[bit.do/azhom] Radio Islam, South Africa 14m Interview of Dr. Asad Zaman by Mufti Yusuf Moosagie on Tuesday, 8 Oct 2018, at 9:30am South Africa time and 12:30am Pakistan Time
Q1: What is Money? 0:20 to 2:22
This is a deep and difficult Question. BUT WHY is it so complex?
50 people own more than half planetary wealth. They cannot exploit us WITHOUT our consent. Our consent is creating by feeding us FALSE theories about the nature of money. Today, Ph.D.’s from Harvard learn and propagate false theories which make it impossible for us to understand how the current monetary financial systems are used to exploit us.
The KEY question to ask, to unravel the mystery, is “Who has the power to CREATE Money?” We must ‘follow the money’ to find the answer. For more details see The Battle for the Control of Money.
Q2: How has the nature of money changed and evolved in the 20th Century? 2:22 to 5:18
Pre-WW1: We had the Gold Standard: technically money backed by gold, Actually, most money is unbacked. Important Note (not covered in talk) Fractional reserve means that only about 20% of paper money is backed by gold. There are proposals for 100% reserve banking – that is all paper money is backed on one-to-one basis by gold. This is what general public understands by gold standard, but this has rarely been used in past few centuries. End of Note. WW1 exhausted gold supplies at Central Banks, forcing world OFF the gold standard. Attempts to restore gold standard failed in the Inter-War Era Bretton Woods Conference in 1944 switched from Gold to Dollar Standard, where dollars would be backed by Gold. 1971: Vietnam War led to massive overprinting of dollars, and the Nixon shock of 1971 removed gold backing from dollars. This has led to the world of floating currencies. For more details, see my post on Monetary Policy from 1914 to 1980.
The point here is that the nature of money has changed radically at least four times over the past century. Learning to protect our collective interests, and to give rulings (fatwa) about money and banking, require a deep understanding of these complexities.
Q3: What is Shadow Banking and how did it emerge in the 1990s? 5:18 – 7:10
Great Depression 1929 caused by speculation by banks led to stringent regulations, which prevented banking crises for 50 years. This caused reductions in wealth share of the extremely wealthy (see The Power of Economic Theory: Graphically Illustrated). They plotted a revolution against these regulations. This counter-revolution was initiated in the Reagan-Thatcher era (1970s), by de-regulating financial institution.(See The Keynesian Revolution and the Monetarist Counter-Revolution). The de-regulation of the Savings and Loan in 1980s almost immediately led to a huge financial crash and subsequent government bailout. However, the financial lobby was well prepared and managed to prevent the public from seeing the connection between de-regulation and financial crises. As the de-regulation process continued, it became possible to create bank-like institutions, which could create money, just like banks, but operate completely outside the realm of rules and regulation imposed on banks. This was called shadow banking – financial institutions which create money, but do not have to follow any rules, unlike real banks.
Q4: What are Financial Derivatives? 7:10 – 10:10
The Glass-Steagall Act 1935 prohibited banks from speculative activities. This was struck down in 1999, and the Commodity Futures Modernization Act in 2000 created legal permission for gambling in “futures” without regulation. Derivatives are gambles on financial transactions. For example, a bank can bet that the mortgagor will not be able to make his mortgage payments on his loan. By selling this derivative, the bank insures itself against failure – if the mortgage loan does not pay, then the derivative will pay off. But now the bank will happily give loans to unqualified borrowers, because it can make money regardless of whether or not they pay. This is one of the reasons for the Global Financial Crisis. Making gambling legal led to a situation where real trade was around $4 Trillion, while foreign exchange derivatives – gambles on this trade – were around $18 Trillion in 2008. It the ability to create huge amounts of money for speculative gambles that led to the Global Financial Crisis of 2007.
Q5: What will money be like in the future? 10:10 – 12:50
One can speculate on what an ideal monetary system would be like – there is substantial amount of work on this topic. One simple-minded suggestion: go back to gold – this will not work, for reasons similar to why gold failed in the first place. Modern Monetary Theory provides better guidance. But the problem is that fair systems which provide for all will be strongly opposed by the rich and powerful elites running the planet for their personal pockets. (See Fear of Floating and Demise of the Dollar? for more details).
If we think pragmatically, the current system bring HUGE benefits to the US, giving them the ability to print dollars, and create money, without any limits. It is this ability which has allowed them to carry on almost continuous warfare against so many nations, and destroy Iraq, Libya, Syria, and many other countries. The harms of this unjust system are becoming clear to all and the effort is being made to create a Multi-Polar system, with Euro, Renminbi, and other currencies being equal partners with the Dollar. It is here where we have a chance to introduce our own Islamic currency, like an oil-based Dinar, or a labor-based currency.
Questions for Next Time 12:50 to 13:30
This provides a lead into our next topics like bit Bitcoins, Crypto-Currencies, and other innovations coming up, like the Facebook Libra. What is the role and significance of these, and what should our stance be on these developments? Will they help or hurt the Muslim Ummah? We will discuss these in the next session.