THE GOLD DINAR CONVENTION\uff08DEWAN TUN HUSSEIN ONN PUTRA WORLD TRADE CENTRE, KUALA LUMPUR\uff0f2003\u5e74\uff17\u6708\uff11\u65e5\uff09<\/p>\n
It is a pleasure to be here today to deliver the
\nkeynote address at this Convention on gold as an
\nalternative to the traditional methods of trade
\nfinancing. Trade can only flourish if the value of
\nthe goods can be easily assessed and paid for in money
\nor tokens that can be equally easily valued. Otherwise
\nonly the exchange of goods, i.e. barter can enable
\ntrade between different countries to be carried out.
\nObviously barter trade is inconvenient as it involves
\neach party trying to value the goods of the other party
\nto determine whether he is getting a fair price, when
\ntranslated into his own currency and what his market
\nwill pay.<\/p>\n
2. Today most countries accept payments made in a
\ncommon trading currency, such as the US dollar. This
\nis possible if the buyers or importers can have access
\nto the trading currency, a foreign currency that would
\nonly be available if the country has exported goods
\npaid for in that currency.<\/p>\n
3. Malaysia has devised a way to trade with countries
\nwhich are unable to earn much foreign currencies.
\nUnder this arrangement called the Bilateral Payments
\nArrangements the exporter is paid in his local currency
\nby the country’s central bank or designated bank while
\nthe importer pays in local currency to his country’s
\ncentral or designated bank.<\/p>\n
4. At the end of an agreed period the designated
\nbanks will contra their accounts to determine which
\ncountry has a deficit and the balance in the trade
\nwould be settled in an agreed foreign currency such as
\nthe US Dollar or Yen or Euro. As the balance is far
\nsmaller than the total trade, the need for foreign
\ncurrency would be minimal. Alternatively the balance
\ncan be brought forward for future trade.<\/p>\n
5. This system can be expanded to cover several
\ncountries. It reduces the need for countries to earn
\nforeign currencies in order to import.<\/p>\n
6. Through the Bilateral Payments Arrangements
\nMalaysia has been able to increase trade by 400 percent
\nwith some developing countries. But still a reference
\ncurrency agreed by both sides must be used. And such
\ncurrencies, even the most stable, change in value.
\nCurrently the US Dollar, the most frequently used
\ntrading currency has depreciated by almost 30 percent
\nagainst the Euro in the last two years. This means
\nthat exporters are getting less for their exports. To
\na certain extent this can be mitigated by accepting
\npayment in the Euro equivalent or changing the receipts
\ninto Euro or other stronger currencies.<\/p>\n
7. All these problems arise because the world went
\noff the Gold Standard. The Bretton Woods Agreement was
\nabout fixing the exchange rate of the currencies of the
\nmajor trading countries against gold. The value of the
\ncurrencies were however fixed against the US Dollar
\nwhich in turn was fixed at 1\/35 ounce of gold or 35 US
\nDollars per ounce.<\/p>\n
8. This fixed exchange rates worked quite well until
\nmajor trading countries found their exports becoming
\nuncompetitive. Then they reneged on their undertaking
\nand devalued their currencies.<\/p>\n
9. Malaysia had remained in the “Sterling Area” after
\nindependence. All the reserves were in British Pounds.
\nThe British decided to devalue the Pound without
\ninforming Malaysia. Suddenly the value of the
\nMalaysian Ringgit and the Malaysian reserves plunged.
\nSince, even then, Malaysia was trading with numerous
\ncountries, exporting rubber and tin and buying
\npractically all the manufactured goods it needed, not
\nonly were the imports from non-sterling areas costly
\nbut buyers of Malaysian tin and rubber insisted on
\npaying the Malaysian Ringgit equivalent in their
\ncurrencies or the US Dollar.<\/p>\n
10. As a result Malaysia decided to exit the Sterling
\nArea, and convert its reserves into a basket of
\ncurrencies.<\/p>\n
11. But following the official devaluation of the
\nPound the currency traders moved in and insisted that
\nthe market determine the value of the Pound and other
\ncurrencies. The US also decided to reduce the value of
\nthe US Dollar against gold.<\/p>\n
12. Effectively this means that money became just
\npieces of paper on which certain figures were printed.
\nWithout any gold reserves, money could be printed to
\nany value. If the market believes in the currency then
\nit will have a value. But when the economy of a
\ncountry did not do well the printed value of the
\ncurrency will not fetch the former equivalent of the
\ncurrency in foreign currency. And so exchange rates
\nfluctuated and made trading difficult.<\/p>\n
13. Although the US Dollar had devalued against gold,
\nit remained strong because the US economy was strong.
\nThe US Dollar thus became a reference currency to quote
\nprices and to trade. Currencies began to be devalued
\nor revalued against the US Dollar. Speculators could
\nthen speculate on the exchange rates of currencies
\nbased on the economic performance of the countries.<\/p>\n
14. Then the currency traders became greedy. They
\ndecided to make money into a commodity like rubber and
\ntin. And like all commodities selling large amounts
\nwould lower the price and vice versa.<\/p>\n
15. Unlike commodities where eventually they have to
\nbe delivered, currencies need only to have the
\nownership transferred to the buyer in the accounts at
\nthe banks. There need not be physical delivery of
\ncash. This enables huge sums to be traded without
\nactually possessing the cash. It is estimated that
\ntotal trade in currencies is many times bigger than
\nworld trade. There cannot be enough money issued by
\nthe countries for these huge amounts. In almost any
\ncountry the total trade even within the country is far
\nbigger than the currency notes issued. The banking
\nsystem enables credits to be extended and payments
\ndebited.<\/p>\n
16. With the advent of the computer and the Internet,
\ntrading in currencies is even easier. Huge sums of
\nmoney can be bought and sold by the traders simply by
\nchanging the ownership of the figures representing the
\ncurrencies in the computers. The trading is actually
\nconfined to a small group of traders who control hedge
\nfunds. These funds large though they may be, cannot
\ncover the total sums traded. Off and on delivery
\ncannot be made and huge losses are registered. This
\nwas what happened to the Long Term Credit Management
\nFund.<\/p>\n
17. The effect of treating currencies as commodities,
\nis to devalue them or revalue them simply by selling
\nlarge sums or buying large sums of literally non-
\nexistent money. When the time to deliver comes the
\namount is simply credited to the buyers account. The
\nwhole transaction is not transparent, totally hidden
\nfrom the public eye, because banks uphold the secrecy
\nof transactions of their clients. Not even Governments
\ncan get access to the accounts of bank clients.<\/p>\n
18. In the meantime the devaluation of the currencies
\nbecause of the currency trade impoverishes whole
\ncountries and all the businesses. Payments for
\nimported goods, including food cannot be made because
\nin local currency term the prices have shot up sky
\nhigh. Unless the wage-earners and traders are given
\nincrease in pay and higher profit margins, and all
\nassets and properties are revalued upwards, they will
\nnot be able to buy even for their daily needs. There
\nwill be rampant inflation and all trading and
\nbusinesses would be thrown out of gear. Local banks
\nwould hold practically useless money, including the
\nsavings. In other words the whole economy would be
\nparalysed. There would be a great deal of uncertainty
\nas the currency traders played around with the money,
\ndevaluing and revaluing it at will and profiting from
\nevery movement of the currency.<\/p>\n
19. Thriving and even very profitable banks and
\nbusinesses would become stressed or bankrupt when
\ncurrency devalues. If money is borrowed from the IMF
\nto pay foreign debts, the Fund would insist that the
\ncountry allow in foreign companies and banks and that
\nall Government companies and agencies be privatised.
\nWith the local currency devalued and all the business
\nin serious financial trouble, the foreign investors
\nwould be able to buy all the banks and companies at
\nfire-sale prices as their currencies would have
\nappreciated greatly against the local currency. At the
\nend of the day all the wealth of the country would fall
\ninto foreign hands. The country would lose control of
\nits economy completely.<\/p>\n
20. Currency trading is only possible when paper money
\nand then computer money is regarded as legal tender.
\nThe pieces of paper which is accepted as money based on
\nfigures printed on them, and subsequently computer
\nmoney based on the number of zeros tapped out on the
\nkey board have no intrinsic value. They cannot be used
\nfor anything other than tokens representing money.<\/p>\n
21. If money is to be truly worth the value that it is
\npurported to be then it must have an intrinsic value,
\ni.e. on its own it can be used to produce something of
\nvalue. Metals are lasting and can usually be used to
\nproduce something useful. During the bronze and iron
\nage, these metals were used and were obviously valuable
\nenough to be made into currency tokens or coins. The
\nvalue of the tokens initially represented the actual
\nvalue of the metal.<\/p>\n
22. Later gold and silver, because of the demand for
\nthese metals for ornaments, were minted into coins.
\nThe value was real until the feudal rulers abused these
\ncoins by mixing with base metals and their value was
\nless than their true worth. Still gold coins with a
\nknown degree of purity commanded a price almost
\ncommensurate with their value in gold. Often enough
\nthe coins were used as ornaments or melted down and
\nmade into ornaments of different shapes. Whatever it
\nis the gold in the coins command a price, and can be
\nused in payments for goods within and between
\ncountries.<\/p>\n
23. But carrying gold and silver coins is obviously
\ncumbersome. As trade within and between countries grew
\nit was not practical to use the coins for payments.
\nPaper is more convenient and these days transfers can
\nbe done very conveniently through telegraphic means and
\nnow the computer. But as we have noted paper and
\nfigures on the computer have no intrinsic value and can
\nbe abused. Although gold has intrinsic value, it is
\ninconvenient to be used physically for payments and
\nthere really is not enough gold in the world to pay for
\nthe huge amounts of trade going on internationally and
\nnationally today.<\/p>\n
24. In order to minimise the need to transfer gold, it
\nshould be used only in international trade. Within a
\ncountry paper money can still be used with the money
\npegged against gold at a rate determined by the
\nauthorities. The authorities must however guarantee
\nthat the gold can be purchased from the treasury at the
\nstated rate. Even for this there will not be enough
\ngold. But as with paper currencies a run on the bank
\nwould bankrupt the bank, a run on the Government
\ntreasury would have the same effect. However it is
\nless likely to happen simply because individuals cannot
\nreally keep or carry large amounts of gold. Demands
\nfor gold against currency would really be very minimal.
\nStill it is better not to use gold within the country
\nbut to use paper currency that is guaranteed against
\ngold. The banking practices within the country should
\nbe able to go on as usual.<\/p>\n
25. To reduce the amounts of gold to be transferred,
\ntrade between countries should only involve the
\nsettlements of the balance of trade. In the Bilateral
\nPayments Arrangements as has been explained, the
\npayments to the exporters are made by a designated bank
\nin local currency and the importer also pay to a
\ndesignated bank in the local currency. At the end of
\nan agreed period the balance in the trade is settled in
\nan agreed trade currency.<\/p>\n
26. All that is needed is for the settlements to be
\nmade in gold instead of a foreign currency. But even
\nthis can be inconvenient. It is easier for a credit or
\na debit note to the value of the gold to be made. If
\nabsolutely necessary only should gold be transferred.
\nOtherwise the gold should be held in the central banks
\nin the form of ingots or coins of a certain purity and
\nvalue to back the value of the deficit in the balance
\nof trade.<\/p>\n
27. It will not be possible for all trade between all
\ncountries to be conducted using gold in the form of
\ngold dinars immediately. For a time the use of the so-
\ncalled hard currency such as the US Dollar or the Euro
\nor Yen will have to continue. But pairs of countries
\ncan begin to use the gold in the form of gold dinars to
\nsettle their balances of payment. It should be
\npossible to then advance by involving a group of
\ncountries.<\/p>\n
28. Actually since the Bilateral Payments Arrangements
\nhave worked using the US Dollar as the trading
\ncurrency, switching to the Gold Dinar is simply done by
\nsubstituting the Gold Dinar for the US Dollar. The
\nvalue of the local currency against the Gold Dinar can
\nbe determined by the authorities of each country, based
\non the local market value of gold.<\/p>\n
29. Gold prices in any currency will fluctuate. It is
\nnot really the gold which revalues or devalues. It
\nwill be the currency which fluctuates against the gold.
\nDuring the Asian currency crisis the currencies were
\ndevalued against the US Dollar basically. The US
\nDollar was not regarded as depreciating when an Asian
\ncurrency revalues. Similarly with gold. When a
\ncurrency strengthens against gold, gold is not
\nconsidered as having devalued.<\/p>\n
30. But as we are now seeing the US Dollar can
\ndevalue. Presently the US Dollar has depreciated by 30
\npercent against the Euro. It can devalue further. In
\nfact during the Asian crisis some currencies devalued
\nto one-sixth of its former value against the US Dollar.
\nBut gold cannot be so devalued simply because it is a
\nmetal that can be used for other purposes besides as
\ncoins. The fluctuation in the gold price in any
\ncurrency would be quite limited. Gold is therefore a
\nmore stable reference currency.<\/p>\n
31. Since trade is conducted in gold, the prices would
\nbe as stable as the gold prices.<\/p>\n
Speculation in gold can still take place but as has
\nbeen pointed out the fluctuation would be minimal. It
\nis not possible for anyone to corner the gold market
\nsimply because it will not be possible to deliver the
\ngold upon settlement. The amount would be too big and
\ntoo cumbersome for the rapid transactions of the
\ncurrency traders.<\/p>\n
32. But the payment in gold is not the same as
\nspeculation in gold. The payments of the balance of
\nthe total trade over an agreed period will have to be
\nmade by the designated bank, preferably the Central
\nBank of the country, and such banks cannot renege on an
\nundertaking agreed upon by the Government under the
\nBilateral Payments Arrangements.<\/p>\n
33. There will be hitches in the early days but they
\ncan be resolved.<\/p>\n
34. The realisation of this proposal on the use of
\ngold for trade settlement, or for that matter, the
\npursuit of alternative mechanisms for trade financing,
\nwill depend, to a large extent on its acceptance by the
\nparties and countries concerned. The support and
\nendorsement of the trading community is of paramount
\nimportance. In this connection, the Dewan Perdagangan
\nIslam Malaysia (DPIM) has a key role in mobilising the
\nsupport of its membership to ensure the success of the
\ngold-based BPA.<\/p>\n
35. The benefits of the gold-based BPA to the traders
\nand businessmen are quite apparent. By converting
\ncommercial risk associated with trade into sovereign
\nrisk, such a mechanism will assume a pivotal role in
\nenabling traders to penetrate new, non-traditional
\nmarkets with greater confidence. The BPA process would
\nalso reduce the cost of doing business by dispensing
\nwith the need for banks to confirm letters of credit.
\nAt the national level, the gold-based BPA mechanism
\nwould help to diversify export markets and avoid over-
\nreliance on the traditional export markets. In the
\nprocess, we can also reduce the over-dependence on
\nforeign currencies in international trade.<\/p>\n
36. In moving forward this important initiative on the
\nuse of gold in trade settlement, a Secretariat is being
\nestablished in Malaysia to coordinate the necessary
\nfollow-up activities. The Secretariat can serve as a
\nfocal point for the dissemination of information on the
\nuse of gold in international trade, liaise with the
\nrelevant parties, both domestic and foreign to develop
\nthe operational framework on the use of gold in
\ninternational trade settlement. The Secretariat will
\nalso serve to promote public awareness on the use of
\ngold as a mechanism for trade settlement. I would urge
\nDPIM members to give full support and cooperation to
\nthis initiative for the benefit of the national economy
\nin general and the business community in particular. I
\nam confident that this convention will deliberate on
\nthis matter in some detail and generate useful
\nsuggestions on alternative proposals to the traditional
\nmethods of trade financing and settlement, including
\nother options on the use of gold.<\/p>\n
37. On this note, I am pleased to declare open, this
\nDPIM convention on the use of gold as an alternative
\ninternational currency.<\/p>\n","protected":false},"excerpt":{"rendered":"
THE GOLD DINAR CONVENTION\uff08DEWAN TUN HUSSEIN ONN PUTRA WORLD TRADE CENTRE, KUALA LUMPUR\uff0f2003\u5e74\uff17\u6708\uff11\u65e5\uff09 It is a plea … \u7d9a\u304d\u3092\u8aad\u3080 \u30c7\u30a3\u30ca\u30fc\u30eb\u306b\u95a2\u3059\u308b\u30de\u30cf\u30c6\u30a3\u30fc\u30eb\u9996\u76f8\u306e\u6f14\u8aac\u2463<\/span>