“fiat money & gold dinar application: an online survey

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“FIAT MONEY & GOLD DINAR APPLICATION: AN ONLINE SURVEY. ”

Nuradli Ridzwan Shah Mohd Dali1 Lecturer, Universiti Tenaga Nasional

Kampus Sultan Haji Ahmad Shah 26700 Pahang

Tel: 09-4552028 Fax: 09-4552020 [email protected]

Hanifah Bte Abdul Hamid2 Lecturer, Universiti Tenaga Nasional

Kampus Sultan Haji Ahmad Shah 26700 Pahang

Tel: 09-4552037 Fax: 09-4552020 [email protected]

Hifzur Rab3

Rahmat Nagar, Jhapia, Bamrauli, Allahabad -

211012 India

[email protected]

Muhammad Rubini Kertapati4 Faculty of Business and Economics

University Kebangsaan Malaysia 43600 Bangi, Selangor

Tel: 016-2518987 [email protected]

ABSTRACT5 The former Malaysian Prime Minister, Mahathir Mohamad has suggested the usage of Gold Dinar as an international

payment settlement among OIC countries as one of the solutions to the Asian financial crisis and the unity of the

countries. However, the implementation of gold Dinar seems impossible because of IMF prohibition (Second

Amendment to the Articles of Agreement in April 1978 which eliminate the use of gold as the common denominator of

the post-World War II exchange rate system and as the basis of the value of the Special Drawing Right) and it is

expected that the mechanism would eliminate the power of central banks to use monetary policy in maintaining price

stability. Despite the hurdles, the demand for the return of the gold Dinar from intellectual discussions is high. In

respond, an online survey has been conducted especially designed to identify the perceptions of the public towards the

implementation of Gold Dinar as a currency.

Keyword: Gold Dinar, Currency

1 The author is a PhD scholar at the Faculty of Business & Economics, Universiti Kebangsaan Malaysia. 2 The author is a lecturer specializing in Management Information System 3 Chief Chemist –Oil and Natural Gas Corporation Ltd India. 4 The author is a master scholar at the Faculty of Business & Economics, Universiti Kebangsaan Malaysia. 5 This paper will be presented for InCOMT 2005 Managing Future Workplaces and Issues & Challenges in the Borderless World Sunway Lagoon

Resort Hotel 12-13 July 2005.

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Introduction

The Asian currency crisis has affected the South East Asian countries seeing several countries economics

plunging downward damaging the domestic financial systems, while many companies were financially

distress. The crisis was promulgated from the currency speculators activities, which led the to the

depreciation of the currency due to lack of confidence to the country’s economic condition. Malaysia use

capital control to overcome the currency from depreciating and pegs the Malaysian Ringgit at RM3.80 to one

USD until present.

Literature Review

A decree was issued in Granada by Umar Ibrahim Vadillo stating that uses of fiat money is injustice

provoking the Muslim community to reevaluate the existing financial system in upholding the Syariah

economy. Furthermore he mentioned that the Islamic banking is fraudulent since the Islamic banking

fraternity uses the fiat money duplicating the conventional system (1991,2002).

However the majority Islamic scholars or ulama approve the usages of fiat money or paper money therefore

his decree did not get as many attentions from the Muslims. However, the 1997 Asian financial crisis has

open a new spectrum of rethinking on the existing monetary system in order to find a stable and justice

monetary system. The revisit of gold Dinar has come into picture and attracted many attentions of economists,

politicians, business leader and the former Malaysian Prime Minister Mahathir Mohamed. He urged the OIC

countries to adapt the gold Dinar mechanism as the international trade payment settlement before giving way

to Abdullah Badawi.

The idea was supported by academicians and practitioners from all around the world including Ahmad Kamel

Meera Mydin (2002,2004) who also urges the OIC countries to start using gold Dinar for International trade

settlement. In this mechanism, the participation of central banks and commercial banks are vital using the

letter of credit as its vehicles. This mechanism is not intended to replace the usage of the domestic currency

for local transactions because it will be used only for international trade settlement.

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However, scholars also were rethinking to look at the Gold Standard system as one of the alternative. In

promoting the interest free economy, Tarek el-Diwany introduces the 100 percent gold backed banking

system and explain on how the existing financial system could be transformed into an interest free economy

(Tarek el-Diwany, 2002). Hifzur Rab (1995/1998) has shown that use of fiat money causes massive

exploitation of the have nots and its use as unit of account generates massive fraud. He has discussed

problems it creates and suggested some solutions ( 2002). Masudul Alam Chowdhury promotes that a

monetary system Riba-free economy is to be a market driven and least policy-imposed phenomena of money-

real economy transformation. He stressed out that money must be fully utilized and not being kept by the

commercial banks as reserve and must be returned to the central bank if not being used in the real economy

(Masudul Alam Chowdhury, 1997).

This could reduce the multiple credit creation process goes back to the Central Bank it forms a 100 per cent

reserve requirement and a zero excess reserve with the Commercial banks. The Central Bank will back up the

residual amount that forms its 100 per cent reserve with gold/silver/other assets of long-term stable value as

the numeraire choice. In this case, the central bank only need a small amount of gold to back up its residual

amount that gets into 100 percent reserve requirement (Masudul Alam Chowdhury, 1997). In addition, it was

pointed out by the researcher that consumers spending have a negative relationship with the amount of gold

needed for backing up the monetary system.

Later on Mohamed Nor Yakcop, presented a paper on the mechanism of gold dinar which was an extension to

the BPA into Multilateral Payment arrangement which involves more than two countries. (Mohamed Nor

Yakcop, 2002). The MPA would resolve the problems of scarcity of gold because only a little amount of

needed to be set-off for a big volume of transactions. This mechanism seems viable but it needs the will

power of the OIC countries to implement the system.

Even though with the usage of gold Dinar in international trade could reduce speculative menace but it would

not eliminate the speculative activities entirely since the price of gold or currencies will fluctuate and

therefore it will be open to such activities. However, the speculation activities could be reduced to its

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minimum level (Nuradli Mohd Dali, Abu Bakar Mohd Yusof, Norhayati Mat Husin, 2002). Consequent

papers supporting Dinar stressed that the implementation of gold Dinar could be the platform of Islamic unity

(Umar Azmon, 2003 & Abdelhamid Evans 2003).

The fiat money is also associated with seignorage as pointed out by Jaafar Ahmad which could reduce its

purchasing power parity especially for developing countries in the OIC (Jaafar Ahmad, 2003) Comparison

between the electronic payment system (E-Dinar) and the bilateral payment arrangement system were

analyzed by Nuradli, Hanifah and Bakhtiar (2003,2004) to find out the most viable system that should be

implemented and its market segmentation. The electronic payment system such as E-dinar is targeted for

small businesses and individual whereas the BPA system is target to the exporters and importers and thus it

will have impacts to domestic economies and balance of payment. It has been pointed out that the BPA

system is more viable as compare to the electronic payment system due to the volume of trade that will

involve and the amount of cooperation among the OIC countries that will involve in the implementation

(Nuradli Mohd Dali, Hanifah Abdul Hamid, Bakhtiar AlRazi 2003, 2004).

Research was also conducted on the MSC companies to see whether the companies are willing to use the gold

Dinar as payment settlement and more than 40 percent of the respondents interviewed agreed to use gold

Dinar since it could reduce the exchange rate risk. (Nuradli Mohd Dali, Hanifah Abdul Hamid, Azwari

Kamaruddin 2003). Furthermore it could promote the economic social order and protect the consumers in

consumerism with focus on reduction of debts, reducing the gaps between the have and the have not, and

elimination of interest from mudharabah and musyarakah financing (Nuradli Mohd Dali and Norhayati Mat

Husin 2004 a & b).

Theoretical paper using the flexible model with the usage of gold Dinar seeing the impacts of gold dinar in a

full swing dinar economy making the monetary policy seems impotent. (Nuradli Mohd Dali, Fidlizan

Muhammad & Mohd Firdaus Azizan 2004). The economy could not use the domestic monetary expansion

policy unless new gold has been discovered or gold currency is being transferred from other countries through

trading.

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However, a previous paper on the same model was also developed by Nuradli Mohd Dali and Abdul Ghaffar

Ismail using the Dinar system partially or side by side with the existing fiat money. It was noted that using

this model the currency depreciation is lesser than the flexible model in the event of a domestic monetary

expansion (Nuradli Mohd Dali & Abdul Ghaffar Ismail 2004).

Even though there are many scholars who wanted for the gold Dinar comeback the IMF regulation prohibits

for any countries to use gold as a medium of currency. The Second Amendment to the Articles of Agreement

in April 1978 eliminated the use of gold as the common denominator of the post World War II exchange rate

system and as the basis of the value of the Special Drawing Rights (IMF, 2004).

With the prohibition for the IMF members- therefore it seems impossible for any OIC countries to implement

Dinar even for international trade settlement only. Despite of the hurdles, the demand for the return to the

gold Dinar is seems high from the public. With this motivation, we conducted the survey analyzing on the

perceptions of gold Dinar from the public perspectives.

Research Objectives

1. To analyze the public perception on the implementation of gold Dinar

2. To evaluate the impacts of demographic profiles on the perception on gold Dinar

3. The assessment of prior knowledge and the perception of Gold Dinar.

4. Challenges that have to be encountered in the implementation of gold Dinar.

The Limitation of the Study

Since this is an on-line survey, it would not include respondents who do not have email facilities. This survey

could not be extended to those who do not have on-line and emails facilities due to the financial constraints.

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Hypothesis

In this research it is expected that the public want to use the gold Dinar as a medium of currency instead of

using fiat money and education is also one of the most important factor that need to be stressed out in the

implementation of gold Dinar.

Justification of the Research

This research is done to mainly identify the acceptance of gold Dinar as a medium of currency among the

public in order for the country policy formulation if the Dinar is legally accepted for domestic uses.

Furthermore, it is important to see that this area could be incorporated in universities’ curriculum should we

want to implement the system. Since gold Dinar is such a comeback currency, we need more expertise in

implementing as well as monitoring this system. Furthermore, the banking and financial institutions could

contribute in opening gold Dinar counters for depositors. This survey could give a picture of the direction of

the market demand in the Malaysian financial system.

Research Scope

The online survey was posted in the Internet from 8th of October 2004 and the cut off period was on the 1st of

February 2005, which is about 4 months. Emails were sent to various e-groups and personal contacts.

Problem with currency is a vital factor in the continuing onslaught of wrong against the right.

Interest seeking and exploitative forces of economic enslavement have established a firm grip over the

resources of the world and their control and dominance has been consistently increasing. Growing

unemployment, disparity of income and wealth, poverty and deprivation, fraud and corruption,

marginalization of justice and righteousness and accompanying loss of human freedom clearly shows that

antihuman forces has usurped power and control over the globe and are trying the enslave the human race.

This enslavement differs from enslavement of the bygone era in that the slave may not be aware of his state of

slavery. The slave continues to work efficiently thinking that he/she is working for himself/herself or for

his/her country or community. However, most of the fruits of his/her labour get transferred to the slave-

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masters through the fraudulent economic procedures leaving for him/her only what is considered essential for

his/her sustenance. This is what constitutes the so-called sustainable society. This, enslavement is being

achieved mainly by use of fraudulent economic procedures Foremost among the economic tools being used is

interest. Next most important tool is fiat money (its depreciation). Interest and inflation are necessary and

sufficient to ensure dominance of each other. Governments are forced to borrow on interest, to agree to unjust

and exploitative terms of trade and commerce, to follow anti-people policies or the policies that weaken the

unity and strength of the country, etc. All these are intended to push the under developed and developing

countries into the debt trap and then to enslave them.

Exploitation and Fraud are integral parts of the system of interest

Amount payable in lieu of interest based finance doubles and redoubles after a period and this redoubling

continue. Suppose rate of interest is 10.41% then amount payable doubles and redoubles every 7 years. In 50

years it becomes 140 times and after 100 and 150 years it becomes 19991 and 2826581 times respectively.

The amount that is returned by previous borrowers is again lent on interest to new borrowers and therefore

this process doubling of dues continues despite the fact that many borrowers are able to repay the loan within

a few years. Naturally things grow and then decay and there is nothing real that can continue to grow in this

exponential pattern. Clearly debts created by interest-based finance can never be cleared. Number of people

below line of poverty has been increasing and many poor countries have already been trapped by the debt

created by interest-based finance. It follows that interest is a mechanism to enslave the people and any law

that enforces its payment is unjust and inhuman.

Further since it is not possible for any economy to continue to grow like this, it will have to go on reducing its

yardstick of measurement of wealth i.e., currency. Considering that manipulation of measure corrupts the

process of measurement, reduction in the quantity of wealth expressed by the yardstick of measurement is a

clear case of fraud. Considering that wealth is most widely sought after, it is clear that manipulation of its unit

represents a massive fraud. Considering that the system of interest cannot survive unless currency is

consistently depreciated (i.e., quantity of wealth expressed by currency is reduced) it is clear that fraud is an

integral part of the system of interest.

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Further since currency is normally used as unit of account, its manipulation corrupts the accounting process

and thus, incorporates element of fraud in all our dealings. It confounds truth with falsehood and masses fail

to distinguish between right and wrong. Further it makes non-exploitative and interest free modes of finance

unviable. All these add to fraud corruption and deception.

Interest continues to suck the earning and wealth of the poor and transfer it to the rich. Inflation goes on

reducing the worth of the savings of the poor. Inflation allows the prices of the products of the organized

sector to be increased faster than increase in the prices of the products of the unorganised sector. It is why

prices of commodities that poor people produce and sell have risen much less than the prices of the finished

products that organized sector owned by the rich produces. Thus, every time poor people sell something to

buy something from rich people they get less and overtime it represents a colossal loss. Similarly, prices of

commodities that poor countries export have risen much less than the prices of the finished products that rich

countries export. Thus every time poor country exports something to import something from rich country they

get less and overtime it represents a colossal loss. Rich lend capital on interest and usurp most of the surplus

produced by the economy, even if the enterprise where the capital is invested make losses the lenders are

assured of payment of not only the capital but also the interest. Resultant increase in disparity goes on

reducing the proportion of people who own enough resources to employ themselves. As the people get poorer

they are not able to provide collateral required for availing interest-based finance. In the economy based on

interest any economic activity that is not able to produce surplus at a rate higher than rate of interest cannot be

run as it results in loss to its owner (entrepreneur). In the interest based economy, expected return must be

higher than the rate of interest for any business to take off otherwise it will result in a loss for the

entrepreneur. If the interest rate is higher than the expected return, resources would be unemployed.Clearly

mechanism of interest and growing disparity of income and wealth produced by it is responsible for growing

unemployment. Further capitalism driven by interest compels labour to accept lower than just wages as labour

do not have any other alternative to sustain themselves.

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Economy that allows interest will ever remain full with fraud and corruption, injustice, exploitation and

oppression. Greedy capitalists are thus using mechanism of interest as a tool to enslave the humanity. Thus,

interest can’t coexist with human dignity and freedom and justice. [Freedom is essential, if man is to be held

responsible before his lord (god).

Money

Free people used gold and silver coins as universal medium of exchange and continued to use these for

thousands of years. Gradually these were replaced by paper money firmly linked to gold and silver. The fiat

money backed by gold were as good as gold and silver coins and it was easier to transport and store.

Gradually reserve was reduced and thus, states were in no position honour their promise to exchange the

paper money with quantity of gold/silver that was promised. Slowly link with gold and silver was completely

broken and now we have fiat money that is not linked with any known quantity of wealth. Mainstream

economists record these changes as if these were efforts to develop the economy and to ensure people’s

welfare. However those who critically analyse the factors that lead to these changes and the consequences

thereof together with the fact that it is not possible to believe that those who brought these changes were not

aware of the consequences are lead to believe that these changes were part of the most sinister long term

strategically designed plans to enslave the people. Here we shall restrict ourselves to examine how and why

this fiat money is one of the worst antihuman developments in the history of mankind.

Fiat Money

The money we use is the fiat money. It is money only due to fiat (order) issued by government. It has value

because people need money to buy their requirements and they are not allowed to use gold or silver coins or

any other real money. It is nothing real but it represents goods and services that it can buy. Strictly speaking it

represents a basket of goods and services and it has same market value as the basket of goods and services it

represents. Thus, in reality fiat money is a basket of goods and services that it represents. Fiat money of today

is not the same as the fiat money of a year or more or less earlier or latter because it represents basket of

goods and services that contains different quantity of goods at different times. 50 percent depreciation means

the quantity of goods and services contained in the basket is reduced to half the quantity of goods and services

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it earlier contained. Thus, 10 dollar of today is not same as 10 dollar of yesterday or tomorrow. It applies to

rupee, ringgit, riyal, euro etc. as well.

Real money is a definite quantity of some valuable commodity normally gold and silver, well known to the

people and that allows the people to participate actively in the process of price determination by the market.

Fiat money is complex money; people hardly understand what it is and that allows the rich owners of the

organised sector to manipulate market prices to serve their vested interests.

To understand it more clearly consider a gold coin. Its value can fall for two reasons. Firstly gold may become

cheaper with respect to other goods and secondly part of the gold may be cut off making it smaller in weight.

However, if we consider value of gold coin with respect to gold it can fall only if some part of gold is cut and

removed (from the coin). Price of any real commodity is constant with respect to itself and it can become

cheap only if part of it is removed (uniform quality is assumed). Currency is a basket of goods and services

and it become cheaper with respect to goods and services only because the quantity of goods and services

contained in the basket is reduced. Thus value of currency falls only because quantity of goods and services

that it represents is reduced.

Depreciation of Currency

The artificial reduction in the quantity of goods represented by currency leads to corresponding fall in

purchasing power of currency and thus currency that is measure of value/wealth become smaller. For the sake

of clarity, we shall restrict the use of the term, ‘depreciation of currency to this artificial reduction in the

quantity of goods represented by currency. Clearly real currency cannot be depreciated except by reducing its

content but that will be clearly understood by people and therefore cannot form basis for massive fraud and

manipulation.

Compared to market value the cost of production of fiat money is almost nil. For example cost of production

of a thousand ringgit note is much less than a tenth of a ringgit. Therefore government can increase money

supply almost without limit. Further the banks that are a vital part of the system of interest create more than

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90% of money supply almost free of cost. Supply of real money cannot be manipulated freely and it involves

prohibitive cost. However, it is to be noted that it is improper and misleading to talk of supply and demand in

case of fiat money. As a matter of fact total supply of money represent the number of shares in that national

out put is divided. Currency is equal to one share. To double the supply of money is to double the number of

shares and therefore each share i.e., currency becomes halved. These are the important differences between

these two types of money. Due to these differences fiat money is the worst antihuman innovation in the

history of the human race while real money is a very important facilitator of justice.

How Currency Depreciates? An Illustration:

To understand this, suppose that in a country a store full of rice is divided in number of shares ordained by its

head of state and such a share is used as measure of mass/weight. Now if the head goes on increasing the

number of shares every month the measure of mass will continue to become smaller every month. Similarly

when the supply of fiat money is increased, the quantity of goods and services it represent falls and it is the

depreciation of currency.

A simplified view of depreciation:

Suppose gold is the only commodity that is traded in a country. X is its currency. Let the total quantity of gold

that was traded today be 100,000 gm. and assume that it was traded for 100,000 X. Clearly today X represents

exactly one gm. of gold. Now suppose that after 6 years 200,000gm.of gold is traded for 400,000X. Clearly

then X will represent half a gm of gold i.e., exactly half the quantity it is representing today. This is what the

depreciation of currency means. In this case depreciation of currency has reduced the quantity of gold that X

represented to exactly half within the said 6 years. Clearly in this case depreciation of currency is equivalent

to the reduction in the quantity of gold that it represented. Since within said 6 years the quantity represented

had been reduced to half, a loan of 10 X of today will be equivalent to a loan of 20 X of 6 years latter and a

capital of 10 X of today will be equivalent to a capital of 20 X of 6 years latter.

A kg is same as a thousand gm. Suppose, that the government orders that from tomorrow kg will equal 500

gm only. Following adaptation of the said kg (note that in this case the yard stick of measurement of wealth is

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changed). The weight of various goods will seem to become double their previous weight. Assuming that

there in no real change in price, commodities will seem to sell at half their previous prices although in reality

there is no change in price. Similarly depreciation of currency is a case of change of scale of measurement of

wealth. There is no change in price level and apparent increase in prices is an illusion created by depreciation

of currency. Thus, currency is depreciated and people who do not understand the under lying fraud wrongly

feel that prices are rising. They are deceived. Thus depreciation of currency amount to a reduction in the

yardstick of measurement or scale that is used to measure wealth. It is therefore a grave crime a clear case of

fraud. Clearly a reduction of measure has to be compensated by ensuring equality of quantity in real terms.

Clearly, in the scenario considered above insisting on receiving double the amount lent if the dues are not

cleared for six years is what justice demands and not paying double is injustice. Clearly in such a scenario

what is normally considered to be involving interest may be nearer to justice than what is considered to be

free from interest. Masses can hardly understand what is just and what is unjust in such a fraudulent

environment.

System of interest cannot exist unless currency is depreciated. It is not possible to depreciate real money

however; fiat money can be depreciated without limit. Clearly, system of interest as well as fiat money are

responsible for the massive, social, political and moral problems that are driving our civilization to the brink

of its annihilation. We have briefly discussed some of these aspects and now we will consider some others.

Research Methodology

The survey contains questions with aims to get the respondents’ point of views on certain issues on gold

Dinar. The information was obtained from structured questionnaire, which was sent to respondents through

email linking it to a website. With the advance of ICT, the authors managed to get 436 respondents to answer

the questionnaires.

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Figure 1: Research Framework: Public Perception of Gold Dinar Acceptance Results and Findings

Demographic Profiles of the respondents

Approximately 65.1 percent of the respondents are male and the remaining 34.9 percent are female

respondents from a total of respondents of 436 people (Table 1a, Appendix 1). Majority of the respondents

fall into between 29 to 35 years old, which consist 31.9 percent from the total respondents followed by 19 to

23 (18.8%), 24-28 (17.2%), 36-42 (13.5%), above 42 (10.8%) and 15-18 (7.8%) (Table 1b, Appendix 1). The

respondents’ education background shows that 54.4 percent have university education while 41.7 percent

have postgraduate degree and the remaining 3.9 percent have school, primary and secondary education (Table

1c, Appendix 1).

60.6 percent of the respondents’ country origin is Malaysia, followed by Indonesia 12.8 percent, United States

of America 4.4 percent, United Kingdom and Pakistan 3.4 percent and the remaining 30.8 percent come from

various countries from around the world (Table 1d, Appendix 1). The distribution of the respondents job

position comprises 21.3 percent are executive, 20.9 percent are academician and college/university students

evenly. The remaining 40 percent comprises from variety of positions from home-makers to professionals

(Table 1e, Appendix 1).

In addition, the data on the public perception questions was tested to see whether it is normally distributed or

not using the skew test. From the result, data is found to be normally distributed since all the seven questions

statistics result are lesser than 1 (Table 2, Appendix 2).

General Perception of Gold Dinar Function of Money The Uses As Currency Gold Prevent Exchange Rate Risk Gold Increase Trade Gold economy need knowledge Payments By Gold Dinar Conversion of Gold Dinar to Other Currencies

Acceptance of Gold Dinar

Knowledge on Gold Dinar

influence

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Findings 1:

Mean analysis of the public perception on the implementation of gold Dinar

The mean score result from the survey were categorized to 5 categories which are strongly disagree, disagree,

Maybe disagree/agree, agree and strongly agree. The ranges of mean score according to its categories are

tabulated as below:

Mean score Interpretation

1.00 – 1.80 Strongly disagree

1.81 – 2.60 Disagree

2.61 – 3.40 Unsure

3.41 – 4.20 Agree

4.21 – 5.00 Strongly agree

Questions Mean Interpretation

The function of Gold Dinar is as the same as the fiat money or paper money 3.06 Unsure

The uses of universal currency Gold Dinar as a medium of exchange for payments of

goods and services are acceptable

3.94 Agree

If gold is being used as a medium of exchange in the electronic payment system. It

could prevent the exchange rate risk associated with the paper money

3.86 Agree

With the implementation of gold Dinar, there will be a substantial increase of trade 3.45 Agree

Knowledge is vital for the implementation of gold Dinar in the business community 4.18 Agree

I am afraid that the other parties will not pay me/us using the proposed Dinar system 3.15 Unsure

I am afraid that I cannot convert the gold currency to my own currency or other

currencies

2.82 Unsure

The results show that many respondents were unsure whether the Gold Dinar could function as the same as

fiat money, the acceptability of others towards Gold Dinar and the convertibility of the gold Dinar to other

currencies. However, they are in the opinion that the uses of gold Dinar are acceptable and it will reduce

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exchange rate risk. Furthermore, the implementation of Gold Dinar will increase trade, and education is vital

in implementing the system.

Findings 2:

Impacts of demographic profiles on the perception on gold Dinar

Based on the Spearman’s Rho correlation (Table 3, Appendix 3) conducted on the demographic profiles of the

respondents and the perception of gold Dinar, it was found that acceptability of gold Dinar has a negative

relationship with gender (-0.210) at 95% confidence level, weak positive relationship with age (0.163) at 95%

confidence level, weak positive relationship with education (0.156) at 95% confidence level and weak

positive relationship with country origin (0.115) at 99% confidence level. Overall the gender, age, level of

education and country of origin of the respondents could have an impact to the acceptability of gold Dinar.

The prevention of exchange rate risk associated with paper in the implementation of gold Dinar also has a

weak positive relationship with age (0.133) and level of education (0.171) at 95 percent confidence level.

Overall age and level of education could have an impact to the perception whether gold Dinar could prevent

exchange rate risk.

Only country of origin has an impact on the perception of whether with the implementation of gold dinar

could increase trade with a weak negative relationship of (-0.087) at 99% significant level. Therefore country

of origin could have an impact to the perception of whether the gold Dinar could promote trade among

countries, business and individuals.

With regards to the perception of the importance of knowledge in implementing the gold Dinar only age and

level of education have a weak positive relationship (0.160) and (0.100) at 95% and 99% percent respectively.

These results shows that age and education level could have an impact to the demand for formal knowledge in

implementing gold Dinar.

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The perception of public towards the acceptability of others to use Dinar has weak negative relationship for

age (-0.101) at 99% significant level, level of education (-0.099) at 99% significant level and country of

origin (-0170) at 95% significant level except for gender with a weak positive relationship (0.148) at 95%

significant level. Thus these results show that all the demographic profiles of the respondents could have an

impact on the perception whether the other parties would use the same gold Dinar for transaction.

All four demographic gender profiles such as gender (0.203), age (-0.208), level of education (-0.185), and

country of origin (-0.195) have a mix weak relationship with the perception of convertibility of gold Dinar to

other currencies at 95 percent confidence level.

Overall, the demographic profiles of the respondents could have an impact to the perception on gold Dinar

except for the function of gold Dinar is the same as fiat money which is not significant.

Findings 3:

The assessment of Anova on prior knowledge and the perception of Gold Dinar.

Based on the Anova results it is noted that prior knowledge on the Gold Dinar could influence the public

perception on the uses of universal currency Gold Dinar as a medium of exchange (Sig. .000), reduction of the

exchange rate risk (.000), the importance of knowledge for the implementation of gold Dinar in the business

community (.001), and the convertible of the gold currency to other currencies (.016) since the significant

levels are below than 0.05. However, for the other three perceptions, prior knowledge does not have a

significant different for the function of gold is as the same as paper money, Increase of trade in the

implementation of Gold Dinar and the acceptance of others to use gold Dinar.

Findings 4:

Challenges that have to be encountered in the implementation of gold Dinar.

Survey results, which show the obstacles and hindrances that the respondents might face in the

implementation of gold Dinar ranked as follows:

1. The willingness of other to accept gold Dinar 36.9 percent

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2. Comfortable with Euro, Dollar and other currency 18.8 percent

3. Lack of Will Power 13.3 percent

4. Scarcity of Gold 13.3 percent

5. Gold quality assurance 8.3 percent

6. Security issues 6.0 percent

7. Fraud 3.4 percent

From the result is found that the respondents are skeptical about the willingness of other to accept gold as a

medium of exchange in performing daily transactions. About 18.8 percent respondents are comfortable with

Euro, Dollar and the existing currencies. The scarcity of gold also has an impact to the implementation of

gold Dinar. It is interesting to find out that gold quality assurance, security issues and fraud comprises only

17.7 percent from the total respondents (Table 5, Appendix 5).

18

Discussion

There are some discussions that need further exploration according to the finding results. Firstly, the

uncertainty of many respondents whether the gold dinar could function as money even though it is acceptable

and logic. This finding is reflected by the real example that no countries nowadays are using gold dinar as a

medium of exchange, especially using gold dinar as a function of payment transaction that replace the fiat

money. One needs to make some great innovations towards the using of gold dinar. Then we could see the

performance of gold dinar compared to fiat money. This will then enhance the public confidence to

implement gold dinar to replace fiat money functions.

Nevertheless, many respondents seem to agree that the uses of gold dinar are acceptable and the usage of gold

dinar will reduce exchange rate risk. The implementation of gold dinar will increase a trade. It is the role of

the government to further decides whether or not to use gold dinar instead of fiat money.

The main related issue of gold dinar however, lies in whether the use of gold dinar as a medium of exchange

could remove the uncertainty. Again it is pointed out that the use of gold dinar is depending on the

willingness of the government to build the innovations towards a better economic condition.

Secondly, the implementation of Gold dinar depends on the knowledge and level of educations. The interest

system has gone too far now. Most people seem to have a better understanding about this system. The

government needs to rebalance the system by ‘reintroducing’ the gold dinar system. This is the first step that

needs to be done before we could further implement gold dinar. Public whom equipped with well gold dinar

education, will have positive perception about this system, thus will create balance situation. Universities as a

knowledge warehouse play a major role in educating our next generation. The universities’ curriculum

should incorporate gold dinar as one the integral subjects in economics, finance, accounting and business

management.

19

The government could then setup gold dinar side by side with fiat money and eventually replace fiat money

once gold dinar is widely used. If the government takes action to introduce the gold dinar, then people will

begin to aware the willingness of government about this system. This will leads to a better perception and

knowledge about gold dinar.

Thirdly, the issue about the scarcity of gold remains low compared to the issue of the willingness of others to

accept gold dinar. It is the fact that with fiat money the government could increase money supply almost

without limit but not with gold dinar system. Again, the issue remains on the willingness of the government or

the acceptance of gold dinar not in the scarcity of gold. However the limitation of the gold reserves is

acceptable. The strategy of implementation of gold dinar remains on the real conditions of the country.

Finally, we already know that gold has a low volatile price compared to the currency. This will lead to a

certain conditions to be expected by the agent of economics. Better expectations that lead to a better

productivity and efficiency. The remain issue is not about injustice, poverty or the economic issue such as

inflation, uncertainty, unemployment rather than the issue about productivity and efficiency.

However we need to conduct more research on the implementation of gold dinar using a specific sample (e.g.

economic agent such as government, business community). Also we need to explore the perception of

economist about this issue.

20

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Understanding Malaysia. 22-23 Oct 2002.

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Electronic Payment System. Proceeding of Student Conference on Research and Development.

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Within MSC Companies”. Proceeding of Student Conference on Research and Development.

Universiti Tenaga Nasional, 2003.

21

Nuradli Ridzwan Shah Mohd Dali at el. The Implementation of Gold Dinar. Is It The End of Speculative

Measures? Journal of Economic Cooperation SESTRCIC, Ankara Turkey. July 2002.

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Islamic Business. Proceeding of Knowledge Management of International Conference & Exhibition

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Tarek El Diwany. The Problem With Interest. TA-HA Publishers UK1997

The authors would like to apologize for not including the appendices in the paper due to the length constraints. Alternatively, Appendix 1 – 5 could be downloaded from the author’s website at http://www.geocities.com/mohdddalins/research/html or by emailing the author at [email protected]

22

Appendix 1 Table 1a: Descriptive Statistics - Gender

Gender

152 34.9 34.9 34.9284 65.1 65.1 100.0436 100.0 100.0

FemaleMaleTotal

ValidFrequency Percent Valid Percent

CumulativePercent

Table 1b: Descriptive Statistics - Age

Age

34 7.8 7.8 7.882 18.8 18.8 26.675 17.2 17.2 43.8

139 31.9 31.9 75.759 13.5 13.5 89.247 10.8 10.8 100.0

436 100.0 100.0

15 - 1819 - 2324 - 2829 - 3536 - 42Above 42Total


CumulativePercent

Table 1c: Descriptive Statistics - Education

Education

10 2.3 2.3 2.3182 41.7 41.7 44.0

1 .2 .2 44.36 1.4 1.4 45.6

237 54.4 54.4 100.0436 100.0 100.0

High SchPostgradPrimarySecondarUniversiTotal


CumulativePercent

23

Table 1d: Descriptive Statistics - Country

Country

2 .5 .5 .55 1.1 1.1 1.64 .9 .9 2.51 .2 .2 2.81 .2 .2 3.01 .2 .2 3.22 .5 .5 3.71 .2 .2 3.91 .2 .2 4.1

12 2.8 2.8 6.956 12.8 12.8 19.7

1 .2 .2 20.02 .5 .5 20.41 .2 .2 20.6

264 60.6 60.6 81.21 .2 .2 81.4

18 4.1 4.1 85.615 3.4 3.4 89.0

2 .5 .5 89.41 .2 .2 89.71 .2 .2 89.95 1.1 1.1 91.11 .2 .2 91.31 .2 .2 91.53 .7 .7 92.2

15 3.4 3.4 95.619 4.4 4.4 100.0

436 100.0 100.0

ArgentinAustraliCanadaEgyptFinlandFranceGermanyGreeceHungaryIndiaIndonesiIrelandItalyJapanMalaysiaNetherlaOtherPakistanPhilippiRussiaSaudi ArSingaporSouth AfTurkeyUnited AUnited KUnited STotal


CumulativePercent

24

Table 1e: Descriptive Statistics – Job Position

Job

91 20.9 20.9 20.97 1.6 1.6 22.5

91 20.9 20.9 43.318 4.1 4.1 47.593 21.3 21.3 68.8

2 .5 .5 69.321 4.8 4.8 74.127 6.2 6.2 80.313 3.0 3.0 83.333 7.6 7.6 90.8

2 .5 .5 91.311 2.5 2.5 93.811 2.5 2.5 96.313 3.0 3.0 99.3

3 .7 .7 100.0436 100.0 100.0

AcademicClericalCollege/ComputerExecutivHomemakeK-12 StuOtherOther TeProfessiRetiredSales/MaSelf-empService/UnemployTotal


CumulativePercent

25

Appendix 2 Table 2: Descriptive Statistics

Descriptive Statistics

436 1.00 5.00 3.0642 1.37649 -.121 .117

436 1.00 5.00 3.9450 1.07070 -.940 .117

436 1.00 5.00 3.8601 1.11671 -.826 .117

436 1.00 5.00 3.4587 1.01512 -.364 .117

436 1.00 5.00 4.1812 1.01561 -1.375 .117

436 1.00 5.00 3.1537 1.08565 -.211 .117

436 1.00 5.00 2.8211 1.19582 .057 .117

436

The function of Gold Dinaris as the same as the fiatmoney or paper moneyThe uses of universalcurrency Gold Dinar as amedium of exchange forpayments of goods andservices are acceptableIf gold is being used as amedium of exchange inthe electronic paymentsystem. It could preventthe exchange rate riskassociated with the papermoneyWith the implementationof gold Dinar, there will bea substantial increase oftradeKnowledge is vital for theimplementation of golddinar in the businesscommunityI am afraid that the otherparties will not pay me/ususing the proposed DinarsystemI am afraid that I cannotconvert the gold currencyto my own currency orother currenciesValid N (listwise)

Statistic Statistic Statistic Statistic Statistic Statistic Std. ErrorN Minimum Maximum Mean Std. Skewness

26

Appendix 3 Table 3: Spearman Rho’s Correlation Between the Demographic Profiles and Perceptions.

Correlations

Gender Age Education Country

Spearman's rho

The function of Gold Dinar is as the same as the fiat money or paper money Correlation Coefficient 0.06375 -0.06945 -0.05052 -0.00848

Sig. (2-tailed) 0.18396 0.15339 0.299372 0.861723

N 436 424 424 424

The uses of universal currency Gold Dinar as a medium of exchange for payments of goods and services are acceptable Correlation Coefficient -0.210** 0.163** 0.156** 0.115*

Sig. (2-tailed) 9.33E-06 0.000773 0.001286 0.017983

N 436 424 424 424

If gold is being used as a medium of exchange in the electronic payment system. It could prevent the exchange rate risk associated with the paper money Correlation Coefficient -0.01076 0.133** 0.171** 0.059235

Sig. (2-tailed) 0.822715 0.006007 0.000393 0.223529

N 436 424 424 424

With the implementation of gold Dinar, there will be a substantial increase of trade Correlation Coefficient 0.037845 -0.06934 0.009662 -0.097*

Sig. (2-tailed) 0.430556 0.154069 0.842762 0.045054

N 436 424 424 424

Knowledge is vital for the implementation of gold dinar in the business community Correlation Coefficient -0.00971 0.160** 0.100* -0.02147

Sig. (2-tailed) 0.83981 0.000929 0.039012 0.659284

N 436 424 424 424

I am afraid that the other parties will not pay me/us using the proposed Dinar system Correlation Coefficient 0.148** -0.101* -0.099* -0.170**

Sig. (2-tailed) 0.001928 0.038154 0.041111 0.000451

N 436 424 424 424

I am afraid that I cannot convert the gold currency to my own currency or other currencies Correlation Coefficient 0.203** -0.128** -0.185** -0.195**

Sig. (2-tailed) 1.98E-05 0.008142 0.000124 5.19E-05

N 436 424 424 424

*Correlation is significant at the 0.01 level (2-tailed).

**Correlation is significant at the 0.05 level (2-tailed).

27

Appendix 4 The Assessment of Anova on Prior Knowledge and the perception of Gold Dinar. ANOVA

Sum of

Squares df Mean Square F Sig. The function of Gold Dinar is as the same as the fiat money or paper money

Between Groups .103 1 .103 .054 .816Within Groups 824.099 434 1.899 Total 824.202 435

The uses of universal currency Gold Dinar as a medium of exchange for payments of goods and services are acceptable

Between Groups 29.950 1 29.950 27.731 .000Within Groups

468.729 434 1.080

Total 498.679 435

If gold is being used as a medium of exchange in the electronic payment system. It could prevent the exchange rate risk associated with the paper money

Between Groups 15.464 1 15.464 12.735 .000Within Groups 527.002 434 1.214 Total

542.466 435

With the implementation of gold Dinar, there will be a substantial increase of trade


448.257 435

Knowledge is vital for the implementation of gold dinar in the business community

Between Groups 10.991 1 10.991 10.898 .001Within Groups 437.695 434 1.009 Total 448.686 435

I am afraid that the other parties will not pay me/us using the proposed Dinar system

Between Groups .190 1 .190 .160 .689Within Groups 512.515 434 1.181 Total 512.704 435

I am afraid that I cannot convert the gold currency to my own currency or other currencies


622.046 435

28

Appendix 5 Table 5: Challenges that have to be encountered in the usage of gold Dinar.

is the major hindrance of implementing the gold Dinar as a medium of exchange?

Frequency Percent Valid Percent Cumulative

Percent Valid Comfortable

with Euro, Dollar and other

82 18.8 18.8 18.8

Fraud 15 3.4 3.4 22.2 Gold quality assurance 36 8.3 8.3 30.5

Lack of Will Power 58 13.3 13.3 43.8

Scarcity of Gold 58 13.3 13.3 57.1 Security purposes 26 6.0 6.0 63.1

The willingness of others to accept gold

161 36.9 36.9 100.0

Total 436 100.0 100.0

“fiat money & gold dinar application: an online survey

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