an islamic solution to the financial crisis dubai, 8 th dec 2012 jamal harwood (twitter...
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An Islamic Solutionto the Financial Crisis
Dubai, 8th Dec 2012
Jamal Harwood (Twitter @Jamal_Harwood)
Greece
Spain
London
World Debt
Growth of Derivatives
US House Price crash
US Govt Bailouts
Facility Total (Billion, $) Percent of total
Term Auction Facility $3,818.41 12.8%Central Bank Liquidity Swaps 10,057.40 34.0Single Tranche Open Market Operation 855 2.9Terms Securities Lending Facility and Term Options Program 2,005.70 6.8Bear Stearns Bridge Loan 12.9 0.0Maiden Lane I 28.82 0.1Primary Dealer Credit Facility 8,950.99 30.2Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility 217.45 0.7Commercial Paper Funding Facility 737.07 2.5Term Asset-Backed Securities Loan Facility 71.09 0.2Agency Mortgage-Backed Security Purchase Program 1,850.14 6.3AIG Revolving Credit Facility 140.316 0.5AIG Securities Borrowing Facility 802.316 2.7Maiden Lane II 19.5 0.1Maiden Lane III 24.3 0.1AIA/ ALICO 25 0.1
Totals $29,616.4 100%
Money Supply Growth
Total Liabilities out of control…
Islam’s Solution
• Non Interest – and most derivatives contract forbidden
• Gold & Silver currency – a real stable currency• True Financial reform – where is the change
since 2008?• No Growth obsession – basic needs not GDP• Radical taxation policy – tax under utilised
wealth not income/consumption• Social welfare – arise the family• Land reform – use it or lose it
Gold and Silver Standard• The gold basis necessitates the free circulation, import and export of gold,
which leads to monetary, financial and economic stability. • The gold standard ensures the stability of exchange rates between
countries, and the stability of the exchange rates in turn leads to a boom in international trade, for traders would no longer fear the uncertainty of exchange rate instability.
• Central banks and governments are prevented from the issuance of banknotes not backed by gold or silver and therefore prevented from eroding the value of money through inflation.
• Each of the currencies used all over the world would be fixed by a specific amount of gold. As a result, the movements of commodities, money and people from one country to another would be easier, and the problems of hard currency would disappear.
Gold Silver and no Interest• Borrowing is encouraged and interest free which does not
increase the debt burden
• Gold and Silver money give prices a strong anchor bringing price stability throughout the economy and creates a stable economic environment for business investment
• The Gold and Silver Standard has historically been associated with no or low inflation which means peoples’ money holds value and is worth more not less year on year
Equity Investment and Tax• Businesses invest based on equity finance that encourages risk
sharing and rewards profits
• Taxation is wealth based and defined so the government cannot increase and create new taxes
• There are no income taxes so work is incentivised and disposal income is higher boosting spending
• There are no expenditure taxes which lowers prices and increases affordability. Wealth tax encourages spending
• Hoarding is prohibited
Wealth Circulation• Taxes are on wealth so the poor don’t pay
• There is active redistribution of income via paying Zakat (wealth tax) so the poor and needy are lifted out of poverty
• There is active and fast circulation of money through the prohibition of hoarding gold and silver, no interest and a wealth tax of 2.5% which encourages equity finance
• The state is prohibited from fixing prices of goods and services or wages allowing prices and wages to fall as well as rise and thereby stimulating the economy even when overall demand is low.
• There are restrictions on derivatives trading and other harmful business activities
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