http://www.bruneitimes.com.bn/section/opinion/19Dec2006-3.php
Dollar has fallen, when is gold-Dinar coming
Dzikrullah W Pramudya
19-Dec-06
THE veteran Samurai of capitalism has acknowledged his sword is no longer
sharp enough to rule the world. Last week, former US Federal Reserve chairman
Alan Greenspan said he expected the dollar to stay weak for the next few years
and will continue to drift down, weighed by the US balance of payments deficit.
``I expect that the dollar will continue to drift downwards until there
will be a change in the US balance of payments,`` Greenspan told a business
conference via video-link from the United States to Israel. He said markets
were so sophisticated it was very difficult to forecast the short term
direction of the dollar.
He also noticed that Opec nations were switching their reserves out of
dollars and into euro and yen. ``It is imprudent to hold everything in one
currency,`` he said, adding that at some point the dollar will be moving lower.
What Greenspan failed to acknowledge was, in fact, that for such a long
time it had been an imprudent act to hold anything in any conventional
currency, any fiat money - which is the paper money that is made legal and
valued by the law. Dollar, Euro, Franc, Mark, Poundsterling, Rupee, Ringgit,
Peso, Rupiah, Bath - none are backed by a real value. Fiat money has no
intrinsic value, as opposed to commodity money such as gold-Dinar.
If tomorrow, for any reason, the US government declares its intention to
devaluate US$100 notes into US$10, then billions of people would not be able to
do anything but submit and accept the `reality' that in the next 24 hours they
would be much poorer.
No such threat with regard to gold-Dinar. Even if all governments under
the sun declare that gold is valueless, not many people would even blink. Gold
is gold, and people will always appreciate it as something highly precious.
The value of a 22-carrat gold-Dinar coin during the time of the Prophet
Muhammad (PBUH) more than 1400 years ago was exactly the same with its value
today. Burn a piece of gold or melt it, its value would remain. Try to burn a
bagful of US$ banknotes and use the charred remnants to buy a plate of rice. A
burnt piece of fiat money is useless. Worse, you do not even need to burn fiat
money to render it useless. All you need to do is save it in a bank and never
touch it; after several years, the value of your money would certainly drop. In
fact, the dollar value has kept sliding downwards against gold since 1970s up
until today.
Many people think that it is the nature of money, and that inflation is
to blame. But pressure groups in the US such as Fame (Foundation of the
Advancement of Monetary Education) or Gata(Gold Anti-Trust Action Committee)
have different thoughts. They are speaking out against the fiat money-based
monetary system. ``Because of material misrepresentations and nondisclosure
regarding our fiat dollar, it is prima facie fraudulent,`` stated Lawrence
Parks, Executive Director of Fame.
Both organisations have long pursued a Congressional reform in monetary
system. According to the Fame fact sheet, the Congress has improperly delegated
to the US banking system a power that the Congress does not have under the US
Constitution: the power to create
legal-tender-irredeemable-paperticket/electronic-fiat-token money out of
nothing.
Since 1946, on a base of about US$150 billion, the U.S. banking system
has created US$9.4 trillions up to 2005. About US$ 700 billion was created by
the Federal Reserve, and the balance, about US$8.7 trillion, was created by
private companies, banks. ``Why should private companies be empowered to create
money?`` asked Parks.
We will let the Americans respond to the confusion that has influenced
the world economy through their fiat money system. This article will focus on a
solution, namely the commodity money. In this case, the gold-Dinar currency, is
a solution.
Many people in Southeast Asia region would usually see the gold-Dinar
issue as political, launched in 2003 by then-Malaysian Prime Minister Mahathir
Mohammad. In fact, Mahathir had been responding to the issue a long time after
it was first raised by many Muslims. Mahathir stated that Malaysia would take
the initiative to overhaul the international financial system, by establishing
gold-Dinar as an alternative currency.
He criticised the current financial system as one that that was ``skewed
toward rich countries and speculators``. He also stated that Malaysia would
exert efforts to use the gold-Dinar for its trade with Iran for starter. If the
initiative proved to be successful, Malaysia would extend it to cover 32
countries having bilateral payment arrangements (BPA) with Malaysia.
Now, the dollar has fallen. Why hasn't the gold-Dinar emerged yet, the
way Mahathir and many other people have wished?
An answer came from Jakarta-based Dinar Club President, Muhaimin Iqbal,
who is also CEO of the oldest insurance company in Indonesia. Iqbal said it
would be very difficult for gold-Dinar to establish itself as an alternative
currency jlwithout the support from sharia or Islamic banking. He said, ``The
only institution that can facilitate modern payment, transfer of the Dinar etc.
is the sharia bank.``
He pointed out how opening a gold-Dinar account would benefit the sharia
bank as it protects people who save their gold-Dinar from interest (usury,
riba). The important element that is still missing, said Iqbal, is the niyat or
the political will of the sharia banking and the governments.
Iqbal specifically suggested that the wisest investment step for
Bruneians, following the fall of the dollar (which will continue to fall,
according to Greenspan's prediction), would be to keep their wealth in
gold-Dinar. An alternative for the Dinar currency, Iqbal said, would be to have
the Pure Gold Bullion.
Iqbal said, however, that the gold-Dinar is not even the ultimate aim of
an economic system. Wealthy people, especially if they are Muslim, should not
let their wealth sit idle in the banks for a long time. It would still be
better to invest in the real sector, or distribute it as infaq or sadaqa in the
path of Allah as this would be the best investment indeed. In the name of
justice, Islam has forbidden the circulation of wealth only amongst the
wealthy. This would be the best solution, indeed, for a world beset by chaotic
financial systems.
The writer is managing editor of ISLAMIA journal for Islamic thought and
civilisation, published in Jakarta
