Faith Freedom International

[abdullahnoor]

Prologue

This folder is named “Opposing views on Islam”. Of course Ali Sina does not have a mirror folder that says, “Views favouring Islam” or “Opposing views on non-Islamic teachings”. No matter – I can still post my point here.

I have long wanted to insert this topic in FFI. But I have my reservations. Reason is that most threads I create attract rude, unwarranted remarks that hardly contribute any intellectual value.

With the exceptions of two threads I started, on topics of atheism http://forum.faithfreedom.org/viewtopic.php?t=3250&postdays=0&postorder=asc&start=0 and the textual integrity of the Quran http://forum.faithfreedom.org/viewtopic.php?t=3698&start=0 , all other topics get slimed.

However, in spite of the slimes, I decided to start a new thread on the topic of the ills of US monetary system. Let us see how sane this thread can be – or should I say how well anti-Muslims can maintain being rational,without having resort to slimes.

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Introduction

Much has been boasted about how superior the Western system has been. In particular, the economy of the West – especially America. However, this topic is going to look from a different viewpoint. In this topic, it is hoped that readers will see that it is the very system which Americans boast, that is causing pain and misery to the Third World.

One of the things that has helped America to attain riches, is to keep the Third World poor. In fact, it is designed to drain resources from these nations to feed the Americans.

Here is a topic I posted in another forum some years back. I have done some modifications.

Interest as in Practice Today

We are all familiar with the current practice of banks at the micro level. This means we get paid interest on deposits and charged interest on loans. Most of us do not see the detrimental impact it has on the society on a larger scale. And why is that so? After all, it is this system that helped created credit – which eventually saw economic growth in many countries. With this system, we are able to borrow money for our cars, houses and so on.

But behind all this, there is an economic time bomb about to explode. Let me say at this point in time that I do not have anything against employees of banks, bona fide ordinary shareholders of banks and customers of banks. What I am against is the approach major owners of banks take. They use interest-based economy for their benefit, at the expense of others. What happens is that if you cut up all the bank services individually, it appears that they are giving service – deposits, safe-keeping, loans, LCs, hedging, investments etc. However, if you were to put all the pieces together and take a macro view, you would see a huge giant money-eating mechanism, sucking up every single cent from ordinary citizens.


The Central Banking System

The Central banking system I am going to describe is the US system. Why I chose the US, is because it is the single largest economy in the world. Although each economy has its own variation, the phenomenon is basically the same. In other countries, although we do not operate the same way as the US, the final effect it has on its citizens is NO DIFFERENT, from the effect it has on US citizens.

Banks pay interest on deposits. They charge interest on loans. This means that they use depositors’ money to lend it to borrowers and charge them interest. The difference between the lending and borrowing rate would be the bank’s profit.

The above is double riba. In the olden days, a money-lender charges interest, using his own money. Today the banks use other people’s money and charge interest. All banks are required to deposit a certain sum to a Central Bank, which acts as a national reserve. In the US, interest rates are used to control the amount of money in circulation and in the reserves. If more money is needed in circulation, interest rates are dropped. It now becomes less attractive to save and more attractive to borrow. So more money gets out of the reserves into the economy.

If more money is needed to be in the reserves, interest rates are increased. It now becomes more attractive to save and less attractive to borrow. So more money is now deposited and less loan taken.

The above looks simple enough. But the problem is the interest attached to it. Below is how a balance sheet looks like if loans are made on interest. Assume Bank A loans to Company B US$1m, and charges an interest of 5%:

The values of the firms show IMMEDIATELY:

Bank A
Accounts Receivable (Loan out) - US$1m
Interest Receivable ** - US$0.05m
Total Assets - US$1.05m
Net Assets - US$1.05m


Company B
Cash (Loan received) - US$1m
Accounts Payable (A/P) - US$1m
Total Assets - US$1m
Net Assets (Total Assets – A/P) - 0


Now compare the value of assets in the ECONOMY (assuming Bank A and Company B are the only players) -

1. Actual Money in Circulation - US$1m
2. Net Assets (Bank A + Company B) - US$1.05m
Difference between 1 & 2 - US$0.05m


Therefore, difference in ACTUAL MONEY CIRCULATING IN ECONOMY and VALUE ACCORDING TO THE COMPANIES’ BOOKS = US$0.05m. Question – Where would that extra US$0.05m be coming from in order to pay the debt?

Now, I know some accountants would criticize the above point. They would pick out on the item I marked (**) above on `interest receivable’, in Bank A’s accounts. They may say that the interest receivable is OVER A PERIOD OF TIME, and DOES NOT come into effect IMMEDIATELY.

However, I say that the interest receivable HAS IMMEDIATE effect. Consider this – can Bank A sell its debt of US$1m, with interest of US$0.05m attached, to Bank B at US$1.025m, the moment it secures the loan? If yes, then is not the interest receivable impacting the value of the loan IMMEDIATELY?

So every time we create an interest on credit, there would be a disparity between MONEY IN CIRCULATION and VALUE IN THE BOOKS. This disparity goes in ONE DIRECTION only – UP. The more loans there are, the higher the disparity.

So it is always a case of `Value according to Books’ ahead of 'Money in Circulation’. The question is how are we going to pay off this internal debt?

Now, if the US is a closed system, it can be seen that citizens would have to pay with their lives and what not to the banks. Because, no matter what, there just is not enough money in circulation to pay off the interest! So the wealth is ALWAYS in one direction – from borrowers to lenders. At a micro level, we see a house owner paying his mortgage loan with his salary. But at a macro level, we are able to see this huge wealth-eating machine.

But the US is an open economy. So rich countries loan to poorer countries. That is where the World Bank and IMF come in. Loans do not come cheap. They come with interest. So if rich countries `help’ poor countries with loans, they charge interest. So in that way, again the interest payment is in one direction. Some poor countries cannot afford to pay off the principle. So the rich countries say that principle payment is not necessary – just pay interest. Now that is like selling your soul. Because as long as principle is there, you keep paying interest till eternity – usually for generations after generations after generations….


Inflation

Most economists would say that too much money chasing after too few goods is the main cause of inflation. However, if one were to look carefully, interest based banking is the BIGGEST CULPRIT for cause of inflation.

Imagine this – if the Central Bank fixes an interest rate of 2% for the next ten years, it would automatically mean that for the next ten years, the cost of living is going to increase by that much EVERY YEAR. This occurs REGARDLESS WHETHER they is too much money chasing too few goods.

Again, note that in any loan with interest, the money issued is less than the assets created. So no matter what, this debt cannot be erased. Not only that, it compounds. Since the rich countries do the lending and the developing ones do the borrowing, it does not take much to guess that the wealth would be enjoyed by the lenders NOW, while the future generations of the borrowers, will have to pay the price.

Is this not what is happening today?

However, in an interest-free economy, there will be no fixed cost increase over time. Any cost of increase will be REAL, in the sense that the forces of demand and supply will take care, uninterrupted by the destructive force of interest.

But then, of course, the west would love to keep the system as it is. Because after all, it is the benefactor.


The Qur’an

One of the attributes of Allah swt is that He is All-Knowing. The Central Banking System as practiced today is less than 100 years old. But the Qur’an is more than 1,400 years old. Long before the damaging effects of riba affected the world, Allah swt has forbidden it. Truly, He is the Wisest.


Conclusion?

Many economists, finance experts and bankers are slow to admit that interest is damaging. But it has caused a large disparity between the money in circulation and value as appeared in the books. This disparity goes only one way – up. This internal debt is therefore like an economic time bomb. Interest is also the biggest contributor to inflation. Futhermore, the US being lenders will benefit, while the third world suffers.
_________________
If you deny that the universe was designed, then by default, you are saying the universe occurred by chance.

If you say, “Your belief in Allah is unscientific!", I will say, “So is your belief in chance!”

[Chingachgook]

[abdullahnoor]

Chinga

I posted at 9:47 am

[Chingachgook]

[ohmyrus]

Dear Abdulahnoor,

I suggest you read my article, "Islamic Banking is not Islamic".

http://www.faithfreedom.org/Articles/Ohmyrus/islamic_banking.htm

Now lets get back to the main topic about Central Banking.

You wrote:

[Paladin]

[abdullahnoor]

Chinga

[abdullahnoor]

Paladin

[adnan]

[Paladin]

We are dealing with an idiot here, I swear, the more times I post with Abd here, the more she (are you really a woman?) shows herself to know jack shit about nothing.

[rand]

Dear Abdullahnoor,

One can invest in a 10 year US treasury, which currently yields 3.65%. There are other relatively riskfree investments with similar returns.
Let's say I have $100,000, I can earn roughly $3,650 a year in interest for ten years and then get my $100,000 back. Instead I can lend it to someone and earn no interest for ten years and hope that he pays me my 100,000 back. Why would I want to lend out that money for free? One can say that it would be charitable. However, that might be true if the borrower were poor, but many borrowers are rich or middle class. Should such people be given free charity?
If there were interest rates of 0%, and I had an opportunity to invest in a business that earned 15% a year with little risk, it would make a lot of sense. However, if riskfree interest rates were paying 20%, why should I invest to only receive 15% if I can recieve 20%?
If I am able to save money, and can invest it riskfree and recieve a few percentage points of interest per year, why should I leave my money in a mattress and not earn the interest?
If I have an opportunity to get a loan from a bank so I can have a mortgage instead of paying rent each month, why should I rule that option out?
If muslims follow these rules in the US it would hurt them financially. These rules would encourage poverty for muslims rather than elimate it.
One could argue that in other economic systems the rule of no interest would make sense. However, the Quran is supposed to be true for all times and places. The Quran also never really seemed to articulated an economic system. (Except perhaps to conquer other lands, war booty, slaves). What is the Quranic economic system like?

Best wishes,
Rand

[abdullahnoor]

Rand

Your example of bonds is looking at the picture at micro level. You are looking at retail level. You are looking at the individual. The issue is a macro problem.

Imagine this. If you have $10,000 today, it will erode over time. Why? Because of interest. Because of interest, we have what is called “time value of money”. Funny thing is that banks cause this interest that cause this time value. And it is this time value that is used to justify interest! Hence, cost of living will increase over time, not because of scarcity of resources, but because of interest.

Another point is that every time interest is charged, the banks have created wealth for themselves NOW, while you have to work IN FUTURE – and A HUGE PART OF YOUR REWARD OF YOUR WORK goes to bank.

Furthermore, this wealth created NOW and the money ISSUED to you has a differential – the interest. Hence, the wealth the banks have created is MORE than the money in circulation. This disparity in the economy will not only never be erased, it will INCREASE for every loan on interest made.

In bonds, there is a tenure period. Beyond that tenure, the compounding effect of this disparity, between the money issued and wealth created, is stopped.

However country-to-country loan is a different thing. Many Third World countries are now beholden to developed countries because they cannot pay off their capital. So for as long as the capital is there, the interest is there – for generations after generations after generations.

Think about it.
_________________
If you deny that the universe was designed, then by default, you are saying the universe occurred by chance.

If you say, “Your belief in Allah is unscientific!", I will say, “So is your belief in chance!”

[ohmyrus]

Dear Abdullahnoor,

You wrote:

[rand]

Abdullahnoor wrote:

[abdullahnoor]

Ohmyrus

[ohmyrus]

[ohmyrus]

[abdullahnoor]

ohmyrus

Did not I anticipate what you would say in my first post? Here it is again.

[cardinalfedra]

Abdullahnoor wrote:

[abdullahnoor]

cardinalfedra

[cardinalfedra]

[ohmyrus]

Dear Abdullahnoor,

You wrote: