Archive for June, 2013

David Graeber – Debt – The First 5000 Years

An activist forwarded this excellent text to me recently. I would like to share a copy with readers of this blog – a vital resource in order to understand the nature and history of the mechanism that is debt and the part it plays in all our lives, whether we are aware of it or not

How much money do we need to solve the hunger crises affecting large parts of the world today? Does generating ever more wealth help us to spread this capital where it is most needed, or is that not the idea of capitalISM

Also take a look at this documentary which gives one of the better seen analysis of the system of wealth which creates poverty and shows that it cannot be fully tackled with charity alone, something deeper is at fault and the root cause must be identified and resolved before anything else can take shape

A fast growing industry estimated to already be worth over approximately $1 Trillion in total global assets, is one which requires much closer examination as to its actual workings and what the real differences are with so-called ‘conventional’ finance practices (ie overtly interest based financing).

A long standing prominent expert in this area is Tarek El Diwany, and I highly recommend his website as an excellent introduction and beyond, into this fraternity;

I would note a number of articles which make for valuable reading from someone who has had an intimate insight into the workings of the industry. Tarek’s knowledge of both theory (Fiqh) and practice ensure his opinions are well founded and concrete.

Tarek has also prepared a short online course which is covers a number of key areas of the industry, details are on the site.

Recently, Tarek appeared on the mainstream news channel Al-Jazeera, with his opinions on conventional/islamic finance;

My brief comment; One must always consider the macro view of this or any other industry/system, in order to place it into context. Can two competing and divergent systems of ‘Islamic Economics’ and Capitalism co-exist, or is one being co-opted and submerged to fit into the other? Which is prevailing and dominant?

All money is created as interest bearing debt – this is an established fact. Any business venture or activity is always assessed by interest based criteria such as the cost of capital or inflation adjusted returns, the time value of money is prevalent, therefore interest based factors are implicit in all the operations of ‘money’ based activity and especially money services such as any form of banking.

Given the above, how can this industry be an alternative to interest based finance when all the services are modeled on existing concepts and practices. I believe it is simply alternative based interest.

In an effort to present alternatives to the fiat paper money system currently in operation, it is interesting to note the attention the virtual currency of Bitcoin is gaining

Here is a link to the official site;

Also note a number a articles recently published giving a view on the merits or otherwise of this currency;

Note this passage of the above article;

“THERE is much to like about what Bitcoin stands for: free-market money, safe from the grabbing hands of a state that cannot wait to debase, devalue and decimate whatever currency it gets its hands on..

… But it is encouraging that governments no longer monopolise money. If the reach and influence of currencies such as Bitcoin continue to grow, the internet may yet eventually achieve what F.A. Hayek, the Nobel prize winning economist, called for many decades ago: competing currencies that finally force monetary authorities to get their act together.”

The rise of Bitcoin comes at a time when a major world currency is believed to be on its last legs; the Euro. The troubles of Cyprus (and those of Greece/Spain to name a few) are rightly pushing populations to understand the major fallacy behind fiat money, thus driving this spotlight on such digital currencies.

As mentioned in the article, the value of Bitcoin has risen sharply, so much so that it is already being dismissed as a bubble. It is important to note that the market mechanisms that are driving this appreciation in value are still one of the components of the global ribanomic system, therefore exposing a key misunderstanding that if one false system is to be replaced, it will not necessarily mean the end of the troubles associated with ‘The Market’

I would also add that digital currencies still allow users to determine the changing value of this currency, albeit with some controls, since it has no intrinsic value – this is a key reason why some observers prefer commodity based currency

The important point behind this is that when we bring forward alternatives, the mechanisms must be holistically free from the workings of the current system; otherwise we are simply dealing with the same problem in a different guise

Those wanting to learn more about paper money system and the thoughts of the renowned economist, Fredick Hayek, can view this site mentioned in earlier blog posts;

Readers can also Google about the history of other such alternative currencies that have been attempted throughout history for more context on this issue

Today, history was re-written.

Recently media outlets have been drumming up fears of a triple dip recession, but it turns out now that the double dip that occurred during Q4 2011 and Q1 2012, did not happen. Performance has been revised from -0.1% to 0.0%, more than a year after the event

Once initial GDP data is released, there are always two further revisions before we can properly assess performance of the national economy. Interestingly enough, economic history has been revised even later than this ‘final’ number before, calling into question all decisions and analysis conducted prior to this re-write of performance.

This area of statistics is of great importance, given that it is the indicator by which we judge how we are progressing. And this not only applies to the economic sphere, but we must raise the question of how reliable and of what quality are these official statistics? Given different interpretations, analysis and the wealth of indices, rates and measurement tools, which stats tell us the truth? Can authorities use data of their choice to justify their own course of action?

Here is one current column from the London newspaper, City AM calling into question the reliability of the regular GDP number release

The influence of data and numbers and their increasing dominance in our everyday lives is also explored in this particular episode of the brilliant Adam Curtis series, ‘The Trap’. Episode 2, The Lonely Robot is advisable viewing as well as the rest of the series;

“History is (re)written by the victor? He who controls the present controls the past…..”

What do these numbers ultimately tell us? How much quality can we gleam from them, does high GDP tell us anything about justice, happiness, well being – can these factors even be measured by statistics? Should they be?

By creating a yardstick for global measurement, it helps forge all nations in the image required by those who deem themselves supreme.

Many Muslims would be happy to view a signed piece of paper by people who have the title Sheikh, Mufti, and the like, along with the logo of an interest based lender as certification of a financial fatwa. This gives them piece of mind concerning how permissible a particular product is, allowing them to purchase it.

One must look deeper into the practises of these so called gate-keepers, and how these fatwas come about. In a similar vein to credit rating agencies in the aftermath of the financial crises in 2008, who earn fees from the institutions which  use their ratings as a show of credit worthiness, there seems to be an issue with impartiality and a conflict of interest, not to mention validity – for who has the authority to issue a fatwa incumbent upon all Muslims.

Please read this article from Bloomberg Magazine, from 2007, showing the monetary incentives for such specialised scholarly talent. This helps create a lucrative market for the few who have the deemed knowledge and reputation to issue these edicts, not to mention incentivising more people to go into this particular field, all contributing to the industrialisation of ‘Islamic Finance’

$haria $cholars

We need scholars with intellect – for Daw’ah, not for Dollar$