The office of national statistics (ONS) has released its first estimate of the final quarter of 2010 and shocked the business world. According to its initial estimate based on the information it has so far collected on the last quarter of 2010 the British economy shrunk by half a percent.
As the new ConDem coalition government drove forward harsh austerity programmes it appears the fragile recovery may be evaporating and the spectre of double dip recession is nearing the inevitable. The government has attempted to defend its position by laying the blame on the wintry weather, which affected consumer spending during Christmas. However the Office for National Statistics said without the wintry weather GDP would probably have been flat – suggesting that the UK economy had already run out of steam before the snow hit.
With inflation hitting 3.7% last month, there are growing fears the UK is heading for an unpleasant dose of stagflation.
The issue currently is if the first quarter of 2011 also shrinks then we will officially be in a double dip recession.
Western governments spent unprecedented amounts of printed money to bail out their banks, they passed on the costs of such debts to their citizens through austerity programmes and we are today on the brink of being in the same position we were on the eve of the global economic crisis.
The problem with the UK is the boom of the last decade was driven by the expansion of the financial sector, public sector job creation and the housing bubble. The financial sector collapse burst the housing bubble while the public sector’s contribution to the economy came to an end as it suffered most from the government austerity programme.
Brian Bethune, economist at IHS Global Insight highlighted this in the summer of 2010: "It's good to have the economy growing again, but we don't think that rate of growth is sustainable because it is distorted by all the government stimulus. The challenge here is to get organic growth - growth that isn't helped by fiscal steroids."
Looking across Europe at the crumbling economies of Greece, Ireland, Portugal et al and the USA, its ironic that the UK is widely regarded as an economy that has got its house in order. The release of today’s data exposes the malaise in one of the "better" western economies.
Capitalism is not yet out of the wood!
Sunday, 20 February 2011
Sunday, 21 November 2010
“Sell gold for silver as you please, on the spot”
Why did the Prophet (saw) demand that transactions involving Gold and Silver and other key commodities be traded on the spot market, ie. Immediately – hand to hand?
It is reported that al-Baraa bin ‘Aazib and Zaid bin Arqam used to be partners, and so they bought silver for money and a deferred payment, and when the Messenger of Allah (saw) heard about this he ordered them with the words “Whatever was paid by money is permitted, and whatever was for a deferred payment must be returned”
Islam set out 1400 years ago trading rules, including key financial instructions which protect the market and its participants. The natural question arises as to how can markets be hurt by non spot trading and immediate delivery of such commodities?
A good example was raised this week by the accusations against large bullion banks using the Comex futures exchange to depress the price of silver – an accusation that has also been raised about the gold market in recent years. The “futures” market allows trades in key commodities to be effected for future delivery ie buy or sell now for delivery in 3, 6 or 9 months time. As the trader does not need to have the commodity “to hand” they can simply keep rolling over their trades, and defer settlement indefinitely. In this way concerted and heavy sell orders (without the need to deliver immediately) will naturally force the price down. This is the tactic of short sellers, who sell securities they don’t own (by borrowing or forward dating delivery) with the objective of forcing the price down and then later buying the security at a lower price (and profiting from the difference). Perhaps the worst example of market manipulation via short selling was seen in the Asian financial crisis of 1997 when hedge funds sold short Malaysian, Indonesian and other markets in volumes many multiples the size of the actual market. The result being entirely predictable – a massive dive in the value of those markets to the profit of the hedge funds and cost of the local populations.
Another tactic of market manipulators is to place spoof trading orders which can be readily withdrawn before execution of the order, yet the fact and volume of placement will have an immediate impact on the market as it appears that there is a high volume of (usually) sell orders. Again this will depress the overall market price. Some sharp operators have even developed sophisticated electronic trading systems which will instantaneously and advantageously place and withdraw such trades. All possible when the dealer does not need to stump up the actual commodity when placing trade orders.
There is a political aspect to this trade. When these commodities (gold/silver) are in a sustained bull (up) market it seems strange that large banks are persistently working on the down side of the market. The reality is that it is expedient for the US government to have the price of gold and silver suppressed as it helps to show the instable fiat (paper) based currencies in a far more favourable light than they deserve. And seeks to delay the inevitable devaluation they mask.
It is interesting to note that the Shariah rules requiring “hand to hand” on the spot settlement for such important commodities removes completely this type of manipulation and provides a fair and functioning market which is transparent and open. Traders can take confidence in the prices which are agreed between participants as the commodities must be available and settle immediately, leaving no room for attempts to push down prices artificially. It is also interesting to note that despite the protestations raised in the article linked below, nothing will be done to outlaw futures trading and short selling as currently widely practiced.
http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=114217&sn=Detail&pid=102055
After an investigation that has taken the best part of two years, on Tuesday, Oct 26, Bart Chilton, a commissioner at the U.S. CFTC said there had been repeated attempts to influence prices in silver markets. The Commodity Futures Trading Commission began probing allegations of price manipulation in the silver futures market in September 2008. At a hearing in Washington on Oct. 27, CFTC Commissioner Bart Chilton said there have been "fraudulent efforts to persuade and deviously control" silver prices and that violators should be prosecuted.
According to an article published on Bloomberg on Oct. 28, both JP Morgan and HSBC Holdings have been accused in an investor's lawsuit of placing "spoof" trading orders to manipulate silver futures and options prices in violation of U.S. antitrust law. The investor alleges that starting in March 2008, the banks colluded to suppress silver futures so that call would decline, and put options would increase, according to the complaint filed in a federal court in Manhattan. The collusion was also intended to maintain prices at levels at which some options would expire as worthless. The banks placed so-called spoof trading orders, or the "submission of a large order which is not executed but influences prices and is then withdrawn before it reasonably can be executed," according to the complaint.
It is reported that al-Baraa bin ‘Aazib and Zaid bin Arqam used to be partners, and so they bought silver for money and a deferred payment, and when the Messenger of Allah (saw) heard about this he ordered them with the words “Whatever was paid by money is permitted, and whatever was for a deferred payment must be returned”
Islam set out 1400 years ago trading rules, including key financial instructions which protect the market and its participants. The natural question arises as to how can markets be hurt by non spot trading and immediate delivery of such commodities?
A good example was raised this week by the accusations against large bullion banks using the Comex futures exchange to depress the price of silver – an accusation that has also been raised about the gold market in recent years. The “futures” market allows trades in key commodities to be effected for future delivery ie buy or sell now for delivery in 3, 6 or 9 months time. As the trader does not need to have the commodity “to hand” they can simply keep rolling over their trades, and defer settlement indefinitely. In this way concerted and heavy sell orders (without the need to deliver immediately) will naturally force the price down. This is the tactic of short sellers, who sell securities they don’t own (by borrowing or forward dating delivery) with the objective of forcing the price down and then later buying the security at a lower price (and profiting from the difference). Perhaps the worst example of market manipulation via short selling was seen in the Asian financial crisis of 1997 when hedge funds sold short Malaysian, Indonesian and other markets in volumes many multiples the size of the actual market. The result being entirely predictable – a massive dive in the value of those markets to the profit of the hedge funds and cost of the local populations.
Another tactic of market manipulators is to place spoof trading orders which can be readily withdrawn before execution of the order, yet the fact and volume of placement will have an immediate impact on the market as it appears that there is a high volume of (usually) sell orders. Again this will depress the overall market price. Some sharp operators have even developed sophisticated electronic trading systems which will instantaneously and advantageously place and withdraw such trades. All possible when the dealer does not need to stump up the actual commodity when placing trade orders.
There is a political aspect to this trade. When these commodities (gold/silver) are in a sustained bull (up) market it seems strange that large banks are persistently working on the down side of the market. The reality is that it is expedient for the US government to have the price of gold and silver suppressed as it helps to show the instable fiat (paper) based currencies in a far more favourable light than they deserve. And seeks to delay the inevitable devaluation they mask.
It is interesting to note that the Shariah rules requiring “hand to hand” on the spot settlement for such important commodities removes completely this type of manipulation and provides a fair and functioning market which is transparent and open. Traders can take confidence in the prices which are agreed between participants as the commodities must be available and settle immediately, leaving no room for attempts to push down prices artificially. It is also interesting to note that despite the protestations raised in the article linked below, nothing will be done to outlaw futures trading and short selling as currently widely practiced.
http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=114217&sn=Detail&pid=102055
After an investigation that has taken the best part of two years, on Tuesday, Oct 26, Bart Chilton, a commissioner at the U.S. CFTC said there had been repeated attempts to influence prices in silver markets. The Commodity Futures Trading Commission began probing allegations of price manipulation in the silver futures market in September 2008. At a hearing in Washington on Oct. 27, CFTC Commissioner Bart Chilton said there have been "fraudulent efforts to persuade and deviously control" silver prices and that violators should be prosecuted.
According to an article published on Bloomberg on Oct. 28, both JP Morgan and HSBC Holdings have been accused in an investor's lawsuit of placing "spoof" trading orders to manipulate silver futures and options prices in violation of U.S. antitrust law. The investor alleges that starting in March 2008, the banks colluded to suppress silver futures so that call would decline, and put options would increase, according to the complaint filed in a federal court in Manhattan. The collusion was also intended to maintain prices at levels at which some options would expire as worthless. The banks placed so-called spoof trading orders, or the "submission of a large order which is not executed but influences prices and is then withdrawn before it reasonably can be executed," according to the complaint.
Monday, 8 November 2010
QE – Is the end nigh?
As expected the US Federal Reserve this week signaled that they will shortly embark on the next phase of Quantitative Easing (QE). With $600 billion announced in addition to the $1.7 trillion of last year and $300 billion in train, markets are worried over where this will end and what the full ramifications will be not only in the US but also globally.
Essentially the purchase of additional government securities is the equivalent of “printing money” or effectively devaluing every dollar currently in circulation and committed to. The mechanism is relatively straight-forward for developed economies like the US. With a sluggish economy, which is struggling to get moving again, and no room to reduce interest rates below their near zero level, the Federal Reserve sees little option other than to increase the money supply through QE. The Fed will credit its own account with new money (from nothing), use this “new money” to buy financial assets, usually government bonds (Treasury Bills) in a process vaguely called “open market operations”. So the Federal Reserve makes more dollars and effectively deposits them with large financial institutions (Banks) and hopes thereby that the Banks will help kick start the economy via increased lending – in multiples of what was given to them (fractional reserve banking). If this all sounds confusing it can be summed up as the Central bank prints more money out of nothing (it is only paper after all), lends it to Banks at tiny interest rates, and hopes that the Banks will use the deposits to create more money via loan (credit) creation thereby creating yet more money.
There are several dangers with this approach:
1. Where does it end. The QE creation of $1.7 trillion last year was supposed to provide the solution. It didn’t. Now inflation is beginning to appear in food and other commodity prices (real assets appreciate against ever increasing fiat papers). Some commentators believe that QE will not end here, the economy shows signs of dropping back into recession and the US deficit grows ever greater. There is a perfect storm brewing of no recovery, unemployment growing, federal and state deficits growing, and little real wealth growth to bail it out. In this scenario the QE will merely devalue dramatically the value of the dollar, which is inflationary, and potentially hyperinflationary. One might reasonably ask when the policy gurus have gotten it right over their economic decisions, and can they control the inflation genie when it is out of its bottle?
2. The worlds largest debtor (the US) is running short of countries that will lend to it. China has for many years, but is now getting cold feet over the more than $2 trillion dollars of US Treasury Bills it holds. In inflationary/QE times these T Bill assets will devalue rapidly. The US may feel this is a clever way of paying back its debts with hopelessly devalued dollars. But in an ever smaller world, this will create severe problems in future re global trust and cooperation whether in trade or elsewhere. If the world cannot trust the custodians of the defacto world currency (US$) to manage it responsibly where else will trust be lost.
3. The US dollar is declining relative to other country currencies, which on the face of it should be positive for US exports (now costing less in foreign countries). However, the rest of the developed world is facing a similar problem and many too are also doing their own form of QE, and therefore devaluing their currencies in a desperated effort to kick start their economies. In a race to the bottom of the currency devaluation war, real asset inflation is the only winner. Jobs, the economy, trade and business confidence will all take a severe beating. The stakes are very high and if this doesn’t work confidence in the whole system will be hit hard.
4. Banks have not and are not lending in anything like the required levels. Furthermore there is not the appetite for relatively free credit as there was in the pre-recession boom period. The economies are not back on track and Banks are using the money given to them by QE to strengthen their weakened balance sheets. This is also counterproductive in a fiat money system which relies on steadily growing credit to keep business afloat, confidence high and recessions few and far between. The consumer is worried about keeping his job, his home, and is now saving what little he has after basic expenses. Hardly a recipe for rapid consumer led spending growth.
In essence the lessons learnt from the financial crisis have not been heeded. Governments, not being content to witness the largest uncontrolled growth in credit in history, and the creation of the largest house and asset bubble, are now hoping they can spend their way out of the problem. Yet the money is not there and needs to be conjured. It is hard to see anything other than a continuation of recession, and inflation if not hyperinflation.
Until the Islamic Khilafah is again established we are unlikely to see the stability of the gold/silver standard which precludes government action to debase the currency. With no interest, a clear and unchanging rule of law and a far more positive and open trading environment I think the Islamic state’s trading partners will also look forward to the real change Islam provides.
Essentially the purchase of additional government securities is the equivalent of “printing money” or effectively devaluing every dollar currently in circulation and committed to. The mechanism is relatively straight-forward for developed economies like the US. With a sluggish economy, which is struggling to get moving again, and no room to reduce interest rates below their near zero level, the Federal Reserve sees little option other than to increase the money supply through QE. The Fed will credit its own account with new money (from nothing), use this “new money” to buy financial assets, usually government bonds (Treasury Bills) in a process vaguely called “open market operations”. So the Federal Reserve makes more dollars and effectively deposits them with large financial institutions (Banks) and hopes thereby that the Banks will help kick start the economy via increased lending – in multiples of what was given to them (fractional reserve banking). If this all sounds confusing it can be summed up as the Central bank prints more money out of nothing (it is only paper after all), lends it to Banks at tiny interest rates, and hopes that the Banks will use the deposits to create more money via loan (credit) creation thereby creating yet more money.
There are several dangers with this approach:
1. Where does it end. The QE creation of $1.7 trillion last year was supposed to provide the solution. It didn’t. Now inflation is beginning to appear in food and other commodity prices (real assets appreciate against ever increasing fiat papers). Some commentators believe that QE will not end here, the economy shows signs of dropping back into recession and the US deficit grows ever greater. There is a perfect storm brewing of no recovery, unemployment growing, federal and state deficits growing, and little real wealth growth to bail it out. In this scenario the QE will merely devalue dramatically the value of the dollar, which is inflationary, and potentially hyperinflationary. One might reasonably ask when the policy gurus have gotten it right over their economic decisions, and can they control the inflation genie when it is out of its bottle?
2. The worlds largest debtor (the US) is running short of countries that will lend to it. China has for many years, but is now getting cold feet over the more than $2 trillion dollars of US Treasury Bills it holds. In inflationary/QE times these T Bill assets will devalue rapidly. The US may feel this is a clever way of paying back its debts with hopelessly devalued dollars. But in an ever smaller world, this will create severe problems in future re global trust and cooperation whether in trade or elsewhere. If the world cannot trust the custodians of the defacto world currency (US$) to manage it responsibly where else will trust be lost.
3. The US dollar is declining relative to other country currencies, which on the face of it should be positive for US exports (now costing less in foreign countries). However, the rest of the developed world is facing a similar problem and many too are also doing their own form of QE, and therefore devaluing their currencies in a desperated effort to kick start their economies. In a race to the bottom of the currency devaluation war, real asset inflation is the only winner. Jobs, the economy, trade and business confidence will all take a severe beating. The stakes are very high and if this doesn’t work confidence in the whole system will be hit hard.
4. Banks have not and are not lending in anything like the required levels. Furthermore there is not the appetite for relatively free credit as there was in the pre-recession boom period. The economies are not back on track and Banks are using the money given to them by QE to strengthen their weakened balance sheets. This is also counterproductive in a fiat money system which relies on steadily growing credit to keep business afloat, confidence high and recessions few and far between. The consumer is worried about keeping his job, his home, and is now saving what little he has after basic expenses. Hardly a recipe for rapid consumer led spending growth.
In essence the lessons learnt from the financial crisis have not been heeded. Governments, not being content to witness the largest uncontrolled growth in credit in history, and the creation of the largest house and asset bubble, are now hoping they can spend their way out of the problem. Yet the money is not there and needs to be conjured. It is hard to see anything other than a continuation of recession, and inflation if not hyperinflation.
Until the Islamic Khilafah is again established we are unlikely to see the stability of the gold/silver standard which precludes government action to debase the currency. With no interest, a clear and unchanging rule of law and a far more positive and open trading environment I think the Islamic state’s trading partners will also look forward to the real change Islam provides.
Friday, 3 July 2009
The new Robber Baron Empire
Stephen Hester the UK Government appointed head of the nationalised bank RBS is in line for a potential 9.6 million pound payout should the bank recover in the stock markets. RBS whose share price is currently languishing at 36 pence (30% less than at the time the government bought 70% of its shares) was on the verge of complete failure last October before the government agreed to step in to underwrite its losses. Since then the bank has declared UK record losses of 24 billion pounds for the 2008 year. Losses which the UK taxpayer will cover.
Reeling from the controversy over former RBS Chief executive Sir Fred Goodwin who walked away with a 16 million pound pension as he was NOT sacked from his position. Controversy is now surrounding the new executive who has already sacked 11,700 jobs from the bank in an effort to balance the books. Despite the meltdown in the share price - it was only 2 years ago that it traded at 605 (17 times its current price) in this light a doubling of its share price is not so ambitious particularly with the government dropping interest rates to record low levels to gild a banking sector recovery.
It is bad enough that the Government in the UK has unilaterally decided to bail out the failing banks - the RBS became grossly over-extended gambling on Credit Default swaps and other highly leveraged security plays (at its absolute depth it had CDS’s equalling more than twice the size of the full UK economy!). We are now witnessing
a new form of robber baron. The government are in full collusion with the banking community to protect their monopoly over finance, issuance of money for lending, right to confiscate lendee assets and now protection of these failed “gambler” banks.
History will mark this period with a huge exclamation mark. People will wonder how society accepted that such a parasite (banking) industry could dominate governments, and elected politicians to get away with such largesse. And why we “the public” should fund 10 million pound salaries for “public servants” to administer more gambling schemes built around usury to feather their pockets.
It is surely just one more sign of the demise of capitalism in the same way that the gross excesses of the Roman empire’s rulers heralded the failure of that corrupt way of life.
http://www.bloomberg.com/apps/news?pid=20601085&sid=aOmJ2o3pgjnU
Reeling from the controversy over former RBS Chief executive Sir Fred Goodwin who walked away with a 16 million pound pension as he was NOT sacked from his position. Controversy is now surrounding the new executive who has already sacked 11,700 jobs from the bank in an effort to balance the books. Despite the meltdown in the share price - it was only 2 years ago that it traded at 605 (17 times its current price) in this light a doubling of its share price is not so ambitious particularly with the government dropping interest rates to record low levels to gild a banking sector recovery.
It is bad enough that the Government in the UK has unilaterally decided to bail out the failing banks - the RBS became grossly over-extended gambling on Credit Default swaps and other highly leveraged security plays (at its absolute depth it had CDS’s equalling more than twice the size of the full UK economy!). We are now witnessing
a new form of robber baron. The government are in full collusion with the banking community to protect their monopoly over finance, issuance of money for lending, right to confiscate lendee assets and now protection of these failed “gambler” banks.
History will mark this period with a huge exclamation mark. People will wonder how society accepted that such a parasite (banking) industry could dominate governments, and elected politicians to get away with such largesse. And why we “the public” should fund 10 million pound salaries for “public servants” to administer more gambling schemes built around usury to feather their pockets.
It is surely just one more sign of the demise of capitalism in the same way that the gross excesses of the Roman empire’s rulers heralded the failure of that corrupt way of life.
http://www.bloomberg.com/apps/news?pid=20601085&sid=aOmJ2o3pgjnU
Saturday, 23 May 2009
Inflation to rear its ugly head
A good summary of the relationship between the US government deficit, their creation of money, the inevitable growth in inflation, and the impact on gold from Gary Dorsch of Global Money Trends.
EACH MONTH, the US Treasury publishes its International Capital account (the TIC report) which foreign currency traders and bond dealers use to gauge the flows of money from around the world into and out of the US capital markets, writes Gary Dorsch of Global Money Trends.
The demand for a nation's bonds and stocks, combined with international trade flows for goods and services – plus behind the scenes intervention by central banks – all act in concert to influence the foreign exchange market which handles $4 trillion per day.
The release of the TIC report often sparks a flurry of trading activity in the foreign exchange market, due to speculators seeking to earn a fast profit. However, the initial knee-jerk reaction to the news headlines can be very misleading, and often isn't long-lasting.
For instance, the US Dollar Index, measured against a basket of six-currencies, defied conventional logic in February by climbing 2.7% higher, even in the face of a net outflow of $91 billion on the TIC account.
Why? Because large off-shore traders are also influencing exchange rates, and their betting patterns are difficult to detect. The finance ministers of the "Group-of-20" (G20) leading industrialized nations recognize the growing threat to their control over the currency markets that this poses, and are calling for increased regulation of hedge-funds and shadow-bankers, insisting on full disclosure of their locations and other information to assess the risks they pose to the policies and manipulations of the major central banks.
The United States has become dangerously dependent upon the whims of foreign investors, needed to help finance its $2 trillion budget deficit this year and prevent a surge in long-term interest rates which would otherwise deal a devastating blow to the US economy.
If bond or currency traders detect that big investors in US government bonds – such as China, Japan, OPEC, Russia, and Brazil – have ceased to buy US Treasury debt, or worse yet, are becoming net sellers, it could spark a sharp slide in US Treasury notes, sending yields sharply higher and igniting free-fall in the US Dollar.
Last week, the US Treasury tried to reassure bond and currency traders that foreign investors haven't abandoned the American debt markets, despite the avalanche of new debt that is swamping the market. The US Treasury claims that China and Japan were net buyers of a combined $48.5 billion of Treasuries in March, and that Moscow was a net buyer of $8.3 billion. Yet the reliability and accuracy of the TIC report should be viewed with a grain of salt and a healthy dose of suspicion.
Perhaps the figures were conjured-up under the guise of "mark-to-make-believe" accounting...?
Either way, President Barack Obama's stimulus program could boomerang and have a destabilizing effect on the US economy if interest rates shoot higher. No one is asking who will purchase $1 trillion of US Treasuries to be issued and sold between now and September. Once that colossal amount of paper is digested, who will then purchase another $5 trillion of Treasury paper over the next four years, as the US government plunges deeper towards insolvency?
The Federal Reserve would be forced to print (monetize) vast quantities of US dollars to pay the principal and interest on the national debt that is not covered by tax revenue.
The US Dollar's surprising strength since last July was largely attributed to "de-leveraging" and "risk-aversion" – both references to the unwinding of "carry trades" in the foreign exchange market.
There, large investors would borrow in cheap currencies (such as the Yen and Dollar) to invest in better-paying currencies (such as the New Zealand Dollar). Thus, as famed hedge-fund trader George Soros remarked on April 6th, "The US Dollar is not strong because people want to hold the Dollar, but it's strong because people have debt in Dollars."
The enormous fortunes of Wall Street's aristocracy were built-up on the leveraging of debt, including "carry-trades" in order to buy exotic securities built around sub-prime mortgages, and other instruments of financial speculation. But when the global commodity and stock markets began to meltdown following the collapse of Lehman Brothers, carry-traders began massive de-leveraging – the selling of risky assets and buying back US Dollars and Japanese Yen – to pay-down margin loans.
There was also a stunning contraction in the US trade deficit as the economy slowed and went into reverse, narrowing from $62.5 billion in August to $26 billion this February, its lowest level in nine years, bolstering the greenback. The US current account deficit, which had increased for five straight years, fell to $673 billion in 2008 from $731 billion in 2007. The deficit equaled 4.7% of the overall US economy last year, down from 5.3% in 2007.
But the US Dollar's "risk-aversion" rally came to an abrupt end on March 18th, when the Federal Reserve shocked the markets by announcing that it would unleash its nuclear weapon – "Quantitative Easing" – by printing $1.1 trillion US Dollars off its electronic printing press to monetize US Treasury notes and mortgage-backed securities.
This quantitative easing is an all-out effort to prevent a deflationary spiral in the US economy, which in turn could lead to widespread defaults on debt and bankruptcies. By pumping vast quantities of US Dollars into the global money markets – easily outstripping the money printing operations in England, the Eurozone, Japan and Switzerland – the Fed has headed off the prospect of deflation. But instead, the Fed has reawakened the "Commodity Super Cycle"...led by the kingpin crude-oil market.
Feeding-off a weaker Dollar, and ultra-low interest rates worldwide, oil just climbed back above $60 per barrel and more, up from as low as $35 in January.
The Fed has now pumped $1 trillion into the banking system since July '08, increasing the monetary base of the United States to a record $1.87 trillion while pegging the fed funds rate near zero-percent.
Super-easy money, beloved of Fed chief Ben "Bubbles" Bernanke, US Treasury chief Tim "Turbo-tax" Geithner, corrupt Washington politicians and Wall Street oligarchs alike, is a traditional recipe for making asset bubbles. And while the rapid expansion of the US-monetary base is buoying the Gold Price above $900 an ounce, other G-20 central banks are also letting the inflation-genie out of its bottle, providing the yellow metal with a huge advantage over government toilet paper.
"Our actions have succeeded in pulling the financial markets and the economy from the edge of the abyss, beating back deflationary pressures, and set the stage for a recovery," declared Dallas Fed chief Richard Fisher on April 15th. Fisher argues the US economy's low capacity utilization rate, near 69%, will keep inflationary pressures under wraps.
"It is doubtful that inflation will raise its ugly head until employment picks-up and capacity utilization tightens," he believes.
But higher inflation down the road means the Fed must, at some point, break its addiction to easy money and dismantle the Quantitative Easing framework it's put in place, flooding the money markets with hundreds of billions of Dollars.
"Nobody I know on the [Fed policy committee] wants to maintain our current posture for any longer and to any greater degree than is minimally necessary to restore the efficacy of the credit markets and buttress economic recovery without inflationary consequences," Fisher said. Because the FOMC "can ill afford to be perceived as monetizing that debt, lest we come to be viewed as an agent of inflation, rather than an independent guardian against future inflation," the Fed's propaganda artist went on.
Typically however, Fed officials continue to keep the printing presses rolling at full-speed long after inflation has already reared its ugly head and an inflationary psychology has become deeply embedded within the minds of commodity traders and the public at large.
Tuesday, 12 May 2009
The Right Honourable Members?
The latest scandal to hit British politics is the expose of the way elected MP’s have been feathering their pockets with taxpayers money via outrageous expense claims. The practice has been widespread across all parties and has only come to light after an MP has gone public with the practices and newspapers have gained access to the details of the claims historically made. Some of the worst excesses have been the practice of “flipping” or declaring a second home to be the main residence to enable specific 2nd property expense claims (which were supposed to be for MP’s which live far from London), claims for a second residence which in fact was a room in her sisters home (Home Secretary Jacqui Smith), a plethora of claims for dog food, cleaning the moat of the family castle, 100 pounds a pop for changing light bulbs and even repairs to the family tennis court. All while the man in the street is under threat of losing their job, suffers from below inflation wage increases, or salaries (such as Nurses) significantly lower than some of the MP expense claims. It is little wonder that confidence in Politicians is at an all time low ebb.
The mantra we have heard from many of those caught with their fingers in the public purse, is that they have done nothing wrong and that the “rules” – if one could call them that – allow such excess. The other argument put forward is that the politicians need to have generous expense allowances to make up for the low level of salary they draw. A salary which in some ways has not kept pace with inflation or recommended increases. It must be noted that in this respect the leaders of the respective ruling parties (Labour and Conservative) have both been happy to announce to the public that they would forgo rises to MP salaries to keep control over public spending. Claims which now ring very hollow when it is clear that the lavish expense allowances have more than made up for seeming probity over salary levels.
The current annual salary for an MP is £64,766. In addition, MPs receive allowances to cover the costs of running an office and employing staff, having somewhere to live in London and in their constituency, and travelling between Parliament and their constituency. It is surprising that many London based MP’s have also deemed it necessary to have a second home in London! The 64,766 salary (before expenses) at more than 2.5 times the national median wage (24,900), is hardly trivial and is surely sufficient for anyone that has the true public service sentiment at heart. Sir Alistair Graham former Chairman of the committee on standards in public life, writing in the Daily Mail wrote:
“For too long, too many MPs have been abusing the taxpayer by unethically claiming parliamentary allowances to enhance what they see as an inadequate salary.”
http://www.dailymail.co.uk/debate/article-1165561/SIR-ALISTAIR-GRAHAM-The-festering-scandal-MPs-expenses-sorted-all.html
However, the argument that MP salaries should be much higher in order to attract candidates of the highest caliber breaks down when one considers the very high numbers who run for office from all walks of life and experience.
The problem essentially stems from a core issue within secular capitalism. If you give the lawmakers – in this case parliament – the right to legislate including their own salaries/expenses they will abuse it. The pursuit of personal gain within capitalism is pervasive, and not limited to UK politicians. From company directors, to heads of public bodies, to those in positions of ruling, where those responsibilities extend to setting their own remuneration, the results have been consistently in their own favour. Western Politics is also seen as a gravy train to related directorships (those most involved in the Privatisation programmes in the Thatcher days, Lord Tebbit, Lord Walker, et al, all achieved lucrative directorships when retiring from the House of Commons). The lure of the speaker circuit and book contracts is also there for those reaching the highest levels. It is a poor politician indeed that cannot establish a key network of contacts that will ensure lucrative employment or further business opportunities post sitting in Parliament.
The whole notion of public service requires a different outlook. I am reminded of the incident during the rule of Omar bin al Khattab, the second Khaleefah when he was publicly challenged over the size of his cloak (the state was effectively rationing cloth in a very difficult time) and Omar was accused of having more than the one assigned piece! Rather than hide the fact that he was indeed wearing a garment made of more than one piece (he was after all a large man) it was left to his son, Ibn Omar to explain that he had given his own piece to his father.
Islamic history is littered with examples of selfless public service. Abdur-Rahman an Nasser was the Amir that opened Andalus (Spain) to Islam. As the Wali (governor) he appointed officers to look after the erection of new buildings (town planners) in accord to the Prophet’s (saw) command:
“The neighbor has the right over his neighbor in two things, firstly, to be free from bad cooking smells, and secondly for him not to build higher than his house.”
He also assigned officers to look after the milk, to ensure that the milk was not watered down. He appointed environmental health officers to inspect meat and other foodstuffs on sale, ensuring that the produce was well protected from flys and insects. He built hostels for the travellers and so scrupulous was he in his accounting of the public assets he would put out the candle he was using from the government store and alight a personal candle when attending to personal business. So busy was he with the affairs of state, that on his death when the people read his personal diaries they found that throughout his entire rule of 55 years, 7 months, and 3 days in office, he had only 14 days free from affairs of state. And on his death he had nothing to leave, he died poor.
In looking at such cases it is important not to assume that this is merely the results of strong principled individuals. The Islamic society is built upon key values which are built upon accountability to Allah (swt) rather than whether the individual will be caught by journalists or a court of public opinion. The values include the notion that authority in Islam is a trust and must be taken with full responsibility and concern for fulfilling that responsibility. The Muslim will seek reward in the hereafter.
There is little surprise that the public in the UK is turning off politics when their elected representatives have been so badly exposed. The democratic idea of assuming the people (or the elites dominating public opinion) will objectively and independently decide right from wrong to the benefit of all is fundamentally flawed. The Muslim world too has suffered from this corruption since the decline of the Caliphate and Islamic rule was replaced with man made rules and laws. But it is this very failure of democracy which is leading to a revival in the call for Shariah throughout the Muslim world – where the West has long lost any form of leadership whether moral, economic or political.
The mantra we have heard from many of those caught with their fingers in the public purse, is that they have done nothing wrong and that the “rules” – if one could call them that – allow such excess. The other argument put forward is that the politicians need to have generous expense allowances to make up for the low level of salary they draw. A salary which in some ways has not kept pace with inflation or recommended increases. It must be noted that in this respect the leaders of the respective ruling parties (Labour and Conservative) have both been happy to announce to the public that they would forgo rises to MP salaries to keep control over public spending. Claims which now ring very hollow when it is clear that the lavish expense allowances have more than made up for seeming probity over salary levels.
The current annual salary for an MP is £64,766. In addition, MPs receive allowances to cover the costs of running an office and employing staff, having somewhere to live in London and in their constituency, and travelling between Parliament and their constituency. It is surprising that many London based MP’s have also deemed it necessary to have a second home in London! The 64,766 salary (before expenses) at more than 2.5 times the national median wage (24,900), is hardly trivial and is surely sufficient for anyone that has the true public service sentiment at heart. Sir Alistair Graham former Chairman of the committee on standards in public life, writing in the Daily Mail wrote:
“For too long, too many MPs have been abusing the taxpayer by unethically claiming parliamentary allowances to enhance what they see as an inadequate salary.”
http://www.dailymail.co.uk/debate/article-1165561/SIR-ALISTAIR-GRAHAM-The-festering-scandal-MPs-expenses-sorted-all.html
However, the argument that MP salaries should be much higher in order to attract candidates of the highest caliber breaks down when one considers the very high numbers who run for office from all walks of life and experience.
The problem essentially stems from a core issue within secular capitalism. If you give the lawmakers – in this case parliament – the right to legislate including their own salaries/expenses they will abuse it. The pursuit of personal gain within capitalism is pervasive, and not limited to UK politicians. From company directors, to heads of public bodies, to those in positions of ruling, where those responsibilities extend to setting their own remuneration, the results have been consistently in their own favour. Western Politics is also seen as a gravy train to related directorships (those most involved in the Privatisation programmes in the Thatcher days, Lord Tebbit, Lord Walker, et al, all achieved lucrative directorships when retiring from the House of Commons). The lure of the speaker circuit and book contracts is also there for those reaching the highest levels. It is a poor politician indeed that cannot establish a key network of contacts that will ensure lucrative employment or further business opportunities post sitting in Parliament.
The whole notion of public service requires a different outlook. I am reminded of the incident during the rule of Omar bin al Khattab, the second Khaleefah when he was publicly challenged over the size of his cloak (the state was effectively rationing cloth in a very difficult time) and Omar was accused of having more than the one assigned piece! Rather than hide the fact that he was indeed wearing a garment made of more than one piece (he was after all a large man) it was left to his son, Ibn Omar to explain that he had given his own piece to his father.
Islamic history is littered with examples of selfless public service. Abdur-Rahman an Nasser was the Amir that opened Andalus (Spain) to Islam. As the Wali (governor) he appointed officers to look after the erection of new buildings (town planners) in accord to the Prophet’s (saw) command:
“The neighbor has the right over his neighbor in two things, firstly, to be free from bad cooking smells, and secondly for him not to build higher than his house.”
He also assigned officers to look after the milk, to ensure that the milk was not watered down. He appointed environmental health officers to inspect meat and other foodstuffs on sale, ensuring that the produce was well protected from flys and insects. He built hostels for the travellers and so scrupulous was he in his accounting of the public assets he would put out the candle he was using from the government store and alight a personal candle when attending to personal business. So busy was he with the affairs of state, that on his death when the people read his personal diaries they found that throughout his entire rule of 55 years, 7 months, and 3 days in office, he had only 14 days free from affairs of state. And on his death he had nothing to leave, he died poor.
In looking at such cases it is important not to assume that this is merely the results of strong principled individuals. The Islamic society is built upon key values which are built upon accountability to Allah (swt) rather than whether the individual will be caught by journalists or a court of public opinion. The values include the notion that authority in Islam is a trust and must be taken with full responsibility and concern for fulfilling that responsibility. The Muslim will seek reward in the hereafter.
There is little surprise that the public in the UK is turning off politics when their elected representatives have been so badly exposed. The democratic idea of assuming the people (or the elites dominating public opinion) will objectively and independently decide right from wrong to the benefit of all is fundamentally flawed. The Muslim world too has suffered from this corruption since the decline of the Caliphate and Islamic rule was replaced with man made rules and laws. But it is this very failure of democracy which is leading to a revival in the call for Shariah throughout the Muslim world – where the West has long lost any form of leadership whether moral, economic or political.
Thursday, 7 May 2009
Islam and Economy
I was requested to summarise Islamic Economy in a page... Not that easy... Anyway here it is... perhaps 2 pages!
Islam and Economy
One of the most important functions of government is to ensure the economic needs of the people are met. Rather than vague notions of a “growing” economy, trickle down effects and maximising gross national product, Islam deems it essential that each and every person in society has certain basic needs met. The inalienable rights which Islam sets out are for food, shelter, clothing, education and basic healthcare. The provision of these needs is of paramount importance.
The main economic problem we experience is not one of a lack of resources as Allah stresses in the Quran:
“Let man consider his food. How we pour water in showers. Then split the earth in fragments. And cause the grains to grow therein. And grapes and fresh vegetation. And olives and dates, and enclosed gardens, dense with lofty trees. And fruits and grazes. Provision for you and your cattle.” [Abasa 24:32]
“So walk in the paths of the earth and eat of His sustenance which He provides.” [Al-Mulk:15]
Contrary to what some want to publicise there is no lack of resource throughout the world to meet the basic food, water and shelter needs of the worlds population. The problem is one of gross unfairness of distribution of the worlds wealth. The US with only 5% of the world population manages to consume 25% of its resource, yet still under capitalism cannot meet the basic food, shelter, and healthcare needs of all its population – a damning indictment of capitalism.
Islam in stark contrast to capitalism defines the key economic problem as being distribution of the wealth rather than production (capitalist theory posits that production must increase to meet an ever increasing number of needs – but doesn’t distinguish between the critical basic needs versus luxurious needs).
Distribution of Wealth
Rather than the communist dream of enforcing some form of equality amongst citizens Islam sets out clear guidance on ownership, taxation and trade to encourage all to be successful in seeking wealth, but fair in the relationships between citizens and between citizens and the state.
This is achieved by setting out clear laws which are scrupulously applied to citizens, both Muslim and non-Muslim and to anyone in a position of ruling.
Ownership
All assets are categorised as either public, private or state. The public properties which include water, electricity, oil/gas, solid/liquid/gaseous minerals and public spaces cannot be sold or privatized, thereby recognising their critical importance to all. As public assets include mineral and oil wealth, which in the words of the Prophet (saw): “the people are partners in” means that they form an important part of the revenue of the state to be utilised for all. The brutal privatisation programmes we suffer from, deprive the people from benefiting from these public assets. One of the reasons for the failure of the capitalist economy is its vest ing ownership of public utilities and properties like petrol, gases, energy sources, heavy and even strategic arms industries to individuals, enterprises and companies - while the capitalist state is shut out of these markets. Effectively shut out of managing the very things that it was responsible for.
Similarly, state property which is strictly under the custodianship of the Caliph and his administration is defined. Political leaders cannot treat state assets as their own as is unfortunately rife throughout the Muslim world without Islam today. Tax revenues including Zakat raised must be distributed in accordance with Islamic law. Elected officials of the state, as is common practice throughout the ages of the Caliphate, were paid a small stipend to meet their basic needs. Public office is in no way a path to accumulating a fortune in Islam. Seeking a greater reward in the hearafter for their efforts is of much greater concern.
Abu Huraira reported that the Messenger of Allah (may peace be upon him) had said: “Seven are (the persons) whom Allah would give protection with His Shade on the Day of Judgment, and they are: a just ruler…”
With clear rules of ownership re state and public property, the individual is encouraged to be successful in trade, service or industry. And as the rules of ownership and transaction law have not changed in over 1,400 years the necessary regulatory stability is achieved. Unlike communism there is no limitations on the scale of ownership, so there is encouragement to be successful and unlike capitalism success is not unduly taxed. Ownership of non-public land, land which has not been used, manufacturing, industry, and salaried employment are good routes to ownership and wealth. Gaining ownership is far easier than many may imagine. The Prophet (saw) said: “Whoever cultivates a dead land it is his”. And if agrarian land is not used for 3 years it reverts to the state to be available for anyone that can use it.
Tax
Unlike capitalism Islamic law maintains a simplified system of taxes which is progressive and wealth oriented rather than income oriented. Zakat is an annual requirement (indeed is an act of worship - one of the 5 pillars of Islam) and is based on 2.5% of non-utilised wealth. Accordingly there is no disincentive to be wealthy and additionally provides a major incentive to utilise (invest fully) what wealth one does have, as opposed to leaving it in a bank account. Compare this to the ever higher growing rates of income and consumption tax (VAT, council, rates, etc) where through the sheer weight and multitude of taxes many choose not to exert to the highest levels when so punitively taxed.
Kharaj and Ushr taxes are upon the productive capacity of the land and are reduced where the land has been developed. Emergency tax for example following natural disasters can only be raised based on wealth, in the way that zakat is levied.
With capitalist governments increasingly using taxpayer money to bail out failed companies (financial crisis), the incentive for hard work is further eroded.
Trade
There can be no confidence in trade and industry without clear regulation and stability in the economy. Islamic society establishes this in several ways. Firstly there must be stability in the currency. This is achieved via the gold and silver currency standard. This means currency has real meaning – i.e. it is the means of exchange of products and services and as gold/silver have an intrinsic value it means traders can have confidence in what they are dealing with. Paper currency must be fully backed by gold/silver reserves held by the state treasury and cannot simply be printed to hide the excesses of government.
Islam prohibits interest. Banks, without the means to make business from “money” can only survive by providing real services to society, for example in structuring company re-organisations or in bringing investors together. With most future oriented and derivative type contracts also forbidden by Shariah most of the excesses and turbulence brought upon by these types of “gambling” contracts is also removed.
Thirdly, the markets in Islam have certain fixed rules of regulation – including clearly defined company structures, trading with real products and services, no price fixing and no customs taxes. Within this Shariah regulatory framework trading is open and transparent. A government heavily influenced by big business cannot figure in the Islamic state as the shariah rules are set including governance over the economy.
A crisis free economy
Some will ask, how can rules revealed 1400 years ago be relevant in delivering a prosperous economy today? In truth economics addresses the basic fundamental nature of man which is unchanged; and mans business relationship with others which again is unchanged (based on trust etc). Questions of what should be private and public properties are just as relevant today as they were 200 years ago. Islam addresses all these in a consistent and unchanging manner ensuring stability and certainty – crucial for economic progress.
From the first principle of providing for the basic needs of all in society, to clear guidance on ownership and contracts, Islamic economy is distinctive and refreshing. Capitalist economy has been subject to extraordinary excesses from selling off the base public assets of the people, to allowing banks to print their own money and charge interest thereon, to the melt down in markets brought on by the gambling finance industry. The divisions between wealthy and poor are at record levels and the “free market” economy has been thoroughly discredited.
The laws set down by our Creator in marked contrast provided stability, meet the needs of the people and provide an even playing field between all. Islamic economic system has addressed and treated all economic problems and crises resulting from man’s heartlessness and thoughtlessness. This is the system mandated by the Creator of the universe who knows what is beneficial for His creation.
“Is not He, Who has made the earth as a fixed abode, and has placed rivers in its midst, and has placed firm mountains therein, and has set a barrier between the two seas (of salt and sweet water)? Is there any ilah (god) with Allah? No, but most of them know not!” [An-Naml, 27:61]
Islam and Economy
One of the most important functions of government is to ensure the economic needs of the people are met. Rather than vague notions of a “growing” economy, trickle down effects and maximising gross national product, Islam deems it essential that each and every person in society has certain basic needs met. The inalienable rights which Islam sets out are for food, shelter, clothing, education and basic healthcare. The provision of these needs is of paramount importance.
The main economic problem we experience is not one of a lack of resources as Allah stresses in the Quran:
“Let man consider his food. How we pour water in showers. Then split the earth in fragments. And cause the grains to grow therein. And grapes and fresh vegetation. And olives and dates, and enclosed gardens, dense with lofty trees. And fruits and grazes. Provision for you and your cattle.” [Abasa 24:32]
“So walk in the paths of the earth and eat of His sustenance which He provides.” [Al-Mulk:15]
Contrary to what some want to publicise there is no lack of resource throughout the world to meet the basic food, water and shelter needs of the worlds population. The problem is one of gross unfairness of distribution of the worlds wealth. The US with only 5% of the world population manages to consume 25% of its resource, yet still under capitalism cannot meet the basic food, shelter, and healthcare needs of all its population – a damning indictment of capitalism.
Islam in stark contrast to capitalism defines the key economic problem as being distribution of the wealth rather than production (capitalist theory posits that production must increase to meet an ever increasing number of needs – but doesn’t distinguish between the critical basic needs versus luxurious needs).
Distribution of Wealth
Rather than the communist dream of enforcing some form of equality amongst citizens Islam sets out clear guidance on ownership, taxation and trade to encourage all to be successful in seeking wealth, but fair in the relationships between citizens and between citizens and the state.
This is achieved by setting out clear laws which are scrupulously applied to citizens, both Muslim and non-Muslim and to anyone in a position of ruling.
Ownership
All assets are categorised as either public, private or state. The public properties which include water, electricity, oil/gas, solid/liquid/gaseous minerals and public spaces cannot be sold or privatized, thereby recognising their critical importance to all. As public assets include mineral and oil wealth, which in the words of the Prophet (saw): “the people are partners in” means that they form an important part of the revenue of the state to be utilised for all. The brutal privatisation programmes we suffer from, deprive the people from benefiting from these public assets. One of the reasons for the failure of the capitalist economy is its vest ing ownership of public utilities and properties like petrol, gases, energy sources, heavy and even strategic arms industries to individuals, enterprises and companies - while the capitalist state is shut out of these markets. Effectively shut out of managing the very things that it was responsible for.
Similarly, state property which is strictly under the custodianship of the Caliph and his administration is defined. Political leaders cannot treat state assets as their own as is unfortunately rife throughout the Muslim world without Islam today. Tax revenues including Zakat raised must be distributed in accordance with Islamic law. Elected officials of the state, as is common practice throughout the ages of the Caliphate, were paid a small stipend to meet their basic needs. Public office is in no way a path to accumulating a fortune in Islam. Seeking a greater reward in the hearafter for their efforts is of much greater concern.
Abu Huraira reported that the Messenger of Allah (may peace be upon him) had said: “Seven are (the persons) whom Allah would give protection with His Shade on the Day of Judgment, and they are: a just ruler…”
With clear rules of ownership re state and public property, the individual is encouraged to be successful in trade, service or industry. And as the rules of ownership and transaction law have not changed in over 1,400 years the necessary regulatory stability is achieved. Unlike communism there is no limitations on the scale of ownership, so there is encouragement to be successful and unlike capitalism success is not unduly taxed. Ownership of non-public land, land which has not been used, manufacturing, industry, and salaried employment are good routes to ownership and wealth. Gaining ownership is far easier than many may imagine. The Prophet (saw) said: “Whoever cultivates a dead land it is his”. And if agrarian land is not used for 3 years it reverts to the state to be available for anyone that can use it.
Tax
Unlike capitalism Islamic law maintains a simplified system of taxes which is progressive and wealth oriented rather than income oriented. Zakat is an annual requirement (indeed is an act of worship - one of the 5 pillars of Islam) and is based on 2.5% of non-utilised wealth. Accordingly there is no disincentive to be wealthy and additionally provides a major incentive to utilise (invest fully) what wealth one does have, as opposed to leaving it in a bank account. Compare this to the ever higher growing rates of income and consumption tax (VAT, council, rates, etc) where through the sheer weight and multitude of taxes many choose not to exert to the highest levels when so punitively taxed.
Kharaj and Ushr taxes are upon the productive capacity of the land and are reduced where the land has been developed. Emergency tax for example following natural disasters can only be raised based on wealth, in the way that zakat is levied.
With capitalist governments increasingly using taxpayer money to bail out failed companies (financial crisis), the incentive for hard work is further eroded.
Trade
There can be no confidence in trade and industry without clear regulation and stability in the economy. Islamic society establishes this in several ways. Firstly there must be stability in the currency. This is achieved via the gold and silver currency standard. This means currency has real meaning – i.e. it is the means of exchange of products and services and as gold/silver have an intrinsic value it means traders can have confidence in what they are dealing with. Paper currency must be fully backed by gold/silver reserves held by the state treasury and cannot simply be printed to hide the excesses of government.
Islam prohibits interest. Banks, without the means to make business from “money” can only survive by providing real services to society, for example in structuring company re-organisations or in bringing investors together. With most future oriented and derivative type contracts also forbidden by Shariah most of the excesses and turbulence brought upon by these types of “gambling” contracts is also removed.
Thirdly, the markets in Islam have certain fixed rules of regulation – including clearly defined company structures, trading with real products and services, no price fixing and no customs taxes. Within this Shariah regulatory framework trading is open and transparent. A government heavily influenced by big business cannot figure in the Islamic state as the shariah rules are set including governance over the economy.
A crisis free economy
Some will ask, how can rules revealed 1400 years ago be relevant in delivering a prosperous economy today? In truth economics addresses the basic fundamental nature of man which is unchanged; and mans business relationship with others which again is unchanged (based on trust etc). Questions of what should be private and public properties are just as relevant today as they were 200 years ago. Islam addresses all these in a consistent and unchanging manner ensuring stability and certainty – crucial for economic progress.
From the first principle of providing for the basic needs of all in society, to clear guidance on ownership and contracts, Islamic economy is distinctive and refreshing. Capitalist economy has been subject to extraordinary excesses from selling off the base public assets of the people, to allowing banks to print their own money and charge interest thereon, to the melt down in markets brought on by the gambling finance industry. The divisions between wealthy and poor are at record levels and the “free market” economy has been thoroughly discredited.
The laws set down by our Creator in marked contrast provided stability, meet the needs of the people and provide an even playing field between all. Islamic economic system has addressed and treated all economic problems and crises resulting from man’s heartlessness and thoughtlessness. This is the system mandated by the Creator of the universe who knows what is beneficial for His creation.
“Is not He, Who has made the earth as a fixed abode, and has placed rivers in its midst, and has placed firm mountains therein, and has set a barrier between the two seas (of salt and sweet water)? Is there any ilah (god) with Allah? No, but most of them know not!” [An-Naml, 27:61]
Subscribe to:
Posts (Atom)
Posts
