The Dinar is the name of the official currency in several countries. The Gold Dinar was a coin dating back to the early days of Islam, issued by many rulers, and the Islamic gold dinar is a modern revival of it as a coin or unit of account. Dinar is a basic monetary unit of currency in Algeria, Bahrain, Iraq, Jordan, Kuwait, Libya, Serbia, Sudan, Tunisia and Yemen. It also a several units of gold and silver currency formerly used in Middle East.
The gold dinar is a coin made of 22K (91.7%) gold, in accordance to Islamic law specifications. It has a specific weight of 4.25g and is just under one inch in diameter. If the gold price is $470 per ounce, the value of one dinar is approximately $58. A Gold Dinar is a gold coin first issued in 77 AH (696-7 CE) by Caliph Abd al-Malik ibn Marwan. The name "dinar" is derived from Greek "dinarion" meaning "give" and the Latin "denarius" was a common Roman currency or coin.
Both dinars and dirhams (silver coins) were used by the Muslim world as far back as the time of the second Caliph, Umar (AD 632), until the fall of the Ottoman caliphate in 1924.
By trading with the gold dinar instead of currencies pegged to the greenback. It is believes that international trade would increase, as exchange rates would no longer be subject to arbitrage. Companies would also benefit as there would no longer be the need to hedge financial transactions.
The gold coin represented by an international unit used by national banks to settled trade among countries. This 'virtual dinar' overcomes the obvious physical limitations of transporting gold coins.
History of Gold Dinar
In the past, Muslims use gold Dinar and Dirham as the official currency. However, when looking at the gold Dinar, this coin has a long history, one that dates back to Islam in the early days. The gold Dinar was also the currency that lasted for a long time, being issued by numerous rulers.
Then for the Islamic gold Dinar, this currency was actually connected to the revival of the currency in coin form, which was referred to as a "unit of account", which is unique from other currencies addressed further in this article. The name of this currency, Dinar, is Arabic but derived from a Greek word that translates to "give". In addition, this Greek word is where the name of the first Roman coin came from known as the Denarius.
The first dated coins that can be assigned to the Muslims are copies of silver dirhams of the Sasanian Yezdigird III, struck during the Khalifate of Uthman, radiallahu anhu. These coins differ from the original ones in that an Arabic inscription is found in the obverse margins, normally reading "in the Name of Allah".
Since then the writing in Arabic of the Name of Allah and parts of Qur'an on the coins became a custom in all mintings made by Muslims. Under what was known as the coin standard of the Khalif Umar Ibn al-Khattab, the weight of 10 dirhams was equivalent to 7 dinars (mithqals). In the year 75 (695 CE) the Khalif Abdalmalik ordered Al- Haddjadj to mint the first dirhams, thus he established officially the standard of Umar Ibn al-Khattab. In the next year he ordered the dirhams to be minted in all the regions of the Dar-al-Islam.
He ordered that the coins be stamped with the sentence: "Allah is Unique, Allah is Eternal". He ordered the removal of human figures and animals from the coins and that they be replaced with letters. Gold and silver coins remained official currency until the fall of the Khalifate.
Since then, dozens of different paper currencies were made in each of the new post-colonial national states created from the dismemberment of Dar al-Islam. This command was then carried on throughout all the history of Islam. The dinar and the dirham were both round, and the writing was stamped in concentric circles. Typically on one side it was written the "tahlil" and the "tahmid", that is, "la ilaha illah Allah" and "alhamdulillah"; and on the other side was written the name of the Amir and the date. Later on it became common to introduce the blessings on the Prophet, salallahu alayhi wa salem, and sometimes, ayats of the Qur'an.
Gold and silver coins remained official currency until the fall of the Khalifate. Since then, dozens of different paper currencies were made in each of the new postcolonial national states created from the dismemberment of Dar al-Islam.
Development of Gold Dinar
Today, the Dinar is still used in some countries that are an Arabic or Arabic-influenced. Of course, depending on the country using the Dinar, the design, as well as the code would vary.
The following are the individual countries that still use the Dinar as the primary currency, along with the official name for that country and the ISP code.
• Algeria - Algerian Dinar - DZD
• Bahrain - Bahraini Dinar - BHD
• Iraq - Iraqi Dinar - IQD
• Jordan - Jordanian Dinar - JOD
• Kuwait - Kuwaiti Dinar - KWD
• Libya - Libyan Dinar - LYD
• Republic of Macedonia - Macedonian Dinar - MKD
• Serbia - Serbian Dinar - RSD
• Tunisia - Tunisian Dinar - TND
Along with the list above of countries that continue to use the Dinar, many others have stopped using it. In addition, the gold Dinar associated with King Offa of Mercia who reigned from 757 to 796 and the Abbasid Caliphate Dinar from 774. Interestingly, the minter who was hired to produce the currency made major mistakes in the design in that he had no knowledge of Arabic.
The countries that at one time used the Dinar but no longer do include the following:
• Abu Dhabi
• Bosnia
• Croatia
• Herzegovina
• Iran
• Republic of Serbian Krajina
• Republika Srpska
• South Yemen
• Sudan
• Yugoslavia
Nowadays, Dinar can be used in many ways.
First, it can be used as saving or investment. Gold have intrinsic value. Due to its beauty, rare and unique nature, gold is valued by mankind. Since 5000 years ago until today, mankind still value gold. Historically, gold has been a proven method of preserving value when a national currency was losing value. By saving a portion of gold as your asset you already have a good financial insurance policy.
Next, Gold Dinar can be used to pay zakat. The literal meaning of the word Zakat is: grow (in goodness) or 'increase', 'purifying' or 'making pure'.
Zakat can only be paid with tangible merchandise, called in Arabic 'ain. It cannot be paid with a promise to pay or a debt, called in Arabic dayn. From the beginning the zakat was paid with dinars and dirham. Most significant is that the payment of zakat was never allowed in paper money during all the ottoman period right until the fall of the Caliphate.
Under Islamic law Zakat is a form of Muslin tithing to God for the support of the less fortunate or jihad and it is to be paid in gold or silver, not paper currencies without any intrinsic value. Paper-money is called fulus, because it only represents money and does not have value as merchandise. It follows that since Zakat cannot be paid in fulus, which has no value as merchandise, it cannot be paid in paper-money, which value as weight of paper is null. On this basis, it becomes clear the urgent need to restore the use of the Dinar and the Dirham as payment of Zakat
According to Viewislam.com,"Zakat (or Zakaah) is an obligatory form of charity on savings. It is not an income tax, but a savings tax. Its major recipients are the working poor, who cannot meet all of their needs without some additional help, and the destitute, who cannot even meet their basic needs. It is also used to pay off the debts of those who are unable to pay off their own debts, to free slaves and ransom prisoners of war and to reconcile the hearts of new Muslims who may not yet have a firm foundation of faith. Other lawful recipients are stranded travelers, those engaged in jihad and employees of the state working to collect and distribute zakaah. Their wages come from it.
Thirdly, Gold Dinar can be used as Mahr which means Mas Kahwin. The mahr (dowry) is something that is paid by the man to his wife. It is paid to the wife and to her only as an honor and a respect given to her and to show that he has a serious desire to marry her and is not simply entering into the marriage contract without any sense of responsibility and obligation or effort on his part.
One of the more common names for it is Al-Sadaaq which comes from the word sidq meaning honesty or sincerity. As-San'aani (Book: Subul As-Salaam) explains its significance: "It indicates the sincerity of the husband's desire for his wife. In the religious laws before us the dowry used to go to the guardians."
Fourth, Gold Dinar can be used as a gift. Since gold is beauty, rare, have its own intrinsic value, increase in value over the time and cannot be destruct. It can be a very good gift. This precious metal will be appreciated by human. That is why we can see the older generation passing gold to the younger generation via gold jewellery and other form of gold i.e. Ring, necklace, bracelet and gold coin.
Lastly, Gold Dinar can be used as a legitimate medium of exchange to buy and sell. Gold is money because it fulfils, to an extent unmatched by any other physical commodity, all the pre-requisites of a money. It was rare and prized long before the concept of "money" was ever discovered. It has many other unique uses, and always has had.
Gold's beauty, scarcity, and the ease by which it could be melted, formed, and measured made it a natural trading medium. Gold gave rise to the concept of money itself: portable, private and permanent.
But for nearly three thousand years Gold's primary utility has been recognized as a medium of exchange. The history of Gold as money in modern coin form spans 2630 years, from 700 BC to about 1930 AD. The history of nothing but paper and base metal and silver coin in circulation spans about 40 years from 1930 to 1970. And the history of paper and base metal coin as "money", with no connection to Gold (or silver) anywhere on earth also spans a period now approaching 40 years - from 1970 to date.
Islamic View Of Gold Dinar
The following Hadith on Dinar is researched by Abdul Halim b. Abdul Hamid.
Here are some of the authenticated ones, Insya'Allah.
/Book 10, Number 3895: /
Jabir (Allah be pleased with him) reported that Allah's Apostle (may peace be upon him) said to him: I have taken your camel for four dinars, and you may ride upon it to Medina.
/Book 10, Number 3893: /
Jabir b. 'Abdullah (Allah be pleased with them) reported: Allah's Messenger (may peace be upon him) bought a camel from me for two 'uqiyas and a dirham or two dirhams. As he reached Sirar (a village near Medina), he commanded a cow to be slaughtered and it was slaughtered, and they ate of that, and as he (the Holy Prophet) reached Medina he ordered me to go to the mosque and offer two rak'ahs of prayer, and he measured for me the price of the camel and even made an excess payment to me.
/Book 10, Number 3889: /
Jabir reported: We went from Mecca to Medina with Allah's Messenger(may peace be upon him) when my camel fell ill, and the rest of the hadith is the same. (But it in also narrated in it:) He (the Holy Prophet) said to me: Sell your camel to me. I said: No, but it is yours. He said: No. (it can't be), but sell it to me. I said: No, but, Allah's Messenger, it is yours. He said: No, it can't be, but sell it to me. I said: Then give me an 'uqaya of gold for I owe that to a person and then it would be yours. He (the Holy Prophet) said: I take it (for an 'uqiya of gold) and you reach Medina on it. As I reached Medina, Allah's Messenger (may peace be upon him) said to Bilal: Give him an 'uqiya of gold and make some extra payment too. He (Jabir) said: He gave me an 'uqiya of gold and made an addition of a qirat. He (Jabir) said: The addition made by Allah's Messenger (may peace be upon him) was with me (as a sacred trust for belssing) and lay with me in a pocket until the people of Syria took it on the Day of Harra.
/Book 10, Number 3886: /
Jabir b. 'Abdullah (Allah be pleased with them) reported that he was traveling on his camel which had grown jaded, and he decided to let it off. When Allah's Apostle (may peace be upon him) met him and prayed for him and struck it, so it trotted as it had never trotted before. He said: Sell it to me for an 'uqaya. I said: No. He again said: Sell it to me. So I sold it to him for an 'uqaya, but made the stipulation that I should be allowed to ride back to my family. Then when I came to (my place) I took the camel to him and he paid me its price in ready money. I then went back and he sent :(someone) behind me (and as I came) he said: Do you see that I asked you to reduce price for buying your camel. Take your camel and your coins; these are yours.
The above is from Sahih Muslim, Book 10: Transactions (Kitab Al-Buyu')
This is also another authentic hadith collected by Imam Abu Dawud in his book Sunan.
/Book 16, Number 3322: /
Narrated Abdullah ibn Abbas:
A man seized his debtor who owed ten dinars to him. He said to him: I swear by Allah, I shall not leave you until you pay off (my debt) to me or bring a surety. The Prophet (peace be upon him) stood as a surety for him. He then brought as much (money) as he promised. The Prophet (peace be upon him) asked: From where did you acquire this gold? He replied: From a mine. He said: We have no need of it; there is no good in it. Then the Apostle of Allah (peace be upon him) paid (the debt) on his behalf.
/Book 16, Number 3325: /
Narrated Abu Hurayrah:
The Prophet (peace be upon him) 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 vapor will reach him. Ibn Isa said: Some of its dust will reach him.
/Book 16, Number 3327: /
Narrated Abdullah ibn Mas'ud:
The Apostle of Allah (peace be upon him) cursed the one who accepted usury, the one who paid it, the witness to it, and the one who recorded it.
/Book 16, Number 3334: /
Narrated Abdullah ibn Umar:
The Prophet (peace be upon him) said: (The standard) weight is the weight of the people of Mecca, and the (standard) measure is the measure of the people of Medina.
/Book 16, Number 3341: /
Narrated Jabir ibn Abdullah:
The Prophet (peace be upon him) owed me a debt and gave me something extra when he paid it.
/Book 16, Number 3343: /
Narrated Ubadah ibn as-Samit
The Apostle of Allah (peace be upon him) said: Gold is to be paid for with gold, raw and coined, silver with silver, raw and coined (in equal weight), wheat with wheat in equal measure, barley with barley in equal measure, dates with dates in equal measure, salt by
salt with equal measure; if anyone gives more or asks more, he has dealt in usury But there is no harm in selling gold for silver and silver (for gold), in unequal weight, payment being made on the spot. Do not sell them if they are to be paid for later. There is no harm in selling wheat for barley and barley (for wheat) in unequal measure, payment being made on the spot. If the payment is to be made later, then do not sell them.
/Book 16, Number 3378: /
Narrated Urwah ibn AbulJa'd al-Bariqi:
The Prophet (peace be upon him) gave him a dinar to buy a sacrificial animal or a sheep. He bought two sheep, sold one of them for a dinar, and brought him a sheep and dinar. So he invoked a blessing on him in his business dealing, and he was such that if had he bought dust he would have made a profit from it.
/Book 16, Number 3380:
Narrated Hakim ibn Hizam:
The Apostle of Allah (peace be upon him) sent with him a dinar to buy a sacrificial animal for him. He bought a sheep for a dinar, sold it for two and then returned and bought a sacrificial animal for a dinar for him and brought the (extra) dinar to the Prophet (peace be upon him). The Prophet (peace be upon him) gave it as alms (sadaqah) and invoked blessing on him in his trading.
Seriousness on Gold Dinar
The information below is proposed by Dr.Mahathir,
If the Muslims are going to protect themselves they must have sufficient wealth. Allah has endowed Muslim countries with inexhaustible wealth. Today trade between Muslim countries is small. It is not suggested that we reduce our trade with the non-Muslims.
We can trade through the exchange of goods, through barter. But today we use money. Since we don't have a currency which is strong enough and stable enough in exchange rate terms, we have to use the American dollar. But the dollar is also not stable. Today the dollar has depreciated against many other currencies. This means that despite the increase in the price of oil for example, we are actually earning less due to the devaluation of the dollar. It is the same with the other currencies. It is the same with our own currencies.
The reason for this is that paper currency has no intrinsic value. You can print any figure you like on currency notes but in exchange rate terms the figure means nothing. The Malaysian Ringgit is 3.8 to one U.S. Dollar. The Turkish Lira is 1.5 million to one U.S. Dollar. The Indonesian Rupiah is 9000 to one U.S. Dollar. The purchasing power within the country is different from the purchasing power outside the country. Sometimes countries have as many as four exchange rates -- one official, one for domestic economy, one for export and one for import. Clearly this situation in terms of international finance is chaotic.
If we want to avoid being short-changed we must have a currency that has intrinsic value. Gold does fluctuate in price but the fluctuation is minimal. It is not possible to devalue gold by one hundred percent or one thousand percent. Nor is it possible to revalue gold by the same percentage. The fluctuation in the value of gold can only be by a few percentages, up or down.
When the Allied nations met in Bretton Woods to determine the principle for the rate of exchange of international currencies in order to facilitate trade, they decided to use gold as a standard. The value of the U.S. Dollar was fixed at one dollar for 1/35 ounce of gold or 35 U.S. Dollars per ounce. This worked quite well until some countries wanted to devalue their currencies in order to become competitive in the international market. Then other countries also decided to devalue in order to remain competitive At this stage the gold standard could not be sustained. The market claimed that it could determine the exchange rate through the demand and supply of currencies freely traded in the market. But profiteers moved in and they manipulated the value of the currencies so that there was chaos in terms of exchange rates of currencies. Business became very difficult. This anarchy [1] in the international financial regime will remain because it benefits the rich and the powerful. If we want to protect ourselves we must evolve our own payment system. The Gold dinar can provide the currency for trade between nations. If we value all trade items against gold, then we will have no problem with the exchange rate. We know that in the last resort we can melt the gold and sell it in the market. You obviously cannot do that with paper currency, worst still with figures on a computer. They have no intrinsic market value. It is not intended to use the gold dinar as currency for everyday transactions in the domestic market. For this we can use national currencies. If there is inflation then the currency can buy less gold and other goods. And vice versa. So there is no necessity to carry bags of gold coins for transaction within the countries.
But even for international trade the transport of gold bullions or gold coins would be very minimal. Through bilateral payments arrangements the imports can be balanced by the exports and the differences settled in gold dinars. The Central Bank can provide a guarantee for the gold required for the payments of the balance. In the following weeks or months the deficits may be reduced or a surplus achieved. In that case the payments of the balance can be made through accounting arrangements between the Central Banks. It is only occasionally that a necessity might arise for the actual gold dinar to be used to pay for the purchase of imports.We cannot really verify the amount of money a country has. A country's own currency cannot be regarded as its reserve. But gold dinars can serve as a country's reserve.
Assuming that Malaysia exports to a Dinar Area country a hundred million Dinars worth of motor vehicles and then imports 110 million dinars worth of oil, then the payment required by Malaysia would be just 10 million dinars. The ten million dinars is credited to Malaysia's trading partner. If in the following month the trading partner buys 110 million dinars worth of Malaysian cars and Malaysia buys 100 million dinars worth of oil, then no payment need to be made by either party. The 10 million dinars that has to be paid by Malaysia's trading partner for the motor vehicle can be offset by the credit of 10 million dinars.
Gold is a precious matter. There has never been a time when there was no demand for gold. It is also not so plentiful that its price will fall the way paper currency or even other precious metals can fall. Yet it is not so limited in quantity that anyone or any trader can corner it.
In different countries the price of gold will differ in terms of the currency of that country. That is a function of the currency of the country. The value of one gold dinar is one gold dinar no matter what the exchange rate of a currency is against the gold dinar. If the value of goods or services is expressed in gold dinar, the value remains the same.
Thus an exporter can declare the agreed price in dinar to the importer in another country and to the Central Bank in his country. Depending on the agreement reached the Central Bank will pay the exporter the current local currency equivalent to the gold dinar price. At the importer's end, he would pay to his country's Central Bank the local currency equivalent of the agreed price in dinar. At the end of the week or month the Central Banks will total up the value in dinar of the exports and imports between the two trading countries. If they are not balanced then the country with a surplus will have a credit account against the country with a deficit. The difference can be paid in dinar or in goods or the country with the surplus can hold the dinar for future purchase from the country in deficit.
Provided there are goods or services to be supplied by all participating countries, the amount of gold dinars that needs to be kept as reserve backing and for payment in the last resort is very small. Ideally there would be no need to transport and pay in dinars. The imports and exports in most instances would cancel themselves. The profits come from disposing of the goods or services domestically when the local currency would be used.
There will be problems of course. But there are problems now. Countries with no "hard currency" i.e. U.S. dollars cannot pay for their imports anyway. In addition the U.S. currency is not as stable as gold. Not only can it appreciate or depreciate widely but a country's currency can be made to depreciate so much against the U.S.Gold price can also be manipulated but not as easily as U.S. Dollar or other currency.
However local currency prices of gold can still fluctuate if left to the market. It is up to the country concerned whether to control exchange rates or not. But speculation and manipulation will not be as easy as when local currency is valued against the U.S. Dollar.
It must again be stressed that the Gold Dinar is exclusively for international trade. It is not to be used as local currency. In a sense it is like the U.S. Dollar now. Some countries of course use the U.S. Dollar locally for paying hotel bills by foreigners. But the dinar is heavy and cumbersome [2] to carry. So it cannot be used as freely as the U.S. Dollar locally. This again lends credibility to the dinar and the local currency, which has to be used for local payment.
We should not be too ambitious as to launch the Gold Dinar for multi-lateral trade at one go. We should begin by pairing off the countries willing to use the Gold Dinar. A pair of good trading countries with a fairly well balanced trade should initiate the use of the Gold Dinar. Problems that arise can be resolved and the system improved. After the bugs have been got rid off then the trade using the dinar can be expanded gradually to involve more countries.
Traders in particular will be happy because their prices in Gold Dinar would not be affected by changes in the exchange rates of the importing countries or the exporting countries. It is not the intention to make the dinar a common currency for all countries. It is not really the Gold Standard with a fixed value against local currency. If countries print more local currency there would still be inflation within the country. But trade would be stable and enhanced. Speculators and manipulators will not be able to undermine international trade.
Of course the Gold Dinar can be a trading currency, for all countries, not necessarily Muslim countries. But Muslim countries are in the best position to demonstrate the viability of the system. They are in a position to manage their economies rationally and in the process show the world that they are capable of growing with stability and in peace. And this will do more towards countering oppressions by their enemies than the futile violent retaliations.
The Impact on Social Order
Gold Dinar impact on Economy Social Order
Creation of a Focused Wealth Accumulation
In the context of the present system, wealth accumulation could be divided into two categories, the artificial wealth and real wealth.
The percentage of "real wealth" to "artificial wealth" is not exactly known, for example: when a bank issues a credit card, how much wealth is created before the billing cycle? The fiat money is good because the government says it is good.
But like all empires, there will come a crisis of "confidence" which will cause a run on the currency. The holders of the new "electronic wealth" will want its full face value in paper, but the paper won't be there which will cause a migration from the paper to some "commodity". The artificial wealth will be discovered and the economy will collapse.
Creation Of Discipline Corporate Society
Asian Crisis 1997 has seen the importance of a discipline corporate society, which is portrayed through corporate governance as one of the measures to prevent another financial crisis. As set out in the Finance Committee's Report, the definition of corporate governance is, "the process and structure used to direct and manage the business and affairs of the company towards enhancing business prosperity and corporate accountability with the ultimate objective of realizing long term shareholder value, whilst taking into account the
interest of other stakeholders" (Securities Commission, April 2001). Corporate governance as may be depicted from this definition is therefore not only about achieving business prosperity but also about ensuring accountability, a proposed theoretical framework for establishing corporate social reporting as a legitimate effort and it is said to enhance transparency of
organizations and democracy in society (Gray et al 1996).
The implementation of Gold Dinar could have helped to improve company's corporate governance by improving its transparency especially in the investment area, one of main contributors for company's income. For instance, in the current international monetary system, arbitrage and speculation is made possible due to the different currencies and the cross exchange rate between them. However, through the use of Dinar as single currency, all these exchange rates are eliminated, which then would remove any attempt for speculation and arbitrage. Notice, however, even though this could further strengthen and stabilize the economy, it will only work if a group of countries such as OIC countries willing to replace their currency with Dinar for international trade purposes.
In addition, in the present monetary system, there are business transactions that involve something that is real (good and services) and virtual (binary bit of computers) (Ahamed & Hassanuddeen, 2002). This situation has widened the opportunity for corporate society to manipulate their operations that defeat the purpose of corporate governance. Dinar, on the other hand, is real and therefore, each transaction is exchange only within the real sector. This will not only justify the point that the introduction of Dinar will create harmonization between money supply and real sector, but also enhance the creation of discipline corporate society.
Reducing Dependency On Debts
The understanding of Gold Dinar as a viable solution to improve economic social order lies in understanding weaknesses of current monetary system. In the fiat money economy, the wealth that the society gained will lead to artificial wealth, as the wealth is not real as compared to the Gold Dinar, which has its own intrinsic value. Not only this artificial wealth will never last as compare to real wealth, it also has created lots of unnecessary debts.
Looking at the nature of human beings who has no discipline in fulfilling their needs and wants, paper money has encouraged society to spend more than what they are earning through creation of debt. The using of credit cards is one of the examples to illustrate this situation. This artificial transaction through credit cards has made it difficult for users to control their needs and hence causing them to keep on spending without realizing that their debt is increasing. Apart form this, when a card owner fails to settle his/her monthly
account, the bank will then impose an interest, which then increases his/her debt. This will also distort the development in social order as most of the benefit will go to the banking system that gains through the interest charged.
This dependency on debt could have been reduced by the introduction of Gold Dinar whereby all transactions is gold backed. In the dinar system, all transactions are instantaneous and take place with actual funds. There is no need for creation of intermediate credit like credit cards in the interest based monetary system (Ahamed & Hassanuddeen, 2002).
In addition, Abdul Halim & Norizaton, 2002 stated that Dinar system could narrow the gap between the riches and the poor through the elimination of interest as Gold Dinar has made it possible to introduce a banking system that discourage debt and encourage Musyarakah or profit or loss sharing. This is due to the fact that each Dinar must be represented with actual money that contains a certain weight of gold and silver, which make it difficult to simply create or print or controlling its supply and demand through the use of interest, as what has been done with paper money through bank loans
Curbing Greed And Other Negative Elements
In the Gold Dinar economy, interest is strictly prohibited since the nature of Gold Dinar prevents itself from being compounded. One Gold Dinar could not be compounded because one Gold Dinar will only be one Gold. The reason is because gold could not be created at will as compared to fiat money.
Therefore, Gold Dinar could only be increased from real gold production such as the exploration of new gold mining and production of gold. Furthermore, Islamic economics prohibit taking and giving interest, as this will pulverize the economy as a whole and promote injustice between the rich and the poor. This will be in line with Dinar economy where, ideally, the rich would be able to assist the poor in the economic system from the payment of
zakat. In addition, the Dinar economy promotes Mudharaba (profit and loss sharing) and Musyarakah (partnership) concepts as the economic engine in the society.
Contradicts to the present fiat system, which depend heavily on interest and inflation, with profit and loss sharing and partnership system, the society will turn out to be less individualistic and be more helpful to each other, which in return reduce poverty problems.
In the current fiat money system, we could see a lot of problems arise due to poverty which led other societal negative elements such as incest, rape, murder and many more.
Another reason that could increase the negative elements in the fiat money system is the nature of the fiat money, which could be rented out i.e. usury or interest that promotes unemployment.
This is true because in economy and finance, when businessman want to venture into business they will have to evaluate their opportunity cost of venturing into the business. If the business could only provide a 4 percent return as compare to interest given by the bank
at 10 percent, the businessman will forgo the business and instead rent his money in the banking system (Vadillo, pg 46, 1991).
Gold Dinar:
An Economic and Strategic
Response to Chaos
Mounting concern around the world that the Bush Administration is madly threatening to drive the world into perpetual warfare, while doing nothing to address the global financial-economic collapse, has led to the introduction of a number of defensive measures by nations and groups of nations acting in concert. One such measure is the proposal for creation of a Gold Dinar, intended as a replacement for the dollar as the currency of trade among nations. With a war against Iraq looming on the horizon, and U.S. threats against Saudi Arabia escalating in the establishment's institutions and publications, it is increasingly probable that the Gold Dinar policy will be implemented in the near term, among certain Islamic nations at first, and potentially expanding to include non-Islamic nations.
Malaysian Prime Minister Dr. Mahathir bin Mohamad hosted a two-day seminar in Kuala Lumpur on Oct. 22-23, called "The Gold Dinar in Multilateral Trade." This was the second major conference in Malaysia on this subject involving representatives of members of the Organization of Islamic Conference (OIC). The first conference, "Stable and Just Global Monetary Systems," held in August, announced that the Gold Dinar would be implemented as a bilateral arrangement between Malaysia and certain unspecified partners by the middle of 2003, and extended to multilateral agreements over time. At the more recent seminar, Bijan Latif, the head of Iran's Central Bank, offered to support the establishment of a secretariat in Malaysia to coordinate the development of the Gold Dinar policy. Dr. Mahathir supported the idea.
Not a Gold Standard
In his speech to the October seminar, Dr. Mahathir made clear that the proposal was not intended to establish a gold standard (as put forth by fixated "gold bugs" around the world), but to return to the Bretton Woods policy of a gold-reserve system, which was destroyed when President Richard Nixon removed the dollar from a fixed peg to gold on Aug. 15, 1971, allowing currencies to float at the whim of speculators. Dr. Mahathir reminded the participants, that after World War II, "when the Allied nations met in Bretton Woods to determine the principle for the rate of exchange of international currencies in order to facilitate trade, they decided to use gold as a standard." This worked until 1971, when "the market claimed that it could determine the exchange rate through the demand and supply of currencies freely traded in the market. But the profiteers moved in and manipulated the value of the currencies so that there was chaos in terms of exchange rates of currencies."
The Gold Dinar policy intends to return to the former, superior policy. Tan Sri Nor Mohamed Yakcop, an economic adviser to Dr. Mahathir, explained the system at the August conference as follows, using trade between Malaysia and Saudi Arabia as an example: "Malaysian exporters will be paid in ringgit [the Malaysian currency] by Bank Negara [the Malaysian National Bank] on the due date of exports.... Similarly, the importers will pay Bank Negara the ringgit equivalent of their imports. The Saudi Central Bank will do the same for its exports and imports. Say, at the end of a three-month cycle, the total exports from Malaysia to Saudi Arabia is 2 million Gold Dinar, and the total exports of Saudi Arabia to Malaysia is 1.8 million Gold Dinar. Therefore, for that particular three-month cycle, the Saudi Central Bank will pay Bank Negara 0.2 million Gold Dinar. The actual payment can be by way of the Saudis transferring 0.2 million ounces of gold in its custodian's account in the Bank of England in London, to Bank Negara's account with the same custodian. The important point to note here, is that the relatively small amount of 0.2 million Gold Dinar is able to support a total trade value of 3.8 million Gold Dinar."
The weakness of the system as it is now proposed is that gold, too, is subject to speculation, especially if it is pegged to a currency such as the dollar, which is heading for a plunge due to the collapse of the U.S. banking system. Dr. Mahathir is aware of the problem: "Gold prices can also be manipulated," he said, "but not as easily as the U.S. dollar or other currencies.... Speculation and manipulation will not be as easy as when local currency is valued against the U.S. dollar."
EIR Founding Editor Lyndon LaRouche has proposed that the necessary return to a Bretton Woods system of fixed exchange rates must also peg currencies to a "basket of commodities" rather than to gold, as a means of basing currency valuations to the real economy, rather than tying the real economy to a speculative entity (see Documentation). Although the Gold Dinar proposal assigns a value to gold in terms of dollars, Dr. Mahathir suggested in his speech that he is thinking along the lines of a "basket of commodities": "The value of one Gold Dinar is one Gold Dinar, no matter what the exchange rate of a currency is against the Gold Dinar. If the value of goods and services is expressed in Gold Dinar, the value remains the same, no matter which country is involved in the trade."
Whatever the case in this regard, the discussion and implementation of the bilateral or restricted multilateral Gold Dinar policy can provide a much-needed defense against the collapse of the dollar-centered financial system, and could contribute to a more durable global solution in the near future.
Strategic Necessity
Dr. Mahathir emphasized that the Gold Dinar policy is being driven by the crushing reality of the economic and strategic crisis. The disastrous situation in the Holy Land, the terrorist attacks of Sept. 11, 2001, and the threatened war on Iraq, have resulted in "the whole world's economy being unable to grow," he said. "The West, and in particular the Americans, are very angry. So are the Muslims. Angry people cannot act rationally." He concluded his speech: "Of course, the Gold Dinar can be a trading currency for all countries, not necessarily Muslim countries. But Muslim countries are in the best position to demonstrate the viability of the system, ... and in the process, show the world that they are capable of growing with stability and peace. And this will do more towards countering oppressions by their enemies, than the futile violent retaliations."
Other voices are also warning that the current folly in Washington will only hasten this break from the bankrupt IMF system. James Sinclair, the head of the mining company Tan Range Exploration, said in an Oct. 28 editorial in Financial Sense Online: "It is perceived, and correctly so, that the Islamic world is controlled via the use of the U.S. dollar as the main settlement currency.... I am told there is a significant possibility that when the U.S. attacks Iraq, the united Islamic salvo back will be at the U.S. dollar via the Gold Dinar." The Saudis, he says, "are less likely than most observers think to rescue the dollar this time."
In fact, the Saudis are already repatriating deposits from the United States, as reflected in the increase by $30 billion in deposits in Saudi banks in September.
Sinclair also notes, as did Bijan Latif of the Iranian Central Bank, that "the establishment of a gold-based currency is rebellion against the IMF, as it is distinctly forbidden under IMF rules." Sinclair adds: "The advent of the Gold Dinar would be the 'nadir' of the IMF and World Bank."
Other commentators have noted the concern in Saudi Arabia that the United States may freeze Saudi assets in U.S. banks, forcing them to consider the Gold Dinar as a replacement for the dollar, and dumping dollar holdings altogether if necessary. As amazing as this sounds, given the long history of U.S.-Saudi friendship, there has been a drumbeat of anti-Saudi hysteria in the United States recently, escalating since the infamous presentation before the Defense Department's Defense Policy Board on July 10 by the RAND corporation's Laurent Murawiec, which declared Saudi Arabia the mother of all terror, and calling for the overthrow of that country's government and other Arab "dictatorships" (see EIR, Aug. 16, 2002). Although Murawiec was fired by RAND for this mindless diatribe, Richard Perle, who runs the Defense Policy Board, was never publicly reprimanded, let alone fired, and the Saudis took note.
Even more blatant was the report issued by the leading think-tank of the American establishment, the Council on Foreign Relations, in October, "Terrorist Financing." The report is the work of a task force, headed by Maurice "Hank" Greenberg of the AIG insurance cartel, himself a notorious money-launderer. The report castigates Islamic charities in general, but hits Saudi Arabia in particular: "For years, individuals and charities based in Saudi Arabia have been the most important source of funds for al-Qaeda; and for years, Saudi officials have turned a blind eye to this problem," says the report. Making their intentions clear, the CFR adds: "It may well be the case that if Saudi Arabia and other nations in the region were to move quickly to share sensitive financial information with the U.S., regulate or close down Islamic banks, incarcerate prominent Saudi citizens or render them to international authorities, audit Islamic charities, and investigate the hawala system-just a few of the steps that nation would have to take-it would be putting its current system of governance at significant political risk." Nonetheless, they argue, the Bush Administration must proceed, and stop pretending that "Saudi Arabia is being cooperative, when they know very well all the ways in which it is not."
With this madness as establishment policy, the Saudis, and others, may well see no choice but to pull out of the dollar-based system. This is one reason for the great interest in LaRouche and his proposals in the Mideast today. It may well lead to the timely adoption of the Gold Dinar policy among Islamic nations, and progress toward a New Bretton Woods monetary system.
