Money

You know,

money has a different meaning,

is seen to function in a different way,

at opposite ends of the vast scale of numbers

that is needed to encompass it,

and considerations concerning what sweets

are the best value on which to spend a few coins,

would seem to have little in common with calculating the numbers involved

in global international trade.

But there is a link.

The link, of course, is the idea of money,

but what seems so tangible in a handful of coins

quickly becomes much harder to get hold of,

much harder to define,

a thing of smoke and mirrors,

built of a network of interconnected debt.

Because

leaving your gold in a gold merchant's safe,

and then trading using the receipts,

is quite different from depositing your income

in a high street bank.

The bank doesn't have any gold bars to show you.

It simply provides a way of storing and exchanging wealth tokens,

whether coinage, bank notes or tallies on paper

or recorded digitally.

But somehow it gives the impression

of there being bars of gold somewhere,

or something else tangible.

Yet things start to look a bit more complicated

when you realise that banks don't just take money from people and store it.

They lend money to people

and charge them for it.

Those gold merchants soon realised

that people were trading using their receipts,

and not bothering to claim the gold to make transactions,

which gave them the opportunity to lend out receipts

even when they didn't have the gold bars,

a system that has come down into the banking system today.

If someone has a hundred pound coins

and deposits them in a bank,

then the bank may think that they are unlikely to want it in the immediate future,

and see fit to lend most of it to someone else for a little while,

to be returned plus interest.

But the money that was loaned,

after being used in trade,

goes back into the bank as a new deposit,

which again the bank may see fit to lend out,

again charging interest.

So if they lend out 90% of that first £100,

and 90% each time that sum is redeposited,

it is soon the case that although people think that

together they have £1,000 deposited,

the bank has never received more than

the original 100 pound coins.

It was just a spiral of imaginary currency.

Of course,

it only takes some financial crisis

giving people an urgent need for their money,

to cause a run on the bank

and to show that it doesn't have what everyone thinks it has,

with the non-existence of those deposits becoming apparent.

It used to be that national central banks would set

a reserve ratio,

a minimum percentage of customer deposits

that banks were required to retain before reloaning,

but nowadays most banks have decided that there is no need for any restraints at all.

This can be seen as one effect of what happened in 1971,

when the USA withdrew from the gold standard as a basis for currency,

and the world soon followed,

now printing what is known as fiat money,

essentially money that is kind of worth

whatever the banks say it is,

except that it is also affected by inflation and deflation,

and international currency trading.

Even so, what is mostly thought of as money

is still that network of debt

in an ever expanding spiral.

With this spiral of reloaning, known as

the money multiplier effect

banks can amass extraordinary amounts of wealth,

as long as the system isn't disturbed.

Because

it was realised that the spiral had no need for that £100 to begin with,

as banks could just open accounts for people

and instead of requiring a deposit,

give them credit.

It's simply a matter of tapping a few digits into a screen,

and the customer can spend it,

and the bank is owed it

plus interest.

Then banks realised that although they may play an essential part

in all kinds of trade in goods and services,

they could also do all sorts of deals

with money and debt itself,

bundling different kinds of debt in different ways

to resell as different kinds of investments.

Banks have separate divisions

known as investment banks

to handle these kinds of trades,

but the system itself is now highly unstable,

with financial markets little more than gambling

with other people's money,

and the wealth gap between the richest and poorest

growing ever unsustainably wider.

For although it is ultimately not based on anything solid,

the money multiplier spiral

has real effects on people's lives that can be devastating,

as the 2008 crash so clearly displayed,

but the banking system has come to rely on it.

If all debt were to be repaid

any money supply would vanish completely,

as all money would end up having to be returned to the bank.

So it is that the capitalist system

needs to sustain and further that debt

if its economy is to have enough funds to survive.

Integral to the money system however

is capitalism's understanding of equating value and price,

and its need for constant growth,

all market driven and based on false premises

that can only lead to financial collapse.

So what does Islam have to offer as an alternative?

and why is it not apparent?

If we are to find Islamic alternatives or possibilities

we need to look not just at money,

but at trade

and what we mean by wealth.

Any Islamic solution will need to be not just economic

but also political and cultural.

new forms of currency may be arising to challenge the old,

giving value not to the rarity of precious metal

but to the rarity of an electronic event,

mined using billions of hours of computer server time,

and with value related only to demand,

but any grand solution to be offered as an Islamic alternative

will need to be firmly rooted in first principles,

yet at the same time extraordinarily subtle and flexible

if it is to be realistic.

As it is, despite the firm belief of many,

the world's economic system

might take a while to transform.

It is not enough to insist that Islam has

a perfect financial and economic system

that only requires the world

to stop what it is doing now and start using it.

Any transformation will need to be voluntary,

so what is offered has to be

obviously preferable to what is there.

It will have to be available to individual muslims,

yet also provide governments the economic tools to deal with business cycles,

inflation and deflation,

drought and flood and national emergencies.

It will have to be able to function alongside,

and in some way integrated with

the existing system

if it is intended that it be suitable to function in its place.

When we look at the complexity of how money functions around the globe,

it is clear that more is needed

than the system being used in Madinah 1400 years ago,

so there is no defined Islamic system ready to use.

But we do know the principles they followed,

and how they have been discussed and developed

by muslim scholars down the years,

so there is some guidance as to how to go about things.

Many say that in an Islamic system

currency would need to return to being linked with gold and silver assets,

as with the original dinar and dirham,

Money should be kept in circulation as much as possible,

following the zakat principle of rejecting hoarding

and only taxing money that is held but not used.

Banks would not be able to charge riba interest on loans,

and instead need to be involved in trading partnerships.

But the essential change would need to be in cultural attitudes to wealth

as it relates to the muslim way of life,

a life where generosity and caring for others

is more important than accruing

goods and power at other people's expense,

rather than a perception of scarcity

with all individuals fighting for a share,

we need a system with an abundance mentality

encouraging sharing,

where what is good is of most value

and everything more than shelter,

clothing, bread and water,

is a gift,

extra comfort and beauty to be enjoyed.