Are There Islamic Solutions for Economic Justice?
Or Is the Insanity of Faux Money an Incurable Western Disease?
by Dr. Robert D. Crane
American domestic policy is just as much at sea as is its foreign policy. If at first a cure does not work, try, try again. If bombing does not work, bomb some more, and maybe try a different country. If regulating ponzi schemes does not work, try more regulation. This is the definition of insanity.
McCain’s extensive experience may explain why he does not know what hit the economy in 2008. As described in Rosa Brooks’ article of September 25th in the Los Angeles Times, this experience includes Senator McCain’s indictment in the Keating Five scandal that led the way to the S&L debacle twenty years ago and the $125 billion federal bailout. In support of Senator McCain, one can say that the problem is not corruption but a system designed to facilitate it.
MCain now calls for more regulation, but regulating a failed system is what is called palliative medicine. This is the specialty of hospices for the terminally ill. Bailing out ponzi schemes will merely set the stage for more of the same later. If the American people can figure this out, and McCain can not, then McCain is a has been, especially if Obama can beat him to the punch in advocating a shift from faux to real money as a systemic solution to what otherwise is an incurable disease.
In his article, entitled “U.S. taxpayers are being enrolled in an economic chain gang,” in the September 25th issue of the U.K. Daily Telegraph, Jeff Randall offers the most colorful writing yet about the insanity of the great heist of 2008.
The problem is that Randall, like seemingly everyone else in the media and government, has no real answers. The issue isn’t problems, though it would help if the prime movers could understand what the problems are. The issue is simple. It’s solutions, stupid!
A stop-gap, though not worth much except as a good precedent, would be for every American citizen of the 300,000,000 to get about $3,000 in individual ownership of the bailed-out firms, which would be the total amount that is to be socialized by government ownership and paid back during the time of economic recovery.
The underlying problem is that since 1971 the American dollar has been a pure fiction, faux money, without any real value behind it. Debt-based money is the mother of all Faux. It is backed worldwide only by trust in America, which for a number of reasons is rapidly disappearing. As a world currency it survives only because countries with a large overhang in dollars, who own 60% of all American dollars, face a dilemma in wanting to shift out of dollars without reducing the value of the dollars they already have.
The only real solution to address all the financial problems that are now being compounded as one sector after another of the American and world economies unravels would be to change the entire institutionalized process of creating money and credit. First, money should be issued only in return for real assets (the real bills doctrine) rather than being backed by debt, which has negative value.
Secondly, money should be created through a two tier banking system by using Article 13 of the legislation that created the Federal Reserve System to provide pure credit, interest-free, to economic enterprises that vest the new money in ownership by the employees or otherwise are founded as Community Investment Corporations to be owned 100% by the individual residents of the community. A second, interest-bearing tier would finance other wealth production, thus tipping the scale to broadening capital ownership rather than concentrating it as been the case in producing the enormous wealth gap within and among nations that contributes to the worldwide spread of terrorism. This second tier on an interim basis could also finance consumption loans, but these are inherently inflationary and should be discouraged. Such interest-burdened consumption credit would be less necessary as individual profits from broad-based capital ownership increase.
Such a thorough overhaul of the American financial system, as a model for the world, would require acceptance of the two main principles of Islamic finance, which have been undisputed for 1400 years. The first principle of Islamic finance has been that money has no value in itself, because it is merely a medium of exchange to quantify the value of real wealth. The second principle is that all wealth should be privately owned.
The major principle of economic justice, known in Islamic normative law as haqq al mal, is that such ownership should be broad, especially in a capital intensive society, so that every person has a birthright individually to own the profits produced by the means of production in addition to the profits from owning one’s own labor. Broadened capital ownership can best be jump-started by providing $3,000 in pure credit, or better yet $7,000, to every citizen at birth and every year thereafter for carefully regulated investment through the commercial banking system in the growing economy. This would produce more than enough to provide all that is needed for free education, free health care, and an adequate retirement (about $600,000 in assets at retirement, producing an income of about $60,000 a year).
Jeff Randall’s article is colorful and insightful in marshalling pertinent quotes from Thomas Jefferson, as well as Secretary Paulson’s quote about “raw capitalism.” Jeff is also dead-on in spelling out the enormity of the greatest rip-off since the advent of Marxism. Nevertheless, we need solutions not mere cries that the sky is falling.
Unfortunately, attention from addressing the underlying problems is diverted by gimmicks offered to palliate the current financial implosion. One such is the transaction tax (Securities Turnover Excise Tax - STET), recommended by Thom Hartmann in his article, “How Wall Street Can Bail Itself Out Without Destroying The Dollar,” http://www.thomhartmann.com/index2.php?option=com_content&do_pdf=1&id=998 as ha,ving a good track record for many decades in many different countries of the world to discourage what is known in Islamic finance as maysir or speculation. This is condemned as destructive to the speculator if it amounts to gambling for improbable returns, but is doubly condemnable if it amounts to robbery of the end losers in a ponzi scheme. The principle is that regulating crime does not promote justice.
This regulatory gimmick might help to reduce the effects of a defective system by penalizing speculation and the speculators, who exploit the fact that money is created in America as debt, at compound interest, so that more money must be created as more debt to pay the previous debt, at more compound interest. Regulating maysir actually can be counter-productive over the long run, however, because it does not address the real cause of the current financial implosion. The basic fault lies in a failed system of money and credit, which can easily be perfected. It does not lie in human imperfection, which is incurable.
It is incomprehensible why anyone would want to bail out such a self-destructive process, rather than let it eliminate itself, but that is politics. It may be politically incorrect to question the system during an election year when both parties are equally guilty of causing the destruction. Whichever party wins in November, however, might then have the guts to institute asset-backed money using Section 13 of the Fed and blame the other party for not doing so earlier.
Palliative measures, such as increasing transparency and accountability, may help over the short run, but failure to address the real causes of our financial bankruptcy may someday bring on a situation where, as the old saying goes, “the living will envy the dead,” and Karl Marx will sit up in his grave and exclaim “I told you so!”. Lenin would have welcomed the current financial oligarchy in New York and Washington for what Osama bin Laden in his proverbial cave calls democratic capitalism’s oxymoronic commitment to creative destruction. In his inimitable prose Lenin would have called them simply “useful idiots.”
It has been clear for decades that no change would ever come unless the system of creating money is fundamentally changed and that this would be possible only when the system itself starts to self-destruct. The real problem now is that the system seems to be finally self-destructing but no-one in authority seems to recognize what the real problem is. Even if they do recognize it, they show no willingness to admit it, because the persons with the power to change the system, namely, the ones who own the faux American economy, would suffer in the short-term, even though in the long term they would benefit along with every one else from a stable, free, and much more productive economy based on the elemental principles of compassionate justice.
One of the famous sayings of the Prophet Muhammad is simple, “There is a cure for every disease. So find it!”