Toby Birch

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End of Usury, not the End of Day

By Mohamed bin Khnifer December 2008 Aleqt Magasine

being ‘payable on demand’. Years later the notes would go out of circulation once passed their ‘sell-by’ date, thereby preventing an increase in the money supply. The initial borrowing was repaid by the tax and rent accumulated from the resulting infrastructure. Modern banks hate cash and notes because they cannot create credit from physical money.

To stabilise exchange rates, some have called for a return to the Gold Standard. Given the volume of money that has been created since its demise in the 1970s its re-introduction would require the gold price to be closer to $70,000 than $700. A wider basket of precious metals to include gold, silver and platinum might be a better match. A system is only as good as the leaders who implement it and wars usually destroy such discipline.

Legacies, not liabilities…
We owe it to the next generation to free them from both government and mortgage debt. Second homes and empty properties could be bought cheaply to provide housing for the young. Rather than being indebted to a bank all their life they could instead pay capital and rent into a pension fund for their retirement which frees the state from future liabilities. The funds could be recycled back into the economy for profitable and sustainable investment, utilising the private sector to fulfil these projects. Capital markets and banks would still provide expertise and interest-free liquidity to fund corporate ventures. Without inflation, stock markets would be stable such that investments would generate dividend income rather than capital growth, compounding genuine returns with less volatility in the long haul.

The world must learn the benefits of Islamic Finance now that the failings of conventional banking are so evident. The concept of transparent pricing and fair dealing should be very appealing in a corporate world beset by deception. Investment in real assets and ethical ventures would provide a welcome alternative to the mirage of geared financial products. Just as classical knowledge was preserved by Islam during the chaos of the Dark Ages so Islamic Finance offers wisdom in modernity. It is time to make debt and interest our common enemy, founding a fresh financial order based on the insights of our ancestors.
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