Toby Birch

Articles:

End of Usury, not the End of Day

By Mohamed bin Khnifer December 2008 Aleqt Magasine

It is unbelievable that those who created the conditions for the financial crisis to flourish are now being called on to solve it. The same old debt-driven bail-outs are the cause and not the cure which will simply deepen the depression. The true problem is a misguided philosophy that demands permanent economic expansion no matter the cost to the environment or future generations. This false growth is fuelled by the creation of government debt and bank credit, diluting money and desiccating the real economy in the process. This inflationary effect was well understood by our ancestors. Such wisdom has been retained in Islamic countries where riba is forbidden but secular societies have forgotten the lessons of the Old Testament that prohibited usury. When I published The Final Crash in 2007, its forecast of a financial crisis in 2008 appeared far-fetched. The suggested solutions seemed even more suspect but for the record were three-fold in nature:

Balanced banking…
This economic crisis is simply the end of a failing system that must be abandoned rather than resurrected. Fractional banking led to total imbalance and a loss of stewardship as a small deposit base created huge multiples of credit, like an inverted pyramid. Even with taxpayers bailing them out, banks continue to act selfishly with rising repossessions. Islamic Finance provides the perfect alternative to this redundant system as it shares risk and reward while matching borrowers and lenders in a balanced manner. Charging fees rather than interest removes the temptation of unrestrained credit creation. It would also avoid the many episodes in history when labour and materials were plentiful but useful projects went unfinished when private banks ceased to lend.

Debt destruction…
We need to utilise the best of both the government and private sector. Big government crushes innovation while capitalism undermines the altruism of public sector workers. A parallel financial system would allow the best of each side to function freely yet act symbiotically. This can be achieved if the government is free to finance itself without the burden of interest whose absence saves a fortune on funding costs. The concept was advocated by Abraham Lincoln whose assassination prevented its implementation.

The public sector provides the infrastructure for business to thrive while the private sector generates tax revenues and rent to clear the original borrowing. It was applied successfully in what was known as the Guernsey Experiment in the nineteenth century. Infrastructure projects were funded without any inflationary effect for over a century. To pay workers and suppliers local bank notes were issued with a maturity date rather than

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