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Gold and silver restore social equilibrium
The Dinar and the Dirham can be the world currency of
all free people.
The 'dollar' is no longer the powerful currency that it was. Recent slides
in its value on international exchanges have dramatically demonstrated
the inherent weakness of a currency 'supported' by high interest rates,
necessary to cover soaring foreign debt and mind-boggling governmental
overspending. The USA, once the world's leading creditor, has now become
its leading debtor,exceeding Brazil, Mexico, Argentina and Venezuela combined.
Gold can now replace the dollar, as the world currency, offering an unparalleled
protection in relation to any other currency. Why gold?
Because all national currencies - even the 'mighty' US dollar - are simply
pieces of paper. Their value is as strong, or as weak, as the country
which stands behind them. Which paper currency would you choose as a refuge
from a shaky dollar?
By contrast, gold is a precious metal. Its value depends on no nation,
on no economy. The value is intrinsic, and therefore trustworthy. Moreover,it
is easy to store, easy to transport. And instantly recognised for the
genuine treasure it is, virtually anywhere in the world. It always has
been. And always will be.
The schism that divides the defenders of gold and silver and their adversaries
is not only utilitarian but also philosophical. The defence of gold and
silver is solidly based on some fundamental considerations of political
philosophy that the defenders of artificial currency cannot ignore.
"Money is not an invention of the State," wrote Menger, "nor is it the
product of a law-making act. For its existence the sanction of political
authority is not even necessary."
Money is the product of the division of labour and of the economy of exchange
that man has established. When the traders intended to exchange their
goods and services for other more commercial goods the precious metals
appeared as the best choice and became the currency for the majority of
people. Gold and silver had value because they satisfied the needs of
man. Contrary to what happened to other useful merchandise, they were
easy to divide into fractions, could be transported at low cost and kept
safe with relative ease. The small weight of the Dinars (4.2 g. of gold),
complemented with Dirhams (3 g. of silver), facilitates small transactions
to occur with gold and silver coins, thus making these coins available
to the widest number of people. Gold, as the most sound and stable currency
in the world, is also the ideal medium for savings, because history has
proved that its value in relation to other basic commodities has remained
uniquely stable throughout centuries. An equally important advantage of
gold, is that gold is universal;identical in Britain as in China, therefore
perfect for making international payments without having to rely on the
unpredictable and costly exchange rates of all other paper currencies.
Gold is money we can trust.
For around 2,500 years the universal currency was made up of small pieces
of gold and silver called coins. They survived for two millennia despite
the numerous attempts by many governments to manipulate them and replace
them with their own medium of exchange. This perception of the very nature
of currency and the characteristics of precious metals at the service
of the economic exchange leads us to think that gold and silver will probably
survive another two thousand years. One way or another, the gold standard
will prevail for a long time after the present eruption of artificial
national currencies has been forgotten, or only remembered in the museums
of numismatics.
The choice of currency is a matter of crucial importance. Do we want a
system where the government will issue and manage the currency by means
of the political and economic process? Or do we prefer that the people's
own decision makes the choice? If we entrust it to the government and
financial institutions then we must be ready to live with an artificial
currency, which is ideal to serve political purposes. It can be expanded
and contracted at will,according to the policies and economic suitability
of the moment. But above everything it can be inflated at will to complement
the tax income.
On the other hand, if we allow people to make their own free choice, it
may well happen that they choose as a medium of exchange a great variety
of trading goods. In the past, through a selective process of several
thousands of years they chose precious metals -gold and silver- as currency.
They will probably choose the same if they are given the freedom to do
so. Imam Malik, the great Imam of Madinah in the early period of Islam,
stated: "Money is any merchandise commonly accepted as a medium of exchange".
Thus through the testimony of the greatest Islamic Imam, the Imam Dar
al-Hijrah,the position of Islamic Law clearly stands in defence of the
freedom to choose among all merchandise rather than the imposition of
an artificial currency.
Bimetallic currency is a natural currency as opposed to an artificial
one. There is no need for an Islamic government to establish a bimetallic
currency by means of a deliberate legal act. In fact, the bimetallic currency
does not need rules or regulations, laws or official control. It only
needs the individual freedom to possess and use gold and silver coins
with an implicit elimination of all taxes imposed on their use. There
is no doubt that the freedom to possess gold does not only mean the freedom
to buy it and sell it for industrial purposes but also the freedom to
use it as a medium of exchange.
Using bimetallic coins means having a healthy currency. It means that
the value of the currency is independent of the government. It is true
that it cannot provide us with the unattainable ideal of an absolutely
stable currency, but it protects the monetary system from the influence
of governments and financial institutions, because the existing stocks
of gold are independent of the desires and manipulations of the political
and financial system.
The bimetallic coins as international currency were in the past the product
of an evolution that occurred naturally without the need for institutions
or treaties between governments. Nobody had to take care to make them
work as an international currency. When the main nations of the world
adopted it as a currency, the world found that it had a world currency.
It is true that the different currencies had different names and various
weights. But that did not matter much, since all of them were made of
gold or silver and they could be exchanged freely. After all, an ounce
of gold is an ounce of gold whether minted in the form of sovereigns or
eagles.
The bimetallic currency united the world because the payments between
nations ceased to be a problem. It facilitated trade world wide and promoted,
with it, a division of labour on a world scale. Nations specialised in
the merchandise for which they enjoyed greater advantages in the international
market. But above everything, the bimetallic currency stimulated the export
of capital from the industrial countries to the undeveloped areas. Without
the fear of loss through devaluation or restriction in transfers, European
and Muslim capital earnestly sought profitable opportunities in all the
continents. As a result, trade and industry improved the conditions of
work and life world wide.
Gold cannot be inflated by printing more of it. It cannot be devalued
by government decree, and unlike paper currency it is an asset which does
not depend upon anybody's promise to pay. Portability and anonymity of
gold are both important, but the most significant fact is that gold is
an asset that is no-one else's liability. All forms of paper assets: bonds,
shares,and even bank deposits, are promises to repay money borrowed. Their
value is dependant upon the investor's belief that the promise will be
fulfilled. As junk bonds and the Mexican peso have illustrated, a questionable
promise soon loses value. Gold is not like this.
A PIECE OF GOLD IS INDEPENDENT OF THE FINANCIAL SYSTEM,
and its worth is underwritten by 5,000 years of human experience.
It may be that the return to the bimetallic currency will be an arduous
and prolonged task. Since it was lost through a gradual erosion of monetary
freedom, perhaps we will have to re-conquer it slowly and painfully going
upstream back to freedom. This is the reason why we do not seek a law
of reform or a law of restoration, nor a conversion or a parity, we are
satisfied just with freedom. This is a short and direct path. It may take
us years to tread this path and that will depend upon the resistance from
ignorance and public prejudice and the greed and love of power of financial
institutions. The government may for that reason take some stages in the
path, which will offer new challenges that invite the supreme effort to
restore freedom. It may take a short time, however, as national interest-debt
becomes manifestly unpayable, countries may decide that they cannot afford
to stay in the system any longer. The system will not survive.
Go
to Chapter 7
The Return of
the Gold Dinar
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