The Gold Dinar, the Silver Dirham and a Resurgent Political Islam

By Younes Abdullah Muhammad Part 3: Financial Imperialism: Dynamics of the International Economy, the Arab Spring and Neoliberal Globalization
Please see Part 1 and Part 2 of this ongoing essay.
When you judge between men, you judge with justice. Verily, how excellent is the teaching which He (Allh) gives you! Truly, Allh is Ever All-Hearer, All-Seer. O you who believe! Obey Allh and obey the Messenger (Muhammad SAW), and those of you (Muslims) who are in authority. (And) if you differ in anything amongst yourselves, refer it to Allh and His Messenger (SAW), if you believe in Allh and in the Last Day. (An-Nisa 4:58-59) If Justice has been abolished what is empire but a fancy name for larceny [grande latrocinium] Augustine The Anglo-American Empire's push through president Richard Nixon to abolish the dollars redeemability for gold in 1971 created an international paper money (fiat) system dominated by the dollar bill. That system, which continues unto today, granted the United States control over the global economy through a monopoly of paper money. Today the political world may be blanketed by nation states but, in actuality the international cabal of independent central banks has placed control of National currencies, and thereby large portions of National economies, in the hands of self-serving elite. The schema helps subvert the nation states unique ability to provide for the general welfare and thereby subjects it ;s citizens to the appeasement of global financial institutions that control the flow of international capital. Today's international monetary system is completely antithetical to Islam. As the Noble Scholar Ibn Taymia (RA) put it, Islamic Economics can be reduced to two primary prohibitions: interest (riba) and excessive speculations (gharar). The contemporary economic arena is driven by interest rates and speculation on real economic activity. Such a system allows financial elite to extract taxes on all real, physical economic development and allocate resources to serve its own imperialist objectives. The rampant inflation and inherent instability of the completely fiat international monetary order make it possible to preserve traditional colonialist inequalities but impossible to craft an economic order around the socially beneficent tenets that prohibit interest and rampant speculation. Contrary to the free market risk and reward that marks both a capitalist and Islamic economy, the international economic arena today would best be classified as a casino for finance capitalism, for it allocates risk onto the poor and extracts all rewards on behalf of global elite.

The processes that occurred from the period of 1971 unto the Financial Crisis of 2007-08 bear witness to the inherent instability of a paper-money order. We are constantly reminded of its successes but the fact remains that we live in a world of drastic inequality. The average American income is 50 times an Afghans and 100 times a Zimbabwean. Over a billion people on the planet remain in destitute poverty. The success of a few depends on the oppression of the masses. The financial order is like a parasite.

However parasitical entities depend on an ability to feed off a host and the empire has lost much of its potential for expansion. All economic systems depend on market expansion for maintenance. However avenues of growth have grown more difficult. Traditional mechanism of expansion: increased trade, domestic development and colonization have all been hindered. The average western consumer is indebted and can no longer pull the global economy. Increased demand from a global elite continues to cause resentment of the west and social upheaval and protest is rampant, as evident in the Arab Spring and mounting protests in Europe over ansterity. Thus contemporary dollar-based neocolonialism, enforced by its transnational institutions like the IMF and World Bank, has enveloped every region of the world, but the world is drifting toward multipolarity. The economic path taken in North Africa and the Middle East will determine the future make-up of globalization. Inserting these Muslim nations into the dollar scheme would feed the parasite for at least a generation. Negotiations with new Islamist regimes in Tunisia, Egypt and Libya already document a willingness to participate in dollar-dominated globalization despite alternatives afforded by recent BRICS (Brazil, Russia, India, China, South Africa) efforts to trade and lend in non-dollar denominations an enhanced Chinese rise in the region and socialist alternatives formulating for Latin America and Iran. The vice president of the Muslim Brotherhood in Egypt recently told Thomas Friedman, it is no longer a choice whether one can be for or against globalization. Such sentiment was heralded by Friedman himself in his book the Lexus and the Olive Tree (1999) where he stated, the hidden hand of the market will never work without the hidden fist, McDonald's cannot flourish without McDonnel Dougles the builder of the F-15. And the hidden fist that keeps the world safe for Silicon Valley's technologies is called the Unites States Army, Air Force, Navy, and Marines. Directly thereafter, Egypt signed onto a $30 billion dollar IMF loan agreeing to open up its economy to foreign corporations. The move was unopposed by the Muslim Brotherhood who will be forced to govern (at least parliamentary) while paying 15% on Egyptian debt. As long as IMF conditionalities set structures in compliance with US norms, there will be no revolution. The goal is to preserve the economic order so politicians can do nothing. As Dr. Henry Kissinger recently explained, The more sweeping the destruction of the existing order, the more difficult establishment of domestic authority is likely to prove and the more likely the resort to force or the imposition of a universal ideology. The more fragmented a society grows, the greater the temptation to foster unity by appeals to a vision of a merged Nationalism and Islamism targeting Western values. To foster its own maintenance of the Arab Spring, the West must prevent the destruction of an order that makes the military a US client, the Egyptian Central Bank participants change to in the dollar scheme and preserves Neoliberal advancement implemented under Mubarak. Otherwise, the Anglo-American empire may lose control, first of the area around the Mediterranean and ultimately the dictatorships that preserve the petrodollar system itself. The oil embargo of 1973 sparked the first US recession of the past World War II era, but rather than bankrupt the financial system, it set up a new monetarist order completely different than what was agreed to at Bretton Woods. It simultaneously initiated a petrodollar standard, ended the dollars redeemability for gold and made possible the push towards globalization. It was orchestrated by conglomerate corporations, international banks and factions of government and was the brain child of high imperial minds like Henry

Kissinger and Alan Greenspan. In truth, it also prepared the way for finance capitals sequestration of the nation state. The 1973 recession proved disastrous for most Americans but was revolutionary for international financiers. It was a coup against truly liberal factions of the US government as much as an effort to project US power through the world. In 1970 US officials from the Secretaries of State, treasury, interior and Defense all signed off on an economic forecast that claimed, the standard price of foreign crude oil by 1980 may well decline and will in any event not experience a substantial increase, By 1980 prices had gone up tenfold. 1974 Senate hearings in the Subcommittee on Multinational Corporations entitled The International Petroleum Cartel, the Iranian Consortium and US National Security, revealed that the US government was using the major international oil companies to advance the national interest, The oil companies, then dubbed the Seven Sisters, were dominant stakeholders in Mideast production and thereby highly influential in the OPEC Cartel. The 1973 embargo and price hikes produced massive profits for the multinational firms even as smaller domestic firms were bankrupt. However, the primary beneficiary was not the oil companies but the international bankers on Wall Street and the City of London. As price hikes led to billions in surplus dollars collecting in the coffers of Arab regimes, the banks sought to guarantee that these dollars were not used in sovereign development. King Faisal was assassinated and alternatives set up a Saudi pledge to return all reserves to New York for deposit in western financial firms. These deposits would allow banks the resources to finance the immense deficits projected indefinitely for countries in the West that were Net-Oil importers. Since then, the Too Big to Fail banks have concentrated on financing massive government deficits that extract large portions of tax revenue to pay down interest (riba). The scheme helps position finance above allegedly sovereign governments, has expanded to direct global capital flows and prepared the way for the type of financialization that led to the crisis in 2007-08. A 2006 New York Federal Reserve Study concluded, Petrodollar investments are finding their way back to the United States. In particular, the increase in net financial inflows to the United States since 2002 has roughly matched the increase in Net outflows from Oil exporters. This relationship suggests that petrodollar purchases on non-US assets continue to generate offsetting flows to the financial markets despite current account deficits in Europe and the United States continuing to rise exorbitantly (which also benefits banks) and boosting debt. Thus the purchase of OPEC oil in dollar denominated terms is the lubricant of both financial and industrial globalization, which in turn transfers all real powers of planning from governments and onto the halls of Wall Street and the City of London. The post-Bretton Woods fiat monetary system turned the international economy into a global casino of financial products like the derivatives trade that is now larger than the entire global economy many times over. With all currencies disconnected from gold and floating relative to each other, speculators can control sovereign nations. In 1971 the US was indebted and the rest of the world was solvent. Today almost every country is indebted to transnational financiers. Contrary to popular opinion, the post-1971 order has not benefited the average American. Removing the gold standard provoked inflationary pressure that was battled by Paul Volcker's Federal Reserve with high interest rates that lasted a decade. Such policy decimated all internal American investment and paved

the way for the disintegration of a previously unrivaled US manufacturing prowess while simultaneously giving birth to today's rampant income inequalities. High interest rates crushed consumption, and sent factories overseas to the Asian economies where labor could be exploited. The growth of multinational firms was exorbitant but the end of the gold reserve system coincided as well with the disintegration of an American middle class that marked a standard developing or reconstructing sovereign nations aspired to in the immediate decades after World War II. It is also nostalgia for such an economy that empowers Americas propaganda unto today. As high interest rates fought inflation and helped prevent dollar collapse, high-paying manufacturing jobs were replaced by low-quality government and service sector positions. Postgraduate engineering degrees decreased and by the 1990's business (MBA) and economic graduates outnumbered engineers 3 to 1. Federal government policy catered to the rich and aided an international elite in exploiting the global population. The US government cut corporate taxes which placed a heavier portion of the tax burden on individual income. Capital gains taxes were slashed and rising debt allocated a higher percentage of government revenue to interest on the deficit. In the 1980's salaries for those earning $20-50,000 increased by 44% while those earning $200,000 to a million went up 697%. Heightened financialization and global commerce allowed multinationals and global financial institutions to play one country off another as free trade agreements like NAFTA exploited labor and wrecked worker rights in the developed world. These conditions birthed globalization which pulled millions out of poverty in countries like India and China but redefined the nations previously empowered middle class. The outcome could have been entirely different. This parasitical system could not have expanded without petrodollar backing. One of the unforeseen consequences of the '73 oil embargo , subsequent near systemic collapse of 1975, the assassination of King Faisal and Saudi support (see Part 2) was the Iranian Revolution of 1978 and the fall of the Shah, up unto that point a loyal western-imposed dictator. In 1975, with rising oil costs and inflation wreaking havoc on western economies, the Saudis agreed to drastic production increases to bring prices under control. The Shah in Iran resisted and posited that lower prices would prevent him from funding his government budget. He was correct, as the lower price of oil spurred conditions that sparked the revolution. The puppet shah of Iran was overthrown and an independent Khomeini regime came to power. Once again, the dollar system faced collapse. In January of 1980 fear that the petrodollar sheme would be ended or that an oil-rich hegemon would ascend in the Muslim world drew the value of the dollar against gold to a level of $1050/ounce. OPEC Nations managed to preserve the petrodollar but the scenario documented the fragility of the petrodollar scheme. The Federal Reserve fought inflationary pressures with high interest rates through the 1980's and into the 90's. The decade long Iran-Iraq war helped prevent the advancement of a Mideastern hegemon that could rival the now essential western alliance with the House of Saud. The global economy transformed during the period; the developing worlds pronounced independence from colonial powers proved cosmetic. The economic relationships of colonization were maintained through World Bank and IMF structural reforms that aided and abetted the rise of the multinational corporations and the further financialization of international capital markets.

The new American economy of the 1990's was based on advances in technology, the rise of the internet and the deregulation of finance. Low interest rates at the Federal Reserve boosted consumption and pushed capital into the stock market but the gains of real wealth rested in the hands of the few. Average wages throughout the 1990's had not risen above 1973 levels. Instead, much of American GDP growth was due to the low cost of borrowing and borne with the burden of debt. Consumers were funding growth by borrowing against their houses and with credit cards assuming that prices always rose and that low interest rates were permanent. Everyone was shopping. Alan Greenspan (the Maestro) was a National hero, but 1990's growth was attained only through enormous (but undiscussed) increases in private debt. In 2000-01 the Dot Com bubble exploded, stocks retreated and the economy slid into recession. President Bush came to office, he was forced to initiate the first round of what has been a series of stimulus package policies to prevent economic contraction; the consequences of these interventions have pushed the American deficit to enormous levels. The attacks on September 11, 2001, largely a reaction to US-led globalization, induced another recession and sent the US Military off to expensive global wars continuing unto today. Chairman Greenspan convinced a startled American public that maintenance of low interest rates wouldn't lead to inflation and Americans were told to shop to show support for the wars. Bush cut taxes on the wealthiest Americans; ran massive budget deficits due to military expenditure and increased spending inducing public debt to spiral as well. In 2007, the last year of a failed Bush Presidency, the US was still embroiled in two costly overseas wars and was several trillion dollars in federal debt. Then the unthinkable happened. Global instability and the depreciating dollar caused gas prices to rise. The increased price of gasoline functioned like a hidden tax on consumers, home payments went by unpaid, a mortgage crisis erupted, the exotic financial products tied to the subprime crisis went sour, exposure to banks across the world was high, the US economy fell into recession, major banks failed, the Bush administration allowed Lehman Brothers to go bankrupt and the monetary house of cards unwound around the world. Policy since has sought to reflate the financial system. Over the past few years the Federal Reserve issued more than $15 trillion in guaranteed loans and asset relief programs, bailouts and stimulus have exasperated debt, interest rates remain at near zero percent for the Federal Reserves primary lenders and short term collapse was prevented by creating a stew of long term liabilities. One of those unforeseen liabilities was the Arab Spring. On November 5, 2010 Ben Bernake announced plans for a second round of quantitative easing (QE2), one of the monetary mechanisms used to rejuvenate the American economy. It is a fraudulent process where the central bank purchases massive amounts of long-term bonds from its own country's treasury and seeks thereby to drive down borrowing costs while generating stimulus through the issuance of dollar bills. The effects of QE2 caused global concern for inflation. Stock markets, oil, gold and staple commodity prices rose immediately. The central banks of Egypt and Tunisia met in emergency as the policy depreciated the dollars value against their currencies and they prepared for the consequences of increased speculative inflows. The long-term policy of zero percent interest rates alongside public and private debt and slow domestic growth had already spurred a 14% increase in Egypt's dollar reserves in 2010. In fact, the policy was not intended to stimulate the domestic American economy but rather to provide liquidity

(dollars) for investment to the developing world. It is an example of the enormous privilege granted by the dollars reserve currency role in that the US is able to export its inflation to the rest of the globe. In reality QE2 gave insolvent financial institutions free money and the consequential flows to developing Nations put upward pressure on interest rates and prices around the world. The effect was deliberate. The halls of high finance recognize that any return to growth in the global economy will occur in developing economies; and monetarist policies grant banks a privilege known as the carry trade (borrow at almost 0% in the US and invest at high rates overseas). Multinational corporations can also exploit the policy and use borrowed money to purchase real assets in economies that were opened up during globalization's prosperous years, but rising prices of stable food products as a result of the QE2 policy sparked protests and temporarily hindered efforts to return to the imperialist norm. The Arab Spring was at least partially, a byproduct of the burst of inflation induced by QE2. On December 17, 2010 Mohammed Bouazizi lit himself on fire in Tunisia; Algerian youth took to the streets in January over sugar price increases and months later Egyptians emulated Tunisians. The rest is history but few connect the cause of revolt to the policies of the Federal Reserve. The Fed, for its part, expressed little remorse for inflation that wreaks havoc on the more than a billion people living on less than $1.25 per day. During the initial stages of the Arab Spring, the Fed Chairman of the St. Louis branch was asked on a CNBC talk show, the question is at what cost and did it (QE2) lead to these skyrocketing commodity prices for things like grain and things like copper and part of the reason we have seen so much unrest in the Middle East? He replied that those countries choose to make a flexible exchange rate and that is up to them. and mentioned that the Federal Reserves mandate forces it to be concerned only with the American Economy and its interests despite evidences that the Fed's policies impact the economies of the entire planet. The lack of concern continues. In-spite of the Arab Spring Monetary stimulus measures persist in causing the same issues today. US expansionary monetary policy continues to appreciate currencies in developing countries; this gives an advantage to US exports by making them cheaper than domestic goods. It deepens trade balances and increases external debt in places like Latin America, Southeast Asia, Africa and the non-oil producing countries of the Middle East. The cost of the stimulus has pushed US debt above 100% GDP, and at $16 trillion, but the global economy still stands on the brink of return to recession. The Anglo-American empire uses its dollar privilege to prevent the development of a multipolar world. The movement of the Muslim world away from that system would pave the way for real change. The IMF predicted 3% growth for the global economy in 2012, but the institution still admitted that the global economy is still deeply into the danger zone and emphasized that where they once loaned to developing nations, Greece, Portugal and Ireland are now on its books. Standard and Poors rating agency lowered the triple-A rating of several European nations including France to start the year and the US is mired in political loggerheads during a hostile election season. Ben Bernake announced plans to continue a zerointerest rate policy through 2014, meaning there will be plenty of dollar capital flowing overseas. A great deal of that move is intended for the relatively unexploited markets of a new Middle East. Intrusion and growth in Libya, Egypt, Tunisia, Syria and others provide an opportunity for expansion. It is impossible to know what will happen however, the chief operating officers of PIMCO, Sami ElArian and Bill Gross have described the present fiat system as paranormal and bimodal. Bill Gross

has remarked that the recent rise in the American dollar relative to other currencies makes it the cleanest dirty shirt. PIMCO is the largest private holder of American bonds and El-Arian describes the paranormality of the dollar-based system by explaining that central banks can no longer deliver economic outcomes that affect the real economy; the results are bimodal because at once the international financial system faces potential deflationary and inflationary disorder. He explains its like if I tell you your plane may leave at 5:30PM but its a bimodal distribution, it may leave at 10AM or 10PM. George Soros recently described that the choice between central bank bailouts and forced austerity in troubled nations was allowing mutually enforcing economic concerns to create potentially disturbing social and political forces, all of which could trigger systemic change. Uncertainty is not relegated to the Arab Spring but in an interconnected world of globalization, the paths taken by new Islamist regimes will reverberate to Europe and the US. Still everyone is talking of reform and ignoring the inherent injustice of the dollar-based world order. The potential for systemic change exists but the void created by the Arab Spring has documented support for Islam in politics whilst ignoring that the true fruits of independence could only occur in the realm of economic sovereignty. The spiders web, as Allah informs us, is the frailest of houses and breaking the web of international control could occur with an attack on the oppressive nature of an alternative present economic relationships and the development of a just economic model founded on the tenets of Islam. Contemporary issues such as the power of the corporation, wealth inequality, government bailouts for the financial industry and the role of currency in an economy predominate progressive thought. The Islamic shariah addresses all these issues, yet there is little development of a new progressive Islamic economics that can engage in the growing quest for a more just economic order. The Islamist regimes would do a great deal of good if they pursued these measures. A conversation about the dinar and dirham is a conversation that leads to a broader awareness of the reality that there is an economic system in Islam. There is a great body of work that enforces the tenets of the Islamic system. Despite centuries of intellectual backwardation in the Muslim world, progressive economics has an immaculate array of compatibility with the Islamic model. In his seminal work Economics and the Public Purpose (1974), the great liberal economist John Kenneth Galbraithe identified that the rise of large corporations was not only the outgrowth of the Neoclassical word of monopoly and oligopoly but that the result empowered selfserving firms with enormous influence over both the state and the smaller entrepreneurial system. Instead of one dominant economic techno-structure, Galbraithe addressed the reality that corporations operated under a planning system that subdued the interests of states and small firms. People under such a system, existed in a contrarian competitive free market that was relegated to the corporate command control and thus were confirmed to self-exploitation. The two drastically different economics caused the increasing discrepancy in wealth distribution of Western Nations in the 1970's, but the key was that the same process was being replicated internationally. As Galbraithe described it: This defines the nature of imperialism in the third world. It is an extension of the relationship between the planning and the market systems in the advanced country. As with the market system in the developed country, abundant supply, slight or no control over prices, a labor supply that leads itself to exploitation all mean intrinsically adverse terms of trade. The result is the same tendency to income inequality

between developed and undeveloped countries as exists within the industrial country between the planning and market systems. Galbraithe would have accepted the proposition that the system has expanded its search and grown entrenched and institutionalized today. The growth of transnational financial institutions like the IMF and World Bank leverage debt to create such unequal distributions, and institutions like the World Trade Organization (WTO) cement the rights of corporations to exert planned control by granting them rights over nations. As markets grow through trade, colonization and domestic expansion, an international network of global control forces developing nations to accept the dictates of the planning system while at the same time calling the process liberalization. As economist Michael Hudson puts it, the system, shifts planning power into the hands of high finance on the claim that it is more efficient than public regulation. Government planning and taxation is accused of being 'the road to serfdom' as if 'free markets' controlled by bankers given leeway to act recklessly is not planned by special interests in ways that are oligarchic, not democratic. Anglo-American globalization is merely institutionalized finance imperialism, no different than the way a parasite controls its host but today the process of parasitic growth has grown to stagnation and may depend on exploiting American the new markets in the Muslim World for its maintenance. Participation in this international economy would incapacitate the political junctions of new Islamist regimes. This Anglo-America network could care less about the conservative social stances of Islamic governments , they are concerned only with economic participation and with decreasing demand, rising debt and coming austerity in western nations, an ability to exploit the Arab Spring will cause opposition to any call for the dinar and dirham and any alternative economic relations. The Muslim World may be the final frontier for an actually imperialist globalization and it appears that the West has willing accomplaces in the New Islamist regimes. The World Economic Forum met in early 2012 to discuss the way to advance the globalization movement. However, in place of crony capitalists like Mubarek and Ben Ali were new representatives of the Arab revolution sharing the same economic aspirations. Abdul Moneim Abdul Fateh, a former member of the Muslim Brotherhood then running for president of Egypt took the stage with Tunisian Islamist Rasheed Ghanouchi; the leader of Al-Nadha party. Both took time to applaud reforms and announce their countrys willingness to participate in the global system, borrow from transnational lenders, and attract foreign investment. They are part of the West's ongoing efforts to craft and nurture a Moderate Muslim movement willing to continue colonialism in the Middle East. Such circumstances will probably cultivate the fulfillment of the Prophet Muhammad's claim that, Iraq will be prevented from its dirham and its measurement; Sham will be prevented from its dinar and measurement; Egypt will be prevented from its dinar and its measurement. You will have returned from whence you began. It is the monetary system the West seeks to preserve in the wake of the Arab Spring. A re-issuance of the Islamic dinar and dirham would prohibit the dollars dominance and pave the way for an economic order based on horizontal profit sharing, absence of interest and prevention of rampant speculation. While this call is not pragmatic at this juncture, one can be assured that economists and others across the world are preparing for the potential collapse of the dollarbased fiat system. In another hadith after mentioning Roman preventing of the dinar and dirham the Prophet said, In the last of my Nation there will be a Caliph who will throw handfuls of money without keeping account. It is impossible to throw handfuls of paper currency and so the Prophet (saws) made

distinction between the two economic systems as well here. A crucial distinction exists in the distinction between commodity and fiat (paper) currencies. Today's global inequalities are largely a consequence of the international monetary order and the imperialist processes it perpetuates. The objective of the US Federal Reserves sustained zero interest rate policy through 2014 is to provide interest free loans, but not to individuals and small companies in America suffering from a staggering domestic economy. Instead, the free money is issued to international financial institutions that will use that money to seek control over emerging markets. The new economies of the Arab Spring offer the best means of reflating the parasitical nature of globalization. The Islamic Shariah offers a comprehensive and progressive alternative based on tenets that even strict secularists are beginning to advocate. The Islamic system promotes interest and speculation free quity sharing and horizontal relationships that preserves the value of the free market but prevents the abuses of oligopoly and monopoly perpetrated by central banks, financial institutions and multinational corporations today. The shariah offers a vast amount of economic material that has been largely unexplored in the industrial age. Its core principle outlined in the Quran is to prevent severe inequality. Allah describes the systems objective: ...in order that it may not become a fortune used by the rich among you. And whatsoever the Messenger (Muhammad SAW) gives you, take it, and whatsoever he forbids you, abstain (from it)... (Al-Hashr 59:7) An economy based on the Islamic tenets must be built in an environment that is inflation free. Issuance of the dinar and dirham makes that possible. In part 4 we will inshaAllah discuss the distinction in Islam between fiat currencies, the gold dinar and the silver dirham. Wa Allah Alam !