An Islamic Solution
to 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
Central Bank Liquidity Swaps
Single Tranche Open Market Operation
Terms Securities Lending Facility and Term Options Program
Bear Stearns Bridge Loan
Maiden Lane I
Primary Dealer Credit Facility
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility
Commercial Paper Funding Facility
Term Asset-Backed Securities Loan Facility
Agency Mortgage-Backed Security Purchase Program
AIG Revolving Credit Facility
AIG Securities Borrowing Facility
Maiden Lane II
Maiden Lane III
AIA/ ALICO
Totals
$3,818.41
10,057.40
855
2,005.70
12.9
28.82
8,950.99
217.45
737.07
71.09
1,850.14
140.316
802.316
19.5
24.3
25
$29,616.4
12.8%
34.0
2.9
6.8
0.0
0.1
30.2
0.7
2.5
0.2
6.3
0.5
2.7
0.1
0.1
0.1
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
Gold Silver Standard
www.thegoldreport.co.uk
Twitter @Jamal_harwood