「THE GOLD DINAR IN MULTI-LATERAL TRADE SEMINAR」／2002年10月23日
I would like to thank the organisers for inviting me to
speak at this seminar on the Gold Dinar in Multi-Lateral
Trade. I hope I can help to make clear the idea and the
concept of the Gold Dinar.
2. For some time now the Muslims and their countries
have become synonymous with backwardness, authoritarian
and frequently unstable Governments and lately with
terrorists and terrorism. Yet Islamic states were not
like that before, nor were Muslims involved in acts of
terror. In fact Muslim countries were where the
persecuted of Europe, in particular the Jews, sought
refuge. The pogroms and the inquisition in Europe
forced the Jews to migrate to the Muslim countries in
North Africa. Yet before that when Muslims ruled Spain,
the Jews, the Christians and the Muslims were able to
live together in peace.
3. If today there is so much animosity between Jews
and Muslims it is not because of religious differences.
The fact is that the Europeans who in the past never
liked the Jews and massacred them every now and then,
wanted to get rid of the Jews. Together with the
Zionists they took Arab land in Palestine and gave it to
the Jews for the setting up of the state of Israel. In
the process the Palestinian Arabs were expelled from
their homes and their land and ever since these people
have been living in makeshift refugee camps in Lebanon
4. When the Arabs attacked Israel in a conventional
war, they were not only defeated but more of their land
was seized by Israel. The Israelis were able to win
because they were strongly supported by Europe and then
America. Every time the Arabs fought to get back their
land, they actually lost more land.
5. The conflict is therefore about land, not about
religion as it is made out to be. If the Palestinians
indulge in acts of terror today, if other Muslims
indulge in acts of terror, it is because conventional
war has become impossible for them. We do not condone
acts of terror by anyone. Suicide bombing against
civilians must be considered as acts of terror. So are
the killings of Palestinian children and civilians by
the Israeli armed forces — all are acts of terror. And
the Israeli army is no less a terrorist organisation now
as is Hamas, as was the previous Jewish Irgun Zvai
Leumi, the Stern Gang and others, all are terrorist
6. The events of September 11 2001, have however
focused the world’s eyes on Muslim terrorists and this
has lead to a very distorted view of Islam and the
Muslims. This view has affected Muslims in all areas.
They are being discriminated against everywhere.
7. This unfortunate repercussion of September 11 has
resulted in the whole world’s economy being unable to
grow. And now, as a direct consequence we are being
threatened by a war against Iraq, a Muslim country and a
major oil producer. Without doubt this will make the
economies of the world even less able to grow,
especially those of Muslim states.
8. The West and in particular the Americans are very
angry. So are the Muslims. Angry people cannot act
rationally. But if we want to solve the problem we have
to strive to be rational, to remain calm and not let
emotions control us.
9. At the moment most Muslims are only bent on
revenge. They are hitting back because of anger. They
do not seem to care whether they achieve ultimate
success or not. Every time they hit, the other side
would hit back. And every time the other side hits back
they would retaliate in kind.
10. The question is how long will we go on like this.
The Palestinians have been fighting for the past 50
years. Their position has not improved. In fact it has
become worse. In fact the position of the Muslims
worldwide has become worse. And if what is happening
now is any indication it would continue to be so for
decades. The Muslims of this world, all 1.3 billion of
them, will continue to be oppressed and humiliated.
11. There are of course some of us who believe that it
is the fate of the Muslims to be oppressed in this world
because in the akhirat we would be in heaven. If this
is the fate of the Muslims, why did the Prophet strive
to save the Muslims from the oppression of the Khuraish?
Why did he and his followers migrate to Madinah; why did
he unite the Ansars and the Muhajirin and gather them
into a strong force in order to repel the enemy? Indeed
the Al-Quran enjoins the Muslims to equip themselves for
their defence, to educate themselves, to achieve success
in life even as they must seek merit for the hereafter,
so they may impress the Jahilliah and spread the
teachings of Islam. In a matter of 100 years the
Muslims had created a powerful Muslim world extending
from Spain in the West to China in the East.
12. Did the Prophet preach to his followers that they
should suffer in silence because for them there will be
heaven in the next world? In fact he prepared them to
defend Islam with their wealth and their lives, to
defeat the enemy. He did not advocate just seeking
revenge upon the enemy in anger through attacks and
13. It is clear that we Muslims are openly and
blatantly ignoring the clear teachings of our religion
in favour of quarrelling over contentious issues and
interpretations while ignoring the oppression by the
enemies of Islam, while failing to prepare for the
defence and safety of the ummah and Islam.
14. One of the clearest teachings of Islam is that all
Muslims are brothers and that no one should question the
religion of anyone as long as he takes the oath that
“there is no God but Allah and Muhammad is His Prophet.”
The split amongst the Muslims into hundreds of different
sects is due to the denial of the Islam of rival groups
in order to justify the fight against them.
15. All who submit to “Allah and His Prophet” must be
considered as Muslims and must be brothers of each
other. Race and nations and borders should not stand in
the way of Muslim unity nor should ideologies and
political parties. There is only one Islam that was
brought by the Prophet. The breakup of the Muslims into
sects and groups all occurred after the death of the
Prophet. It follows that the differences in the
interpretations of Islam, differences which lead to the
many splits and the formation of splinter groups, which
are opposed to each other, is due to different
interpretations of the teachings of Islam. But we all
subscribe to the basics and it is a basic creed of Islam
that all Muslims are brothers. If we can forget our
differences in the interpretations of Islam, if we go
back to the basics which we all accept then it is
possible for us to unite. Certainly now, when the
Muslim ummah everywhere is threatened and oppressed,
when our holy places are being desecrated, when we are
so weak and poor, particularly poor in knowledge and
skills in this age of technology, certainly now we must
forget our differences and unite.
16. However, our unity should not be for the purpose of
futile attacks on the enemy. We should unite in order
to build up our capacity and our strength. Simply by
being united and strong, we would be freed from
oppression. It will take time but Allah has enjoined
upon us to be patient.
17. “Innallah hamaassabirin”. The Prophet was patient;
He did not seek revenge for the humiliation and
oppression he was subjected to. He retreated to a safer
place in order to build up his strength. And he created
sufficient wealth among his followers to support his
struggle to return to Makkah.
18. We have to do the same. The Muhajirin and the
Ansars among us must unite, must build up our capacities
in terms of wealth and technology, in terms of stable
Islamic communities, in terms of following all the
undisputed injunctions of Islam.
19. Pure materialism is abhorred by Islam but there is
no injunction against the legitimate acquisition of
wealth. Tithe must be paid on our wealth but we are
also enjoined to be charitable. We know that the third
Caliph, Saidina Othman, was wealthy. During the
campaigns by the Prophet he donated camels and other
supplies for the defence of the Muslims.
20. If the Muslims are going to protect themselves they
must have sufficient wealth. Allah has endowed Muslim
countries with inexhaustible wealth. These need to be
administered for the good of the ummah.
21. But wealth can also be acquired through commercial
activities, through the production and distribution of
goods and services and through trade.
22. Today trade between Muslim countries is small. It
is not suggested that we reduce our trade with the non-
Muslims. But we should endeavour to increase the trade
between Muslim countries.
23. We can trade through the exchange of goods, through
barter. But today we use money. Since we don’t have a
currency which is strong enough and stable enough in
exchange rate terms, we have to use the American dollar.
But the dollar is also not stable. Today the dollar has
depreciated against many other currencies. This means
that despite the increase in the price of oil for
example, we are actually earning less due to the
devaluation of the dollar. It is the same with the
other currencies. It is the same with our own
currencies. They all fluctuate in value. And they are
all subject to speculation and manipulation as happened
in Malaysia and other East Asian countries, in Russia
and in Latin America.
24. The reason for this is that paper currency has no
intrinsic value. You can print any figure you like on
currency notes but in exchange rate terms the figure
means nothing. The Malaysian Ringgit is 3.8 to one U.S.
Dollar. The Turkish Lira is 1.5 million to one U.S.
Dollar. The Indonesian Rupiah is 9000 to one U.S.
Dollar. The purchasing power within the country is
different from the purchasing power outside the country.
Sometimes countries have as many as four exchange rates
— one official, one for domestic economy, one for
export and one for import.
25. Clearly this situation in terms of international
finance is chaotic and anarchic. But since the system
benefits the powerful countries they are unwilling to
26. If we want to avoid being short-changed we must
have a currency that has intrinsic value. Gold does
fluctuate in price but the fluctuation is minimal. It
is not possible to devalue gold by one hundred percent
or one thousand percent. Nor is it possible to revalue
gold by the same percentage. The fluctuation in the
value of gold can only be by a few percentages, up or
27. When the Allied nations met in Bretton Woods to
determine the principle for the rate of exchange of
international currencies in order to facilitate trade,
they decided to use gold as a standard. The value of
the U.S. Dollar was fixed at one dollar for 1/35 ounce
of gold or 35 U.S. Dollars per ounce. All other
currencies were valued in gold through the rates of
exchange with the U.S. Dollar.
28. This worked quite well until some countries wanted
to devalue their currencies in order to become
competitive in the international market. Then other
countries also decided to devalue in order to remain
competitive. Finally the U.S. Dollar was devalued
against the Gold.
29. At this stage the gold standard could not be
sustained. The market claimed that it could determine
the exchange rate through the demand and supply of
currencies freely traded in the market. But profiteers
moved in and they manipulated the value of the
currencies so that there was chaos in terms of exchange
rates of currencies. Business became very difficult.
Indeed many good businesses went bankrupt when the
domestic currency gets devalued. The hedge Funds which
claim to insure the value of the currencies made huge
sums of money speculating and manipulating the values of
30. This anarchy in the international financial regime
will remain because it benefits the rich and the
powerful. If we want to protect ourselves we must
evolve our own payment system, our own trading currency.
31. The Gold dinar can provide the currency for trade
between nations. If we value all trade items against
gold, then we will have no problem with the exchange
rate. We know that in the last resort we can melt the
gold and sell it in the market. You obviously cannot do
that with paper currency, worst still with figures on a
computer. They have no intrinsic market value as gold
32. But gold is bulky. We cannot be carrying gold all
over the world in order to pay for goods we want to
import. But we need not do that.
33. It is not intended to use the gold dinar as
currency for everyday transactions in the domestic
market. For this we can use national currencies. If
there is inflation then the currency can buy less gold
and other goods. And vice versa. So there is no
necessity to carry bags of gold coins for transaction
within the countries.
34. But even for international trade the transport of
gold bullions or gold coins would be very minimal.
Through bilateral payments arrangements the imports can
be balanced by the exports and the differences settled
in gold dinars. The Central Bank can provide a
guarantee for the gold required for the payments of the
balance. In the following weeks or months the deficits
may be reduced or a surplus achieved. In that case the
payments of the balance can be made through accounting
arrangements between the Central Banks. It is only
occasionally that a necessity might arise for the actual
gold dinar to be used to pay for the purchase of
35. We cannot really verify the amount of money a
country has. A country’s own currency cannot be
regarded as its reserve. But gold dinars or gold
bullion or gold ingots can serve as a country’s reserve.
Still in the end we have to trust each other. If we are
good Muslims then the cases of fraud by Central Banks
would be minimal.
36. Assuming that Malaysia exports to a Dinar Area
country a hundred million Dinars worth of motor vehicles
and then imports 110 million dinars worth of oil, then
the payment required by Malaysia would be just 10
million dinars. The ten million dinars is credited to
Malaysia’s trading partner. If in the following month
the trading partner buys 110 million dinars worth of
Malaysian cars and Malaysia buys 100 million dinars
worth of oil, then no payment need to be made by either
party. The 10 million dinars that has to be paid by
Malaysia’s trading partner for the motor vehicle can be
offset by the credit of 10 million dinars from the
previous month’s transactions.
37. Today with computers we can close account and pay
more frequently. Through this method it is not
necessary to purchase or earn hard currency.
38. Of course there may be some countries which are so
poor that they cannot have gold dinars. We can buy some
raw materials to be paid in gold dinars. They can be
helped to build up the reserves of gold dinars.
39. There will be problems. But if we begin with just
a pair of countries we would be able to minimise
problems and demonstrate whether it works or not. We
will be able to identify the weaknesses and the faults
and correct them.
40. Gold is a precious metal. There has never been a
time when there was no demand for gold. It is also not
so plentiful that its price will fall the way paper
currency or even other precious metals can fall. Yet it
is not so limited in quantity that anyone or any trader
can corner it and manipulate the price.
41. In different countries the price of gold will
differ in terms of the currency of that country. That
is a function of the currency of the country. The value
of one gold dinar is one gold dinar no matter what the
exchange rate of a currency is against the gold dinar.
If the value of goods or services is expressed in gold
dinar, the value remains the same no matter which
country is involved in the trade.
42. Thus an exporter can declare the agreed price in
dinar to the importer in another country and to the
Central Bank in his country. Depending on the agreement
reached the Central Bank will pay the exporter the
current local currency equivalent to the gold dinar
price. At the importer’s end, he would pay to his
country’s Central Bank the local currency equivalent of
the agreed price in dinar. At the end of the week or
month the Central Banks will total up the value in dinar
of the exports and imports between the two trading
countries. If they are not balanced then the country
with a surplus will have a credit account against the
country with a deficit. The difference can be paid in
dinar or in goods or the country with the surplus can
hold the dinar for future purchase from the country in
43. In multi-lateral trade, the process may be a little
more complicated but it is entirely, manageable. A
clearing house can be set up for a group of trading
countries and the deficit and surpluses balanced. The
process is not unlike the clearing of the cheques of
numerous banks at a central clearing house.
44. Provided there are goods or services to be supplied
by all participating countries, the amount of gold
dinars that needs to be kept as reserve backing and for
payment in the last resort is very small. Ideally there
would be no need to transport and pay in dinars. The
imports and exports in most instances would cancel
themselves. The profits come from disposing of the
goods or services domestically when the local currency
would be used.
45. There will be problems of course. But there are
problems now. Countries with no “hard currency” i.e.
U.S. dollars cannot pay for their imports anyway. In
addition the U.S. currency is not as stable as gold.
Not only can it appreciate or depreciate widely but a
country’s currency can be made to depreciate so much
against the U.S. Dollar that its imports cannot be paid
for, priced as they are in U.S. Dollar. The gold dinar
cannot depreciate much against the U.S. Dollar.
46. Gold price can also be manipulated but not as
easily as U.S. Dollar or other currency. No one can
sell gold at below market price because he just will not
be able to deliver when called upon to do so. Short-
selling will be very difficult if not impossible.
47. However local currency prices of gold can still
fluctuate if left to the market. It is up to the
country concerned whether to control exchange rates or
not. But speculation and manipulation will not be as
easy as when local currency is valued against the U.S.
48. It must again be stressed that the Gold Dinar is
exclusively for international trade. It is not to be
used as local currency. In a sense it is like the U.S.
Dollar now. Some countries of course use the U.S.
Dollar locally for paying hotel bills by foreigners.
But the dinar is heavy and cumbersome to carry. So it
cannot be used as freely as the U.S. Dollar locally.
This again lends credibility to the dinar and the local
currency, which has to be used for local payment.
49. We should not be too ambitious as to launch the
Gold Dinar for multi-lateral trade at one go. We should
begin by pairing off the countries willing to use the
Gold Dinar. A pair of good trading countries with a
fairly well balanced trade should initiate the use of
the Gold Dinar. Problems that arise can be resolved and
the system improved. After the bugs have been got rid
off then the trade using the dinar can be expanded
gradually to involve more countries.
50. Traders in particular will be happy because their
prices in Gold Dinar would not be affected by changes in
the exchange rates of the importing countries or the
exporting countries. In dinar, the prices will always
remain the same.
51. It is not the intention to make the dinar a common
currency for all countries. It is not really the Gold
Standard with a fixed value against local currency. If
countries print more local currency there would still be
inflation within the country. But trade would be stable
and enhanced. Speculators and manipulators will not be
able to undermine international trade.
52. Of course the Gold Dinar can be a trading currency,
for all countries, not necessarily Muslim countries.
But Muslim countries are in the best position to
demonstrate the viability of the system. They are in a
position to manage their economies rationally and in the
process show the world that they are capable of growing
with stability and in peace. And this will do more
towards countering oppressions by their enemies than the
futile violent retaliations.