fractional reserve banking system and inflation

Fractional Reserve Banking System and InflationThe Oppressive Nature and

Deception of Debt-Based Economy

Presented by Dean ArifMyBullionTrade.com

3 March 2012

What is Inflation?Supply

Demand

En. Salleh Salary

1970: Fresh Grad RM840/mth

Worked for 40 years

2010: Retire as GM RM20,000/mth

Price of gold/oz

RM84

RM4,800

Qty. of gold

10 pieces

4 pieces

JUSTICE?

A Brief History of Paper Receipt

Souq – Open Market

A Brief History of Paper Receipt

Desert Caravan

A Brief History of Paper Receipt

Safety Deposit Boxes in Vault

A Brief History of Paper Receipt

Paper Receipt for Gold

A Brief History of Paper Receipt

• Fractional Reserve Banking (remember this!)• Reserve Ratio: 10%

Hadith on Paper ReceiptFrom the Hadith Book of Malik's Muwatta (Business Transactions: 31.19.44):

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 Thabit and one of the Companions of the Messenger 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.

Hadith on Paper ReceiptTranslation:Yahya meriwayatkan padaku dari Malik bahwa ia mendengar resit (sukukun)

dibagikan pada penduduk pada masa Marwan ibn al-Hakam untuk barang di pasar al-Jar. Penduduk membeli dan menjual resit diantara mereka sebelum mereka mengambil barangnya. Zayd ibn Tsabit bersama seorang Sahabat Rasulullah s.a.w., pergi menghadap Marwan ibn al-Hakam dan berkata, “Marwan! Apakah engkau menghalalkan Riba?” Ia menjawab, “Naudzubillah! Apakah itu?” Ia berkata, “Resit-resit ini yang dipergunakan penduduk untuk berjual-beli sebelum menerima barangnya.” Marwan kemudian mengirim penjaga untuk mengikuti mereka dan mengambilnya dari penduduk kemudian mengembalikannya pada pemilik asalnya.

Modern Time Currency Creation

GOV

CB

TH

AS

EPF

SARA 1M

Treasury

IRBRM 100 MillionBOND / SUKUK, 10 Years Maturity@ fixed 4% p.a.

TAX $

PaybackRM 140 Million

After 10 years

Inflation@3.5% : RM140 x (0.965)10 = RM98

Inflation@5.0% : RM140 x (0.950)10 = RM84

Inflation@10.0% : RM140 x (0.900)10 = RM49

BondCash

GOV

CB

TH

AS

EPF

SARA 1M

Treasury

IRBRM 100 MillionBOND / SUKUK, 10 Years Maturity@ fixed 4% p.a.

TAX $

PaybackRM 140 Million

After 10 years

Gov buys RM100k worth of stationery every month

RM100k: Ali

Bank M

Liability = Asset

RM96k: ChongAdam

RM4k: SRR

Bank I

Liability = Asset

RM92.2k: Muthu

RM3.8k: SRR

Bank C

Liability = Asset

RM88.6k: Ad Infinitum…

RM3.6k: SRR

Fractional Reserve BankingStatutory Reserve Ratio = 4%

Currency creation formula= Base Currency ¸ SRR= RM100k ¸ 0.04

BondCash

= RM2.5 million!!!

12

3

1 2 3 = Riba!

Riba’ in QuranAllah said in surah Al-Baqara (2:275): “Those who devour usury will not stand

except as stands one whom the Evil one by his touch hath driven to madness. That is because they say: “Trade is like usury,” but Allah hath permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (the offence) are Companions of the fire: they will abide therein (for ever).”

Declaration of WAR on riba’, surah Al-Baqara (2:278-279): O ye who believe! Fear Allah, and give up what remains of your demand for usury, if ye are indeed believers. If ye do not, take notice of WAR from Allah and His Apostle: but if ye turn back, ye shall have your capital sums: deal not unjustly, and ye shall not be dealt unjustly.

Mudharat (Negative Side Effect)

Mudharat (Negative Side Effect)100%

-98%

Decades

Inflation = Reverse Compound Interest!

Value Decay of Paper Currency

Gold, the most efficient preserver of value

1971: Nixon took us off the gold standard2012: We are HERE and the USD and ALL Paper Currencies are in ICU!

Twilight Zone

NW

O: 1

Wor

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ncy

IMF:

1W

orld

Cen

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Ban

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Al Ghazzali and Ibn Khaldun rightly asserted that Allah SWT created gold and silver as measure of value.

Evilution of Paper Currency

1837-1936: 420 grains = 26.95g (90% silver).

Evilution of Paper Currency

They took your real wealth…

…and give you this!