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INTRODUCTION TO GOLD DINAR - Business From Islamic Perspective-

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1 INTRODUCTION TO GOLD DINAR - Business From Islamic Perspective-

2 introduction Claimed by a Muslim scholar, Ibn Khaldun that God created the two precious metals, silver and gold to serve as a measure of all commodities Gold had played an important role for many centuries in a way or another until the end of Bretton Woods system After the collapse of Bretton Woods system, fiat money and a floating rate exchange system have taken place in the monetary system Fiat money is created out of nothing by the power of an issuing authority With the spread of Islam, the dinar was minted in large quantities and gradually displaced the bezant gold coin as the major international currency, circulating throughout the Muslim world and the Christian Europe as well

3 differences between current monetary system & dinar system CURRENT MONETARY SYSTEM Money creation would cause a gradual shift of power into the hands of those who control the financial system. With foreign financial institutions like banks operating, gradual loss of sovereignty is likely to be seen in the land. (Ahmad Kameel Mydin Meera, The Islamic Gold Dinar, 2002) Paper money quantity can be increased at will any time since there will always be demands from the public to increase the quantity of money which would cause inflation = manipulation of paper money Floating rate exchange is the currency rate that is unstable which can be easily fluctuating

4 Differences between current monetary system & dinar system DINAR SYSTEM fixed exchange rates resulted the absence of exchange rate instability and thus exchange rate risk where this may encouraged world trade by eliminating the uncertainty when exchange rate fluctuate Islamic countries will not need reserve of foreign currencies to finish commercial trading The principle of the Islamic economy in the light of the Quran and the sayings of the Prophet Muhammad S.A.W. is to improve the quality of the economy by encouraging good and forbidding the harmful

5 how dinar can help in economic crisis? The gold prices are indeed relatively stable compared to other commodity prices, exchange rate movement and the stock market index Manipulation of currencies and the impact toward one economy could be reduced because of the fact that gold does not inflate in value as it is a commodity and, thus, has an intrinsic value If gold coin were used, then counterfeiting would also be checked With dinar and elimination of interest, we would have a stable currency and monetary system, money supply growth (from new discoveries of gold) can be expected not to overshoot growth in the real sector, thus eliminating the inflationary pressure in the economy If all these exchange rates are eliminated by means of a single currency like the dinar, then speculation, arbitrage and manipulation will be very much removed if not eliminated

6 can dinar solve the trade problem among the Islamic countries? Organization of Islamic Conference (OIC) international organization grouping to pool their resource together, combine their effort and speak with one voice to safeguards progress and well being of their people and all Muslims in the world implementing part-by-part of the Gold Dinar reflects on how our Prophet Muhammad S.A.W. started to introduce Islam the successful implementation of the Islamic Gold Dinar is the level of acceptance among OIC members The Gold Dinar could be an important facilitating mechanism to help the smaller countries of the world move away from an inherently unstable and ultimately unjust global monetary system, (Minews, 2002).

7 can dinar solve the trade problem among the Islamic countries? Though there is yet empirical evidence to conclude on the overall acceptance by the OIC members, several salient factors might need to be considered The factors can be further segregated into economic, political as well as infrastructure facilities development

8 gold standard a monetary system in which the standard economic unit of account is a fixed weight of gold gold standard may also be viewed as a monetary system in which changes in the supply and demand of gold determine the value of goods and services in relation to their supply and demand often been viewed as ensuring long run, though not necessarily short- run, price stability via the operation of the classical commodity theory of money its rarity and durability, gold has long been used as a means of payment

9 implementing the gold dinar Implementing the Gold Dinar in Domestic Transactions The other way of implementing gold dinar Collection and Distribution of Zakat Minting, Buying and Selling Coins/Kiosks Opening an e-Dinar Account Trading with Dinars and Dirhams Establishing an Open Market Donating in Dinars Supporting Dawa

10 the dinar future The future of Gold is a very young gold market with a long way to go (Sinclair, 2002) promotion of direct trade between Islamic countries, preferably through the mechanism of the gold dinar, could be the initial first step in the proverbial journey of a thousand miles

11 the dinar future 5 reasons that dinar will be excellent in the future: Many people are aware of the shortcomings of the present system and advancements in IT technology that providing a way out for these people. The emergence of e-dinar, e-gold, and GoldMoney. From the IT, political is not necessary and a gradual introduction of the dinar is possible without adversely affecting the current system. Does not require substantial new regulations. The system is easy as where people invest in gold. With the advent and staggering growth in e-commerce, e-money is unavoidable. Gold has high prospect as a single global currency. Just consider the obsession humanity has for this metal since historical times. The simultaneous economic distress in the US, Europe and Japan are warranting to ponder over the underling causes.

12 conclusion We have spent a good part of the last two decades in establishing Islamic financial systems in our respective countries The time is now right to complete or complement the domestic systems with an international system - a system that will allow each Muslim country to reach out to one another and strengthen the level of trade - a system that will also allow the ummah to use its collective surpluses to fund each other, and help each other grow


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