1. Gold Dinar as an Alternative to the Current Monetary Systems
Presenters:
Lorena Frischeisen G
Nida Phettongkam G
Rebeka Sultana G
Rehan Saeed G
Atif Ahmed

2. Outline How FIAT money is created?
History of Gold Dinar (payment system)
Quotes from Modern Scholars
Why should bring back the Gold Dinar?
FIAT System
How FIAT money is created?
What are its advantages and disadvantages
Comparisons with the Gold Dinar
Implementation of the Dinar
Domestic transactions
International Trade
Objections
Conclusion

3. Quotes from Modern Scholars
Gold is going to be part of the structure of the international monetary system for the 21st century”
Robert A. Mundell 1997
“Gold still represents the ultimate form of payment in the world”
Alan Greenspan 1999

4. Gold recognized as money in Islam
Allah (SWT) has created gold and silver to act as money. Qura'n mentioned that these precious metals will always be desired by men:
Alluring to men the love of things they covet, women, and sons, hoarded treasures of gold and silver, and highly bred horses, cattle and land. (3:14)
The Prophet (s.a.w.) has said:
“A time is certainly coming over mankind in which there will be nothing left which will be of use except a dinar and a dirham” (The Musnad of Imam Ahmad ibn Hanbal)
The Prophet (s.a.w.) noticed that trade and business were appraised in gold and silver

5. Used in different times
Arab-Byzantine and Arab-Sassanian

6. The Umayyad coin ( 661 – 670 CE)
Abd al-Malik Ibn Marwan (685 – 705 CE), introduced the first Islamic gold coins

7. The Abbasid Coin (750 – 1258 CE)

8. The Andalusian Coins (711 – 1495 CE)

9. The Fatimid Coins (909 – 1171 CE)

10. This gold dinar, minted by King Offa of Mercia (Kent, England) between CE., was probably the first gold coin minted in England.

11. Why bring Gold Dinar back?
To avoid Riba, Major Sin in Islam
We will attain the Maqasid Al Shariah
Our sovereignty will return…
Will not be subservient to other nations.

12. Prohibitions of Riba from Authentic Sources

13. People of Riba at war with God
Quran
2:278. “… give up what remains (due to you) from Ribâ (usury), if you are (really) believers.”
2:279. “And if you do not do it, then take a notice of war from Allâh and His Messenger…”

14. Riba worse than fornication
Sunnah
‘Abdullaah ibn Mas’ood (may Allaah be pleased with him) reported that the Prophet (peace and blessings of Allaah be upon him) said: “There are seventy-three types of riba, the least of which is as abhorrent as a man having intercourse with his own mother and worst of which is [violating] a Muslim's honor and sanctity.
(al-Haakim in al-Mustadrak, 2/37; Saheeh al-Jaami’, 3533).

15. Any Involvement with Riba - Cursed
Sunnah
Jaabir (RA) reported that the Messenger of Allah (SAW) cursed “the one who consumes riba, the one who gives it to others, the one who writes it down and the one who witnesses it.” He said: “They are all the same.”
(Reported by Muslim, 3/1219)

16. Riba prohibited in Other faiths
Non-Abrahamic prohibitions of “usury”:
Code of Hammurabi (ca 2100 BC): interest ceilings of 33% and 20% on loans-in-kind.
Hindu law: total interest may not exceed principal.
Plato,…: Capital not viewed as a valid “factor of production”.
Judeo-Christian-Islamic prohibition of “Ribā”:
Exodus [22:25], Leviticus [25:35-7], Deuteronomy [23:19-20], Bava Metzia, Chapter 5, Mishna 2.
Luke [6:27-36], Benedict XIV (De Synodo Diocesana, X.iv, n.6), First Council of Carthage (345)-until-Fourth Council of the Lateran (1215).
Qur’an [30:39], [3:130], [2: ], various Prophetic traditions.
Source: Mahmoud A. El-Gamal,

17. Maqasid Al Shariah Protection of Faith Life Intellect Posterity Wealth
Indispensable for the establishment of Islam itself on earth
Imam Ghazali

18. Poverty leads to disbelief
Sunnah:
Poverty in all probability leads to unbelief (kufr)
(Baihaqi and Tabarani)

19. Slogans of Global Institutions
World Bank
“Our dream is a world free of poverty”
IMF
“Until There is a Cure... There is the IMF”
Source:
Source:

20. Transferring of Wealth (Sovereignty)
Current banking policies is to lend to the rich and wealthy (ie high credit ratings).
Inequitable distribution of wealth
Rich and poor gap increases
Socio-economic problem occur (ie Crime)
Quran:
In order that it (wealth) may not (merely) make a circuit between the wealthy among you
(Al-Hashr 59:7)

21. Fiat Monetary System

22. Fiat Monetary System - Design
Central Bank
Creates
$100
Interest Rate 10%
$20
$20
$20
$20
$20 =
$100
$22
$22
$22
$22
$22 =
$110
Usually Money is created in the form of debt

23. Fiat Monetary System - Design
Problem
Extra 10% interest does not exist. So loan is not repayable in aggregate
System is designed to default
Options for Banks (Lenders)
Reschedule / Restructure Loans
Print more money, and role it into the economy
Confiscate real wealth

24. Fiat Monetary System - Advantages
More Liquid
Easily Tradable
Money is easier to divide than many trade goods
Easily Transportable
Standardized Medium of exchange
One dollar is worth the same as another dollar
It is easier to add up and count money

25. Fiat Monetary System - Disadvantages
Seigniorage
Inflation
Easy to Destroy
Easy to Forge
No Intrinsic Value
Currency Crisis

26. Seigniorage Cost of creation of paper money is almost nil.
They lend those currency to the others on interest.
Income and wealth of developing countries is transferred to the developed countries that leads to poverty and starvation for developing countries.
Costs $0.20 cents to create
Seigniorage is $99.80

27. Sources of Seigniorage
Fiat Money
Fractional Reserve Requirement
Interest (Riba Al-Nasiah)
All of these are forms of Riba
Money is never questioned by the society, even in the modern literature

28. M V P Y = Inflation Explained * * * * 100 10 10 100 200 10 20 100
Money
Velocity
Price
Goods
200 * 10 20 *
100
M=Money V=Velocity = P=Price Y=Total Output

29. Inflation
“A persistence and appreciable increase in general level of prices” – Sapiro
Surplus of money supply exceeding the real needs of the economy.
Some Socio-Economic Effects of Money Creation
Disparity in Income Distribution and Creation of Poverty
Effects on Housing
Effects of Price Control on Agriculture
Effects on Society
Effects on Environment

30. Easy to destroy The Fragile nature of paper
Ex. Fire, Water and natural disasters

31. Easy to Forge Easy to counterfeit the paper money.
Nation have used counterfeiting as a means of warfare.
Ex. Great Britain did this during Revolutionary War to reduce value of the Continental Dollar.

32. No intrinsic value
Cannot be utilized in direct fulfillment of human needs.
Can be used for acquiring goods and services.

33. Currency Crisis Crisis from inflation
Artificial lowering of purchasing power, by increasing supply of fiat money beyond the real need of economy.

34. Gold Dinar System

35. Gold Dinar - Advantages
Durable
Valuable
Stable Currency
Reduce Foreign Exchange fluctuation
Excellent Medium of exchange

36. Gold Dinar - Advantages
Durable
can’t be destroyed
Valuable
has intrinsic value
Stable Currency
The creation and destruction of gold is impossible
Hedge risk
No speculation
No Inflation

37. Gold Dinar - Advantages
Reduce Foreign Exchange fluctuation
The exchange rates constantly fluctuate, but gold dinar does not fluctuate.
This would further strengthen and stabilize the economy
Excellent Medium of exchange
Since gold is priced and revered globally, it is something that it always valued by people of all nations
Owing to its inherent value and its easy divisibility, gold is an excellent medium of exchange

38. Gold Dinar - Disadvantages
Rare
Gold is too rare and it creates an undesirable effects in the society
Economic activity will slow down
Unemployment will rise
Not evenly distributed in the world
Not easy to carry
Heavy metal
Less secure
Time consuming

39. Summary: Gold Dinar vs Fiat Money
Issue
Gold Dinar
Fiat Money
Where does money come from; how does it originate?
Lowest transaction costs when transferring wealth geographically and over time.
Gold-as-money is because it is the commodity for which the buy/sell spread increases the least.
Because it takes work to create commodity money, it is said to have “intrinsic value.”
An arbitrary (fiat) invention.
It is created out of nothing by banks and central banks and made legal with legal tender.
Because it takes no work to create fiat money, it is said to have no “intrinsic value.”
With fiat money, there is no limit as to how much can be created.
Is there a limit as to how much money exists?
The amount of money is limited by the costs of producing it. In the case of gold-as-money, costs of producing gold.
Because fiat money is created without work, there is no limit as to how much can be created.

40. Cont… Issue Gold Dinar Fiat Money
How does the type of money affect the propensity to save?
Gold Dinar is very savable because it doesn’t obsolesce or deteriorate and is difficult to counterfeit. Purchasing power is not diminished.
Fiat money is less savable and can discourage long-term savings altogether, since its future value is always in doubt.
Interest rate volatility and foreign exchange volatility.
Virtually none.
With fiat money, there is inherent high volatility, which tends to be hedged and which adds additional cost to financing.
People in the financial sector benefit. Workers, manufacturers, entrepreneurs and consumers pay the cost.

41. Cont… Issue Gold Dinar Fiat Money Effect on the banking system.
The role of bankers is limited to: (1) storing money for safekeeping; (2) acting as intermediaries between savers and credit-worthy borrowers; and (3) facilitating the payments transfer system.
Bankers have a greatly expanded role: they sell instruments to hedge interest rate and foreign exchange volatility;
they create fiat money (in the form of credit) for which they get the interest and fees.
Social mobility: the ability to improve one’s lot in society.
High.
Less to none. Because improving one’s lot requires the accumulation of wealth, and because it is not economic to save fiat currency, the poor tend to stay poor.

42. How to bring it back? International Trade Domestic Trade
Bilateral Payment Arrangements (BPA)
Multilateral Payment Arrangements (MPA)
Domestic Trade
Investments
Savings

43. International Trade via BPA
EXPORTS
Commercial Banks with Gold Accounts
Malaysian Businessmen & Traders
Saudi Businessmen & Traders
Central Bank Malaysia
Central Bank Saudi Arabia
Net Gold Difference Settled Among the Central Banks
IMPORTS

44. International Trade via BPA
Gold Dinar (million)
Export
Import
Net payment
Malaysia
2.0
1.8
+0.2
Saudi Arabia
-0.2
In the example above, a total of 10.7 million gold dinar of trade takes place among the 3 countries, with a net payment of only 0.1 million gold dinar as follows:-
·                    In other words, the only payment required is for Egypt to pay Saudi 0.1 million gold dinar, but the total value of trade among the 3 countries is substantial, at 10.7 million gold dinar.
It is also possible to refine the mechanism further, whereby the credit or debit outstanding at the end of each quarter can be forwarded to the subsequent quarters and final settlement is made only at the end of the year. The advantage of this refinement is that a net import position for a country during a particular quarter may be off-set by a net export position in the subsequent quarter, so that, for the year as a whole, the payment flows are further minimised.
Saudi Arabia needs to pay Malaysia 0.2 million gold dinars
However total amount of trade was 3.8 million

45. The Gold Dinar in Domestic Transactions
Initially for savings, investments
Payment of mahr, zakat etc.
Transform savings into payment
system

46. Domestic Trade – Gold Dinar
All is possible due to advancement of Technology

47. Investment Account and Charge Card
Balance
 Savings Account
 Current Account
Gold Dinar Account
Gold Dinar

48. Pricing in Gold Dinars Dinar
Start pricing items in Dinar instead of local currency

49. Common Objections: Gold
Failure of gold-backed system
Not true, it is used as money through out history
Gold producing countries at an advantage
Today only US is at advantage
Price of gold fluctuates
More stable than FIAT
Not enough gold to support the volume of international trade
Really?

50. Conclusion: Sustenance Predestined (Rizq)
Your wealth (Rizq) has been written.
Sunnah
Abdullah b. 'Amr b. al-'As reported: I heard Allah's Messenger (may peace be upon him) as saying: Allah ordained the measures (of quality) of the creation fifty thousand years before He created the heavens and the earth, as His Throne was upon water.
(Bk 33, Number 6416: Sahih Muslim)

51. Allah Knows Best
Thank You

52. References
2002 International Conference on Stable and Just Global Monetary System: Viability of The Islamic Dinar
Mahmood M. Sanusi, “Gold Dinar, Paper Currency and Monetary Stability : An Islamic View”,
Hifzur Rab, “Problems Created by the Fiat Money, Islamic Dinar and Other Available Alternatives”
Ahamed Kameel Mydin Meera and Hassanuddeen Abdul Aziz, “The Islamic Gold Dinar: Socio-economic Perspectives”
Saiful Azhar Rosly and Emad Rafiq Barakat, “The economic Though of Al-Maqrizi : The Role of the Dinar and Dirham as Money”
Ahamed Kameel Mydin Meera, “The Theft of Nations”