
That is why Muslims as Khalifatullah (representatives of The Almighty Creator) should be at the forefront of the environmental movement, and resist the hoax of climate change propagated by Bill Gates and his likes to dupe us into funding green technologies that is considered the new industry into which they will plough their fortunes and multiply again.  Some of the skills that will be needed in the coming world of Peak Oil and Food shortages are permaculture, food as medicine, herbal medicine, eco-building, optimizing energy systems and minimizing waste.  You will find them being discussed at the newly established International Islamic Institute for Sustainability:
I do not mean to be a sensationalist but these changes were foretold by our beloved Prophet (pbuh) 1,400 years ago.  Rather than denying them I would rather be prepared.  Hope you can join us in any way form you can, and promote this much-needed institute.
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Clear Thinking is a Gift Endowed by Allah (Most High) to Those who Submit their own will to His (Most High) Will

The article below has been re-published from:

“He it is Who sends down clear signs to His Slave (Muhammad s.a.w.), so that He may lead you out of darknesses into the light;  Allah is Kind and Compassionate to you.” (The Noble Koran: Surah Hadid (57); Ayat 9)

“Gold and Silver, The Colour of the Shariah-Compliant Money”

August 24, 2010 by Hajj Ahmad Thompson

In the Numismatics department of the British Museum there is preserved a curious and interesting gold coin, over twelve hundred and thirty years old, on which is inscribed in unmistakable Arabic characters the declaration that ‘There is no Deity but Allah, The One, Without Equal, and Muhammad is the Apostle of Allah,’ and the further declaration, engraved around the margin of the coin, ‘Muhammad is the Apostle of Allah, Who sent him (Muhammad) with the doctrine and the true faith to prevail over every other religion.’

This coin was engraved, struck and issued by Offa, King of Mercia, or ‘Middle England’ (an ancient Anglo-Saxon kingdom, which extended on both sides of the River Trent from the North Sea to Wales), from 757 to 796.

‘Islamic Finance’ and ‘Shari‘a Compliance’

At the Islamic Finance and Trade Conference held in London on the 13th and 14th June 2006, what has come to be known as ‘Islamic Finance’ came of age. Important figures from the financial world gathered to mark its progress and emphasise its potential. In his keynote speech the then Chancellor Gordon Brown spoke of how he wanted “to make Britain the gateway to Islamic finance and trade” and of his ambition “to make Britain the global centre for Islamic finance”. He also spoke proudly of how recent regulatory reforms in England have supported “the development of Shari’a compliant finance” – by bringing Shari‘a compliant products comfortably and inextricably within the Bank of England’s financial fold.

Although Mr. Brown quoted some hadith of the Prophet Muhammad, may Allah bless him and grant him peace, it is significant that he did not quote any of those which deal specifically with financial transactions, perhaps because he also referred to his master the Governor of the Bank of England’s speech made the previous evening in Edinburgh in which Mervyn King referred to the twin features of the Bank’s present framework for monetary policy – “namely inflation targeting and independence of the Bank of England”. Having observed that “there are some signs of inflationary pressures in the main industrial countries” and that “the economic outlook is far from certain,” the Governor concluded that the Monetary Policy Committee, which meets monthly to decide on interest rates, would, “month by month, be debating the prospects for the economy in order to decide in which direction, if any, interest rates need to move.”

The Chancellor did not have to spell it out, for clearly any accommodation of ‘Islamic Finance’ by a financial system which is based on manipulating interest rates, the prime cause of inflation, could not possibly involve the abolition of usury – which was illegal in England until Henry VIII changed the law. Clearly the quid pro quo for the Bank of England’s recognition and support of ‘Islamic Finance’ is that Muslims are expected to accept regulation by a banking entity immersed in usury – even though, from a Shari‘a perspective, usury is a serious crime, since it always involves exploiting human need in order to gain something for nothing.

This between the lines message was also inherent in the speech given by Callum McCarthy, the Chairman of the Financial Services Authority whose four statutory objectives are firstly, market confidence: maintaining confidence in the financial system; secondly, public awareness: promoting public understanding of the financial system; thirdly, consumer protection: securing the appropriate degree of protection for consumers; and lastly, the reduction of financial crime: reducing the extent to which it is possible for a business to be used for a purpose connected with financial crime.

Mr McCarthy outlined the FSA’s approach towards the regulation of Islamic finance by emphasising the need to provide “a framework which offers those who use Islamic finance, whether from wholly Sharia compliant Islamic banks or by way of Sharia compliant products offered by non Islamic banks, the same degree of protection which is offered to those who use non Islamic finance”. He emphasised the need to promote “financial inclusion” – in other words the inclusion of ‘Islamic Finance’ within the parameters of the main banking system – and with this goal in mind he observed that, “We at the FSA are determined to continue to help the development of Islamic finance in the UK.”

Significantly, Mr McCarthy referred to “the special position of the Sharia Supervisory Board within an Islamic Bank”, for without the sanction of a Sharia Supervisory Board, no financial product or banking entity can be deemed ‘Shari‘a compliant’. It is therefore very important to the interests of the banking community that Sharia Supervisory Boards make favourable decisions.

The Big Question

The eminent members of the various Shari‘a supervisory boards have worked extremely hard to ensure that their Islamic financial institutions and Islamic financial products are ‘Shari‘a compliant’ – thereby ensuring a healthy number of local, national and international portals through which Muslims’ wealth can be channelled in to support the main banking system. Just as some scientists have agreed not to ask what existed before the Big Bang, however, the Shari‘a boards appear to have agreed not to ask themselves whether paper money – and by extension, digital electronic money – is Shari‘a compliant. This is in spite of the fact that if a transaction is to be truly Shari‘a compliant, then the means of exchange utilised in the transaction must be Shari‘a compliant. So, let us ask the Big Question on their behalf, “Is paper money Shari‘a compliant?”

Paper Money

What is paper money? Today paper money is an unredeemable I.O U. For example, I have an English £5 note which records a ‘promise to pay the bearer on demand the sum of FIVE Pounds’ made by Merlyn Lowther, ‘the Chief Cashier’. This promise refers to the time when people (they weren’t referred to as consumers in those days) used to deposit their gold sovereigns and silver florins with the bankers who would give them an I.O.U. in exchange which promised to repay the sum of gold or silver when asked. People soon realised that these I.O.U.s could be used as a means of exchange in any number of financial transactions before being turned back into gold or silver when needed. Then the bankers began printing I.O.U.s even though they were not backed by gold or silver and using them as money – although they did make sure that they still had enough gold and silver to honour any I.O.U. if anyone did ask for it to be redeemed. At this point, this paper money was a redeemable I.O.U. By this means the bankers were able to loan printed money on interest which in turn resulted in more money being created out of nothing – which meant that more I.O.U.s had to be printed.

When asked if he would become king of America, a banker replied, “Give me control of the issuing of money and credit and I care not who sits in the house of politics.”

In the end, there were so many I.O.U.s – there was so much paper money – that it became no longer possible to honour them. So the bankers changed the rules and informed every-one that they could still use the paper money as a means of exchange, but they could no longer exchange it for gold or silver. In the end gold and silver money was taken out of circulation altogether.

Everyone knows, myself included, that even if I manage to locate Merlyn Lowther himself, he is not going to keep his promise. He is not a magician. My £5 note is not backed by gold or silver. It is only a piece of paper with a fancy design and a number printed on it. It is only worth what people think it is worth. Is this piece of paper a Shari‘a compliant means of exchange? No it is most definitely not.

An I.O.U. is not a Shari‘a Compliant Means of Exchange

The authority for the prohibition of using an I.O.U. as a medium of exchange derives from the earliest days of Islam:

Yahya related to me from Malik that he had heard that receipts were given to people in the time of Marwan ibn al-Hakam for the produce of the market at al- Jar. People bought and sold the receipts among themselves before they took delivery of the goods. Zayd ibn Thabit and one of the Companions of the Mes-senger of Allah, may Allah bless him and grant him peace, went to Marwan ibn al- Hakam and said, “Marwan! Do you make usury halal?” He said, “ I seek refuge with Allah! What is that?” He said, “These receipts which people buy and sell before they take delivery of the goods.” Marwan therefore sent a guard to follow them and to take them from people’s hands and return them to their owners. (Al- Muwatta of Imam Malik : 31.19.44)

In other words, an I.O.U. cannot be used as a means of exchange, even if it can be redeemed for gold or silver – because it opens the door to usury. For example, A sells B some goods for 10 gold dinars. B does not have the money on him, so he writes A an I.O.U. and takes possession of the goods. A is not permitted to use that I.O.U. as a means for purchasing goods from C – because the transaction may become usurious. For example, C may only agree to sell goods which are worth 9 dinars for the I.O.U. – for which he will subsequently receive 10 dinars from A. Or perhaps C will only accept 9 dinars in payment for the goods and A can only raise them from D who pays him 9 dinars for the I.O.U. knowing that A will give him 10 dinars for it.

Since today’s paper money is an unredeemable I.O.U., it follows that dealing with today’s paper money is in fact usurious – and therefore any financial transaction or financial product which involves its use is unavoidably usurious and cannot therefore truly be described as being Shari‘a compliant, let alone “wholly Shari‘a compliant” to use Mr McCarthy’s phrase.

Using digital electronic money is a substitute for using paper money and therefore the same analysis applies. Since virtually all money deposited with banks is used by the banks to provide loans on interest and to earn interest for the bank while not being used by the bank account holder, this means that even if an individual bank account holder does not accept interest on any credit balance, the bank will still be using the money in that credit balance to create money out of nothing by way of interest, either by lending it or by depositing it in an interest bearing account, whether it is overnight or for a longer period. Even if a bank assures its Muslim customers that their deposits will not be utilised to create money out of nothing by placing them in an interest-bearing account, this does not alter the fact that the money itself remains an unredeemable I.O.U. and is therefore itself usurious and accordingly not Shari’a compliant. If an I.O.U. is not a Shari‘a compliant means of exchange, what is?

Gold and Silver

Islamic jurisprudence clarifies the difference between gold and silver on one hand and paper money on the other by the legal terminology which is used to indicate their inherent characteristics : Gold and silver are categorised as ‘ayn (tangible merchandise with intrinsic value) – whereas paper money is categorised as dayn (a promise to pay, a debt). An ‘ayn can never be mistaken for a dayn – and vice versa. The Shari‘a permits an ‘ayn to be exchanged for an ‘ayn, but it is not permitted to exchange an ‘ayn for a dayn, nor is it permitted to exchange a dayn for a dayn.

Since the time of the Prophet Muhammad, may Allah bless him and his family and companions and grant them peace, the traditional currency of the Muslims has always been the gold dinar and the silver dirham. The Islamic dinar is a specific weight of 22 carat gold equivalent to 4.25 grams. The Islamic dirham is a specific weight of pure silver equivalent to 3.0 grams.

Umar Ibn al-Khattab, the second leader of the Muslim community after the death of the Prophet Muhammad, confirmed and established the known standard relationship between the two based on their weights: 7 gold dinars must be equivalent to 10 silver dirhams.

Traditionally, the respective weights of the two coins were determined with reference to the weight of a specific number of grains of barley:

“Know that there is consensus [ijma] since the beginning of Islam and the age of the Companions and the Followers that the dirham of the shari’a is that of which ten weigh seven mithqals [weight of the dinar] of gold. . . The weight of a mithqal of gold is seventy-two grains of barley, so that the dirham which is seven-tenths of it is fifty and two-fifths grains. All these measurements are firmly established by consensus.” (Al-Muqaddimah, Ibn Khaldun).

The gold dinar and the silver dirham have intrinsic value. They can only be devalued either by debasing them with other metals, or by clipping them so that they are under weight.

The gold dinar and the silver dirham can be used as a means of exchange – but they cannot be treated as a commodity in themselves, which means that they cannot be rented out (i.e. loaned on interest) and they cannot be replaced by or represented by an I.O.U. or a promise to pay.

Although Gordon Brown made no reference to it, an essential element of true Islamic finance is Zakat.


As well as being one of the five pillars of Islam, an essential element of Islamic Finance is the Zakat tax, the annual obligatory tax on Muslims payable on surplus wealth at a rate of 2.5% – which after being collected is then distributed amongst the poor, thereby ensuring the re- distribution of unused wealth. Zakat can only be paid in gold and silver or in certain goods in kind or in certain livestock, but not with an IOU nor with fulus (small change represented by base metal coinage or paper tokens, with no inherent value) nor with digital electronic money.

When the great Maliki ‘alim, Shaykh Muhammad Alish (1802-1881), was asked:

“What is your judgement in respect to the paper with the stamp of the Sultan that circulates like dinars and dirhams? Is it obligatory to pay zakat as if it was a coin of gold or silver, or merchandise, or not?” he replied:

“Praise belongs to Allah and blessing and peace upon our Master Muhammad, the Messenger of Allah.

Zakat is not to be paid for it, because zakat is restricted to livestock, certain types of grains and fruits, gold and silver, the value of rotational merchandise [stock in trade] and the price of goods withheld. What has just been referred to does not belong to any of these categories.

You will find an explanation by making a comparison with the copper coin or fulus with the stamp of the Sultan which is in circulation and for which no zakat is paid since it does not belong to any of the categories just mentioned. It says in the Mudawwana : ‘Those who possess fulus for over a year for a value of 200 dirhams do not need to pay zakat unless it is used as a rotational merchandise [stock in trade]. Then, it should be treated as if it is merchandise.’

In the ‘At-Tiraz’, after mentioning that Abu Hanifa and Ash-Shafi’i obliged payment of zakat for the fulus, [it is stated that] since both affirm that the payment of zakat is from value, and considering that Shafi’i has two contradictory opinions about the subject, the opinion of this school is that there is no obligation to pay zakat for the fulus since there is no disagreement about the fact that what applies with respect to the fulus is not its weight or its quantity but only its given value. If the zakat was obligatory [on paper] by considering its substance as a merchandise, then the nisab would not be stipulated according to its given value but according to its substance and its quantity, as is the case with silver, gold, grain or fruits. Since its substance [paper] is irrelevant [in value] in respect to the zakat, then it should be treated the same as the [coins made of] copper, iron or other similar substances.

And Allah, ta’ala, is the Wisest. And may Allah bless and give peace to our Master Muhammad and his family.”

(Translated from the Al-Fath Al-‘Ali Al-Maliki, pp. 164-165).

In other words if Zakat were to be paid on paper money because it was being assessed as merchandise, or stock in trade, then the amount payable would be calculated with reference to its inherent value as paper in terms of its weight – and not with reference to its given value as indicated by the numbers, patterns and promises printed on it.

Since a small piece of paper is worth next to nothing, even if Zakat was payable on paper (which it is not), the Zakat payable on many pieces of paper would be negligible – and whether the numbers and symbols £5 or £10 or £50 or £100 or £1000 were printed on each piece of paper, this would be entirely irrelevant as regards measuring their worth as pieces of paper for the purposes of paying Zakat.

Since paper does not belong to any of the categories of goods on which Zakat is payable, and since paper money is in practice never treated as stock in trade, and since it is therefore treated as small change, it follows that it is in fact not Shari’a compliant to pay Zakat with paper money or with electronic digital money or with small change – or indeed to have a Zakat bank account, unless that account is an e-dinar or e-dirham account where every electronic dinar or electronic dirham is backed by a physical gold dinar or a physical silver dirham.

It follows that any future bona fide Islamic Finance and Trade Conference will need to consider the introduction of a universal Shari‘a compliant means of exchange in which Zakat can also be paid – in other words, in compliance with the Shari‘a of Allah and in accordance with the Sunnah of our master Muhammad, may Allah bless him and grant him peace, not Mervyn, the introduction of the traditional currency of the Muslims, the gold dinar and the silver dirham.

The Role of Islamic Banks and Shari‘a Boards in establishing the Gold Dinar and Silver Dirham

Up to now most Shari‘a Boards have either failed to consider or have studiously ignored or skirted round this fundamental issue. This is either because their members have become so accustomed to using paper and digital electronic money that they do not see what it really is (that is, they cannot distinguish between an ‘ayn and a dayn), or it is because they argue that achieving Shari‘a compliance is an evolutionary process which will take time and therefore it is not feasible to deal with this issue at this stage. This is a false argument and as convincing as the argument which asserts that eventually a pig can evolve into a camel.

Sooner or later, the Shari‘a Boards will have to give this matter serious thought, for even if their current financial products are Shari’a compliant in every other aspect, in fact none of them will be Shari’a compliant until the means of exchange which they all utilise is itself Shari’a compliant. Furthermore, the Islamic banks now have the infrastructure by means of which Shari‘a compliant gold dinars and silver dirhams can be minted, distributed and utilised – and therefore any excuse based on the doctrine of darura (necessity) to avoid this obligation is simply no longer valid.

The principle of darura does not entitle Islamic banks to pretend that paper and digital electronic money are Shari‘a compliant by virtue of necessity indefinitely. The Shari‘a requires them to strive to move from what is haram (forbidden) to what is halal (permitted) – and since it will not be difficult to do this, this means that they cannot plausibly assert that there is no alternative to paper and plastic, however well qualified the members of their Shari‘a boards appear to be.

The Islamic banks and the governments of the traditionally Muslim countries now have the knowledge and the infrastructure and the resources to legally recognise the gold dinar and the silver dirham as their currencies, and to put the gold dinar and silver dirham back into circulation and to operate dinar and dirham accounts, including the use of internet technology, provided that each e-dinar and each e-dirham are backed by an equivalent number of gold dinars and silver dirhams.

No financial transaction and therefore no financial product can be truly Shari‘a compliant until these traditional Islamic means of exchange are in use again.

By doing this, they will also facilitate the proper collection and distribution of Zakat in gold and silver in compliance with the Shari‘a – which will in turn impede hoarding and ensure the equitable re-distribution of real wealth amongst the poor.

We look forward to the day when not only the Islamic Banks and Shari‘a Boards but also the Governor of the Bank of England, the Lord Chancellor and the Chairman of the Financial Service Authority have addressed these issues and brought the practices of their institutions within the parameters of the Shari‘a. Instead of re-defining ‘Shari‘a Compliance’ to suit the usurious banking system, there is an urgent need for the usurious banking system to become Shari‘a compliant if it is to survive and truly flourish. They will then be glad to quote the ayats of Qur’an and the Hadith of the Messenger of Allah, may Allah bless him and grant him peace, which never featured in their speeches at the Islamic Trade and Finance Conference 2006, especially the following ayats in which Allah (God) contrasts riba with bay‘ (trade) and with sadaqa (voluntary charitable giving) as follows:

Those who practise riba will not rise from the grave

except as someone driven mad by Shaytan’s touch.

That is because they say, ‘Trade is the same as riba.’

But Allah has permitted trade and He has forbidden riba.

Whoever is given a warning by his Lord and then desists,

can keep what he received in the past

and his affair is Allah’s concern.

But all who return to it will be the Companions of the Fire,

remaining in it timelessly, for ever.

Allah obliterates riba but makes sadaqa grow in value!

Allah does not love any persistently ungrateful wrongdoer.

Those who have iman and do right actions

and establish salat and pay zakat,

will have their reward with their Lord.

They will feel no fear and will know no sorrow.

You who have iman! have taqwa of Allah

and forgo any remaining riba

if you are muminun.

If you do not, know that it means war from Allah

and His Messenger.

But if you make tawba you may have your capital,

without wronging and without being wronged. (Qur’an : 2. 274-278)

The reported words of the Prophet Muhammad, may Allah bless him and grant him peace, and the recorded practices of the first Muslim community are equally explicit:

‘Abdullah ibn Mas‘ud related that the Messenger of Allah, may Allah bless him and grant him peace, cursed the one who accepted usury, the one who paid it, the witness to it and the one who recorded it. (Sunan of Imam Abu Dawud: 16.1249.3327)

Yahya related to me from Malik from Nafi‘ that he heard ‘Abdullah ibn ‘Umar say, “If some one lends something, let the only condition be that it is repaid.” (Al- Muwatta’ of Imam Malik: 31.44.94)

Malik related to me that he had heard that ‘Abdullah ibn Mas‘ud used to say, “If some one makes a loan, they should not stipulate better than it. Even if it is a handful of grass, it is usury.” (Al-Muwatta’ of Imam Malik: 31.44.95)

Abu Hurayrah related that the Messenger of Allah , may Allah bless him and grant him peace, said, “A time is certainly coming to mankind when only the receiver of usury will remain, and if he does not receive it, some of its vapour will reach him.” Ibn ‘Isa said, “Some of its dust will reach him.” (Sunan of Imam Abu Dawud: 16.1248.3325)

Today, most of the world’s population is choking on the dust of usury. The only cure is to restore the use of gold and silver as a means of exchange.

The Future

The impulse to make this transition from paper and plastic to gold and silver may well arise not so much out of a yearning to be pleasing to Allah by following His Shari‘a, and not so much out of a desire to be granted a place in the Garden in the next world as a reward for obedience to Allah, and not so much out of a wish to avoid a place in the Fire in the next world as a punishment for disobedience to Allah – but rather simply out of sheer necessity:

When it becomes unavoidably apparent that the frail bubble of modern economics must inevitably burst, given that paper money is only intrinsically worth the paper on which it is printed and given that most of the trillions of all the major currencies in the world today only exist as electronic data tenuously located on various hard disks around the world, then prudent investors are likely to exchange their worthless paper and digital electronic tokens for merchandise or property which possess intrinsic value.

From the sane perspective of the Shari‘a, it does not take a great deal of financial acumen or expertise to appreciate that most modern financial problems have arisen out of the institutionalisation of usury and that these have ballooned out of control in less than a lifetime – ever since the banking system abandoned the gold standard. Even economists who do not have access to the wisdom of the Shari‘a are beginning to realise that this departure from bi-metal backed currency has turned out to be no more than an experiment which has gone horribly wrong.

Historically, as long as the Muslims used gold dinars and silver dirhams, they thrived. Since it is an essential aspect of true Islamic finance that money may be used as a means of exchange, but must not be treated as a commodity (which means that it cannot be rented out – that is, loaned on interest), and since the Shari’a forbids any unjust increment in a commercial transaction (even by so much as a blade of grass), in this past age, usury was virtually non-existent and therefore there was zero inflation. For fourteen centuries, a silver dirham was enough to purchase a chicken and a gold dinar was enough to purchase a sheep. This is still the case today.

Since there was no usury and no inflation, other than the Zakat, there was virtually no taxation. As long as the Zakat tax was collected and distributed, there were no national debts. There was therefore no need to increase taxes every year in order to service the national debt, as is the case in most countries today, including the UK. Today elections are won or lost on a party’s taxation policy, not on their foreign policy however misguided.


If complicated mental gymnastics are avoided and the simplicity of the Shari‘a is acknowledged and appreciated, then it appears inevitable that the world of finance will one day return to a bi-metal based economy, simply because it is healthier and it has a proven track record of at least five millennia.

From a Shari‘a perspective, the return to the use of gold and silver currencies will not be an attempted escape back to the past, but rather it will be a recovery of sanity and true economic stability – and once established it will then and only then be possible to have truly Shari‘a compliant financial products, in substance as well as in name.

“Yahya related to me from Malik that Yahya ibn Sa‘id heard Sa‘id ibn al-Musayyab say, ‘Keeping gold and silver out of circulation is part of working corruption in the land.’” (Al-Muwatta of Imam Malik : 31.16.37)

To end on a positive note (and definitely not an I.O.U.) our prayer for the various Islamic banks and Shari‘a advisory boards and the Governor of the Bank of England, the Chancellor and the Chairman of the Financial Services Authority is that they do something really worthwhile during their brief time on earth – by bringing back gold and silver into circulation.

In the words of the HSBC advertisement, “Shari‘ah isn’t just a privilege, it’s an Amanah,” an amanah which the mountains refused – but which some people in every age have accepted, in compliance with the command of Allah and His Messenger, may Allah bless him and grant him peace.


Quotations from the Qur’an are from THE NOBLE QUR’AN – a New Rendering of its Meaning in English by Abdalhaqq and Aisha Bewley, (Bookwork, Norwich, 1999). The hadith which are quoted are from Al-Muwatta of Imam Malik translated by Aisha Bewley and Yaqub Johnson (Diwan Press, Norwich, 1982) and the Sunan of Imam Abu Dawud translated by Professor Ahmad Hasan (Sh. Muhammad Ashraf, Publishers, Lahore, 1984). Most of the definitions of Arabic and Islamic terminology are derived from A Glossary of Islamic Terms by Aisha Bewley (Ta-Ha Publishers Ltd, 1998). Much of the conceptual framework and some of the intellectual content of this article are the results of the research of Professor Umar Ibrahim Vadillo, Dean of Dallas College, Cape Town, South Africa and author of The Esoteric Deviation in Islam (Madinah Press, 2003).

Ahmad Thomson is a practising Barrister specialising mainly in Islamic, Charity, Employment and Discrimination Law ( He is a co-founder and member of the Association of Muslim Lawyers (UK) and Muslim Lawyers (Europe). He embraced Islam in 1973.

Posted in What is Islamic Finance? | 1 Comment

True Wealth is Created Through Hard Work, Not Financial/Derivatives Gimmickry

by Saeed Haqq

True wealth is created through value-added services, such as trading and manufacturing, not by fancy financial derivative models on computers giving valuation in the ether to products that do not bring any benefit productive capacity or capital stock to society, and instead give rise to uncertainty and deception arising out of informational asymmetry.

Islamic modes of financing/contracts are transparent because both parties conclude a contract through mutual agreement, and everything is agreed upon upfront such as the profit-sharing ratio (PSR) which reduces disputes and ambiguities later on.  Whereas in an interest-based banking system economic, financial or risk consequences of new products that are introduced are an after-thought.

Islam forbids loaning money on interest and the only purpose of loaning money should be benevolent loans (Qard Hasan) where interest cannot be charged.  Someone might ask how can I loan my money when the money that is returned later has less purchasing power.  This is the problem with non-commodity money that is mandated by governments, and these governments have their interest in perpetuating this type of money that is only worth the ink and paper they are printed on.

If one looks back in history, say 200 years a silk Italian suit would have cost a troy ounce (tr. oz.) of .999 gold, and that same suit can be purchased today with 1 tr. oz. of gold at US$ 1,236.  A chicken that cost a Dirham (2.975 grams of .999 Silver) hundreds of years ago can be purchase for 1 Dirham (selling in Malaysia for RM 13.00).  So those who trade in real money are saved from the wrath of fiat-money which constantly and consistently losses purchasing power.

Throughout Islamic civilisations money (gold or silver) was not allowed to be traded as a commodity, that is, one could not exchange some inferior quality of one weight of gold for a superior quality of different weight of gold.  If they wanted to trade then the parties had to trade equal weights regardless of the quality, otherwise, one party could be at a disadvantage or cheated by the other.

Today the world is flooded with US$ 60 trillion worth of paper and electronic national currencies ( around the world of dubious value, and no one knows their values except computer models of speculative traders.  We live in an ‘Age of Stupid’ where we care only about our immediate gratification, satiating our sensory pleasures to the extent that we do not even know how we are being robbed by the elite through the fraudulent fractional reserve banking and the paper/electronic money system, or for that matter capable of seeing the right from the wrong.  Besides, the media does its part with sound-bites without objective analysis that glorifies celebrity lifestyle in movies, finance and politics, that distract us from deep thinking that is required to keep the people in a republic honest.

Let us consider the US Dollar as a Legal Tender, that is, as a Common Stock of a Nation.  With US$ 53.0 trillion in current debt amongst consumers, businesses, financial institutions and government, and with an additional US$ 60 – 106 trillion in future liabilities to retirees and armed forces, who in their right mind would consider the US Dollar to be a store of value, and thus maintain dollar accounts anywhere in the world.  Those that do consider the US Dollar as a store of value are giving a blank check to the Federal Reserve to print more, without asking for any compensation for the depreciating currency – not that I would condone accepting interest that is forbidden in Islam.

There is nothing Federal about in the Federal Reserve, nor is there any Reserve.  The last time the supposed 8,133 tons of gold in Fort Knox was audited was in 1957.  No wonder US Congressman Dr. Ron Paul has been calling for an audit of Fort Knox.  The name Federal Reserve is a deception because it is a Central Bank owned by private banks controlled by the wealthiest families from the US and Europe, and all of us around the world are paying tribute to them via the ever-depreciating US Dollar.  Author G. Edward Griffin has done a superb job of documenting the origins of The Federal Reserve in his book titled “The Creature from Jekyll Island – A Second Look at the Federal Reserve”.  Also, please refer to Mr. Griffin’s Aug 21, 2010 interview with James Puplava on FSN news hour at

Without the recent bailouts by the Federal Reserve and US Govt. the US would have imploded on its own weight of debt.  The size of the bailouts (US$ 3.7 trillion) was only possible because of the reserve currency status of the US Dollar.  If it were any other country its currency would have collapsed.  We have seen what happens to other countries (Greece, Hungary and others to follow) when they ‘hit the wall’ in their finances and without the backing of the reserve currency status.  Does anyone in their right mind think that the US can continue this state of affairs of issuing new money whenever it faces implosion that a day of reckoning will not come.  After all who pays the price when the country issues new currency – it is the middle-class and people on fixed income, such as retirees.

Before a publicly-listed company issues new shares it has to get approval from existing shareholders because the latter face dilution in earnings per share (EPS).  So how can any government have a free hand in issuing additional currency when this new money eventually turns up in higher prices of goods that affect retirees and people on fixed income.  How can a free and thinking people accept that their government bailout bankers (who already made their fortunes playing with other people’s money and created the mess) and not raise hell, unless these same people are so indulged in their desires that they do not even consider this as an injustice on their fellow citizens.  Or, is it because ordinary people are kept in the dark about the mechanisms of money creation and its consequent effect on prices (the invisible tax that politicians love so much), and thus are unable to hold their elected officials accountable.  How does that serve the cause of Economic Justice when a few chosen classes of citizenry (i.e. bankers and their friends in high places in business and politics) get a free hand in creating funny money (credit) with ordinary peoples’ deposits, and earn a living without lifting a shovel or a anvil?

In this age of deception by people in high places, including ivory towers of academia, ordinary people will find that Islamic business ethics and economic models will liberate them from grip of mammons, because Islam forbids eating other people’s wealth via deception and collusion by people in positions of power.

Creating money out of thin air from depositors’ money and claiming a profit from it must be the surest way of making money.   Is it any wonder that the banking cabal are gloating in joy in the following excerpt from a letter from the London branch of the banking firm of Rothschild Brothers, dated 25 June 1863 and addressed to the New York bank of Ickleheimer, Morton and Van der Gould (quoted by Ezra Pound in his writings) that:

“The few who understand the system…will either be so interested in its profits, or so dependent on its favours, that there will be no opposition from that class, while, on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantages that Capital derives from the system, will bear its burden without complaint, and perhaps without even suspecting that the system is inimical to their interests…”.

Today we have electronic money which can erode our purchasing power at the press of a computer button.  I bet the ‘powers-that-be’ that wants to defame Islam will never speak the justice aspect of Islam because it will expose their fraudulent monetary system that preys on the middle-class.

Is that also the reason why there was such a commotion when the State of Kelantan in Malaysia issued its own currency with real money – Dinar and Dirham? Or, was the commotion about ensuring that the international bankers get their interest payments from holding Malaysian Govt. debt, and thus keep Malaysia’s access to international debt markets intact.  Or, is it because Malaysia’s Central Bank could follow a course of action that is different for a stable economy operating under Dinar and Dirham, that the financial authorities in Washington and London could not control through their interest lever that creates boom/bust cycles through which they brought the entire world economy to its knees two years ago from which we haven’t recovered.

Using the species (Gold and Silver) ties the hands of corrupt politicians who promise the world to their constituents just to get elected and then break those promises once elected, and yet have the gaul to promise new goodies the next time around.  Was there a similar promise made by the US President when nations gathered in 1944 at Bretton-Woods and agreed to peg their currency to the US which would in turn be pegged to gold at US$ 35.00 to a tr. oz. of Gold.

Is it any wonder that after so many broken promises that there are so many regions of the world considering issuing their own community currencies.  Otherwise why would there be 14 regional currencies operating in Germany today, and many are in the pipeline in Europe to protect their communities from the fraud of fiat-money issued by the globalists to enslave the middle-class.  Professor Peter North of University of Liverpool wrote a book in 2006 titled “Alternative Currency Movements as a Challenge to Globalisation”.

Also, Economics Professor Emeritus Michel Chossudovsky published a book in 2003 titled “The Globalisation of Poverty and the New World Order” to expose the financial intrigue of IMF and World Bank, not to mention John Perkins’ (a former World Bank consultant) book titled “Confessions of An Economic Hitman” that exposes the real agenda of these supra-national institutions.

Today these supra-national institutions have given new meaning to colonisation via their deceptive debt structuring programme that grab precious resources of developing countries, and they blame over-population as the cause for low GDP per capita and never a mention of how they steel wealth of other nations in broad daylight.  It is time to speak the truth to power when these globalists have hijacked and demonised one of the great religions in the world that produced great scholars and scientists in Spain from 714 AD to 1492 AD.

Islam prohibits conducting business on the basis of interest, because it gives unfair advantage to Capital, and looks out for the interest of all parties to a business contract so that the contracting parties are not at a disadvantage to another.  So what are the alternatives to interest-based banking.  As mentioned earlier Islam encourages fair trade between people to the extent that a local merchant cannot buy-off the merchandise of a foreign merchant until the latter finds out the price for himself.  Today manipulations in the commodities, stock and bond markets happen on a regular basis as major investment banks are given favoured positions.  Read Matt Taibbi’s article on Rolling Stone magazine how Goldman Sachs was the only investment bank allowed to sit in the bailout discussion on AIG, because Goldman Sachs would have lost $20 billion in derivatives insurance payment from AIG.  Also, read about how Morgan Stanley had sold US$ 1 billion worth of silver that they were supposed to hold for their 22,000 investors, and the lawsuit was settled out of court in 2007.

Compare these incidences with an incident that happened during the Fourth Caliph’s time (Ali ibn Abi Taleb) in Medina.  Someone had stolen the shield/armour of the Caliph and sold it to a Jew in the market.  When Ali (may Allah Almighty be pleased with him) was strolling the market he recognised his shield and asked him where he got it from.  He said he bought it from someone.  The Caliph took him to the Judge (Qadi) and the Judge asked the Caliph for proof, and the Caliph said he recognised his shield.  With that the Judge dismissed the court saying that the Caliph did not have a case.  Observing this justice being meted out against the Caliph the Jewish person later converted to Islam.

Those were our leaders whom God Almighty has honoured and we remember them to this day.  Which political leader today would accept the decision of an independent high court judge against an ordinary citizen and go about his business without doing something to the judge to show him who is in power?  President George W. Bush signed over 700 waivers before he left office so charges could not be brought against him after he left office.  How cowardly?  Or, compare this with the justice being meted out for Muslims who are imprisoned in places like Guantanamo and other secret prisons in third countries, such as US Military Base Camp Bond-Steel in Kosovo, that country the US liberated and established something even more horrific.

Returning to the matter at hand, that is, fairness in trade and business…  In Islamic civilisations financiers and entrepreneurs both took risk with their inputs, unlike today’s banks which take their ‘rent’ (interest) regardless of what happens to the business or the entrepreneur.  This is considered an injustice in Islam.  The cause of Economic Justice is best served when Financier and Entrepreneur agree to a profit-sharing ratio through mutual agreement on a pre-agreed basis, and not resort to grabbing the collateral as practiced in conventional banking.  Is it any wonder that banks are always getting rich regardless of economic times?

Today it is a proven fact that large banks like to conduct business with large corporations because of their predictable cash-flows and loan-servicing ability.  In the process shareholders of banks get richer in good times, and when bad times arrive (due to their own excess credit creation) they go ‘tin-cupping’ to their bribe-accepting politicians begging for bailouts.

It is also a proven fact that wherever Wal-Mart or any of the large retail chains locate their stores, they decimate small businesses because of large corporations command better economies of scale in production, supply chain and financing.  Thus community wealth evaporates because small businesses go under which tend to generate 70-90% of new jobs.  Even today small and medium businesses generate 80% of the new jobs in the U.S.  In the on-going credit collapse and economic depression combined with outsourcing manufacturing overseas, large corporation will find profit and EPS growth via ‘workforce rationalisation’ which only means one thing – rising structural unemployment.

Marxist economics of central planning has proven to be inefficient in allocating resources, and now with the Sovereign Debt Crisis putting a limit on how much debt governments can take on for Keynsian deficit-spending economics (another form of central planning combined with interest lever), past economic ideologies will soon prove to be obsolete.   Do not expect solutions to come from the world’s political and economic leaders because they have their interest in maintaining the hegemonic position with their friends in the banking franchises.  It is up to the common people to find new solutions, and they will find that partnership modes of Islamic trade, finance and contracts are their holy grail that will liberate them from the clutches of the banking cabal, and bring communities together again.  And to maintain the freedom they will gain back communities need to trade in currencies that the cabal cannot print out of thin air like paper and electronic monies.  They should trade in real money as Dr. Ron Paul (US Congressman) has been ranting and raving about for the past three or four decades.

In Islam Economics, capital and labour/skills are given the same importance unlike Capitalist societies where capital reigns over labour, or in Marxist ideology where collectivist labour dictate to the Capitalists.  Islam gives equal footing to Capital and Labour so these two parties come to the negotiating table feeling confident that they both have a say in contracting without feeling intimidated by the other.   In my consulting practice I have heard complaints from small and medium businessmen that they felt intimidated by bankers and their loan application processes when they enter a bank.

The by-product of the Islamic economic and business models is that wealth accumulation happens as a natural course of business and trade without the intervention of the invisible hand of market regulators, politicians and central bankers.  Because Capital and Labour share in the risk they are deserving of profit, otherwise, how can one justify profit without any work as conventional interest-based banking had us believe all these years.

In this negotiation process the rights of the entrepreneur and financier are respected, and market’s demand and supply mechanism works well in the absence of central planners trying to prop-up prices of certain assets as we recently experienced in the recent housing bubble, which gives rise to other market dislocations in the long term.  It is like allopathic doctor prescribing medicine to suppress the symptoms of a disease without curing the root cause, and the disease shows up in another form down the line.

Interference by bailout politicians, bankers and sleepy regulators have artificially propped-up housing, stock and bond markets in the US for the short term via injection of US$3.7 trillion in funny money.  However, when this economic stimulus/steroid runs out watchout for deflationary forces, and then you will hear loud calls for another massive bailout in the order of US $4 to $5 trillion.

The regulations that emanated from the Global Financial Crisis only accorded more power to The Federal Reserve System, which proves that parties involved in enacting and executing the law are friends of the elite ruling structure.  This should clearly prove to the ordinary people that they have to think for themselves and question everything in the mainstream media and universities.  What does it mean for you and I to save in any currency when all currencies are linked via the US Dollar, and soon to be linked via another funny electronic money called SDR (Special Drawing Rights), that has been in the backwoods since its creation in 1969 and only coming to prominence lately after the global financial crisis.  Do we smell some foul play that is slowly nudging us towards a global currency, central bank, and political regime?  Do the great religions of the world have anything to say about the direction the world is headed with one elite body ruling the world?

Please refer to James Puplava’s Aug 21, 2010, interview of experts on Globalist’s agenda on  Or, listen to Bob Chapman or Gerald Celente’s interview on Youtube.

What does it mean to be endowed with God-given rights: right to life, right to fresh water, right to pro-create, right to think freely without being conditioned in free public schools, right to think freely without being conditioned by the mass media, right to trade and travel far corners of the world created by The Almighty and getting to know other people, and not get bogged-down by obstacles of immigration, passport and manmade borders?

Please refer to Sep. 26, 2001 (a fortnight after the horror of 911) speech at the CEO Forum in Minneapolis, Minnesota, by HP CEO Carly Fiorina who had the courage to extoll the virtues of a great civilisation that spanned from Spain to Indonesia, where no passports were needed to travel and the civilisation was tied by one language and belief in One God.  As a historian she made some astute observations so we do not fall into the trap of demonising a civilisation that brought us many of the foundations of science and technology that we enjoy today.  She ended her speech by mentioning that that civilisation was the Muslim civilisation.

Many civilisations have been attacked by others and have succumbed to forces that were more powerful than them, and some have even been decimated, such as the American Indians.  These cycles from Spirituality to Enslavement have happened throughout history, and we are not exempted.  The only thing different this time is that the propaganda machine is so much more sophisticated that even George Orwell (who wrote “1984″) would be surprised.

Professor Emeritus Alexander Tyler (University of Edinburgh, Scotland) wrote a book titled “History of Mankind from the Beginning of Creation to the Early Eighteenth Century” in 1850, in which he mentioned that mankind goes from Spirituality to Enslavement in 8 stages.  At the Eighth Stage and after much suffering mankind (through the leadership of God-sent Messengers – my conclusion) finds the courage to break out from the shackles of bondage.

Perhaps we are at the Seventh Stage when we are crossing from Apathy to Dependence living on government bailouts, rather than accept the consequences of our unsustainable profligate lifestyle built on credit that cannot be sustained with more debt that future generation will be paying with depreciated currencies.  This means that more of the working hours for future generations will go towards servicing debts that previous politicians took on, and what a great way to be born into slavery.

In the final stage we will go from Dependence to Enslavement.  However, there is hope for humanity because human spirit (in light of Divine Wisdom and assistance) is indomitable and wants to be free from any kind of slavery, and submit to no one except to his Creator – The Almighty.  This journey to freedom begins with proper understanding of the true meaning of freedom found in the holy scriptures, such as the Qur’an, when read with an open mind.

When ordinary people begin to communicate with each other we will not only find that we have common aspirations, but also find that we have been put at loggerheads by the corporate-controlled media for the benefit of the elite.  I am hopeful that together we will discover freedom again.

While we gather the courage to regain other forms of freedoms we can at least exercise one freedom today, that is to transact in real money (gold and silver that have intrinsic value), and do not suffer from the counterparty risks that may not be so apparent but are  prevalent in all fiat currencies.

Posted in What is Islamic Finance? | 5 Comments