Brunei Times takes note of GATA and FAME

The Dollar Has Fallen;
When Is Gold Dinar Coming?

By Dzikrullah W. Pramudya
The Brunei Times (Brunei Darussalam)
Tuesday, December 19, 2006

http://www.bruneitimes.com.bn/section/opinion/19Dec2006-3.php

The veteran samurai of capitalism has acknowledged that 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.

Greenspan 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, pound sterling, 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 devalue 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 (peace be upon him) more than 1,400 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 dollar notes 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 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 for the Advancement of Monetary Education) and 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," says Lawrence Parks, executive director of FAME.

Both organisations have long pursued a congressional reform in the monetary system. According to the FAME fact sheet, Congress has improperly delegated to the US banking system a power Congress does not have under the US Constitution: the power to create legal-tender-irredeemable-paper-ticket/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$9.4 trillion up to 2005. About US$ 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?" asks 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 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 said Malaysia would take the initiative to overhaul the international financial system by establishing the 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 starters. If the initiative proved to be successful, Malaysia would extend it to cover 32 countries having bilateral payment arrangements 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 the 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 the gold dinar to establish itself as an alternative currency without 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 sharia banking and 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 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 among the wealthy. This would be the best solution, indeed, for a world beset by chaotic financial systems.

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The writer is managing editor of ISLAMIA, a journal for Islamic thought and civilisation, published in Jakarta, Indonesia.

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