. by Dr. Zeno Dahinden
Delivered at the 11th International Fiqh Conference
Cape Town, South Africa
To truly understand what is happening today in the so-called credit crisis, we first need to understand what happened back in 1910 when the Federal Reserve System was conceived and what the hidden agenda of the 'founding fathers' of the Fed were. Without an understanding of this historic background, we cannot possible comprehend the deeper context of the ongoing crisis.
My analysis will focus on four aspects of the Modern Financial Power System: 1. FIAT money: how FIAT money (or money made out of nothing) comes into existence; 2. Loss of Purchasing Power and Inflation: what effect the unlimited creation of FIAT money has on the broader economy and ultimately on you and me; 3. Central Banks and the Fed: the hidden agenda and objectives of the banking cartels known as Central Banks and the Federal Reserve System; 4. Real Money and Shari’a Economics: the only viable alternative to the FIAT economy. Please allow me some introductory remarks: 1. How FIAT Money comes into Existence FIAT Money is money made out of nothing and comes into being through the creation of government, business and private debt. That is a very important fact to remember: FIAT money is created from debt. We will later see why this is so important. This becomes possible through a collusion of interest between governments and the privately owned banking cartels known as Central Banks and the Federal Reserve System. You might rightfully wonder how it is possible to create money out of nothing – the same money that all of us labor and sacrifice for our entire lives. Let us use an example to best illustrate how FIAT money is created: It all starts with the government side of the equation. The government runs out of money and needs 10 billion USD to pay for its running expenses over the next few weeks. Congress thus goes to the Treasury and asks for the money. The Treasury official tells Congress that they must be kidding because all tax receipts have long been spent in January and February (most of it by the way on the Fed to service the government’s debt). But don’t worry, they say, and together they go down the road to the Fed. Now the Fed has been waiting for them since this is one of the reasons it has been created. Once they arrive at the Fed, the Fed official takes out a big check book and writes a check over 10 billion USD to the US government. At this point, we have to ask the legitimate question where did this money come from. The astounding answer is that there is no money, technically speaking there is not even a checking account, there is just a check book. This money came into being in the precise moment the Fed official signs the check. It is therefore created out of nothing and is loaned to the government against interest. If you or I would do that, we would go to jail. The Fed however can do it because Congress wants it to do it. We will later see why. The Treasury official then deposits this new money in a government checking account at the Federal Reserve System Bank (which is properly speaking not even a bank) and the government starts to write checks to pay for its projects. Let us now follow a small part of this money to better understand what happens on the commercial banking side of things. Once the money leaves the government side of the equation, it enters mainstream banking. Let us assume, the postman next door receives a government-issued check over 100 USD and brings it to his commercial bank down the road. The bank official deposits the 100 USD and goes to the loan window to announce that 100 USD have just been deposited and the bank can now loan money. This makes everybody waiting outside the loan window joyous because this is one of the reasons people go the bank – to loan money. Some people are however a little concerned because it is only 100 USD that were deposited. Do not worry the bank official says, we can loan you up to 900 USD. How is this possible? Let me explain: this becomes possible because the Fed has ruled that a minimum of 10% of all outstanding loans must be kept on deposit (this is called fractional banking). Since 100% of 10% (in our case of 100 USD) is 1000 USD, the bank can thus loan up to 900 USD based on the 100 USD that were deposited earlier. At this point, we have to ask the same legitimate question – where did this new money come from? The amazing answer is the same – this money was created from nothing and comes into existence at the precise moment the loan is signed by you and me. In summary, as a result of the government’s need for 10 billion USD, a total of 100 billion USD have been created from nothing – all of it loaned out and collecting interest for the banking side of the partnership. Interest on nothing! There is however one important difference in the use of the money loaned to the government and the money loaned to us by the commercial banks. While the government uses this money to pay for its projects, the banks do not use it on their projects, but loan it to us for our projects against interest and secured by our assets. While the large part of our profits from this nothing money thus goes back to the banks via interest payments, the banks will take all of our assets if we fail to pay interest on this nothing money. While the banking side collects perpetual interest on nothing, the fruit of our labour and sacrifice goes back to the banks in the form of interest. Whether in times of expansion or contraction, it does not matter: the banks always win – it was engineered that way. If we however fail to pay interest on this nothing money, the banks take our cars, our houses, in fact all of our assets because we signed on the dotted line. You might rightfully wonder how the banks which collect perpetual interest on nothing and have the right to our assets can possible get into trouble as they do today. The answer lies in their excessive leverage (which is based on greed) where they loan out too much and keep too little in reserves. If only a few percent of the outstanding loans fail, the banks get into trouble because they cannot meet their reserve requirements – this is exactly what is happening today and what is falsely labelled a credit crisis. The current crisis was caused by an overextension of leverage while the tightening of credit is simply a side-effect of insufficient capital reserves resulting from this overextension. For the above reason, the whole FIAT system is a house built on cards, and any major storm can bring it down. The higher the leverage, the higher the risk of failure. What we witness today in the so-called credit crisis is the result of an over-extension of leverage. This is the second important fact to remember, we will later see why. 2. Loss of Purchasing Power and Inflation Let us now follow the diffusion of this newly created money into the economy. Since FIAT money is made out of nothing, every time new money is created and injected into the economy, the new money ‘borrows’ its value from the existing money and thus debases it. It is like pouring water into a pot of soup – it dilutes the soup. We experience this as a loss of purchasing power which is the phenomenon of inflation or, more properly speaking, the appearance of rising prices I say appearance of rising prices because in terms of REAL Money (namely gold and silver), prices do not change over long periods of time. Rising prices (or inflation) are the result of ‘making money out of nothing’. In ancient Rome, a one ounce gold coin (which is REAL Money) bought you a fine toga, a handcrafted belt and a pair of sandals. Today, you can walk into any fine men’s store and, with a one ounce gold coin, you can buy a fine suit, a handcrafted belt and a fine pair of shoes. In other words, the real price of these things has not changed in thousands of years. Real Money therefore is the best protection of purchasing power, since it is not subject to manipulation (in other words inflation) and thus ensures long-term price stability - something which our central banks proclaim as their core objective and which none of them have even remotely achieved. Quite on the contrary, our central banks, by creating an unlimited amount of money from nothing, became the principal destructors of purchasing power and enabled the concentration of wealth into the hands of a few exceedingly powerful institutions and individuals (through interest on nothing) while ensuring that everybody else gets poorer and poorer. At this point, we have to ask another legitimate question: did anybody get our lost purchasing power which resulted from inflation or did it just evaporate into thin air? The answer is: for every loser, there is a winner. Who got our lost purchasing power? It is the people who got the money first before it was injected into the wider economy. Who are these people? Obviously the government who got the first check over 10 billion USD, the commercial banks which created new money based on the new money from the government and the people lining up at the loan window when the new money left the commercial banking side of things. These people got our lost purchasing power. By the time most of us receive this new money, it has already lost some of its value and is worth less and less. The losers are always we; the winners are the government and the banks. Through the phenomenon of inflation or, more properly speaking, the loss of purchasing power, all FIAT money is eventually destined for the ‘graveyard of FIAT currencies’ (as proposed by James Turk, CEO of GoldMoney). On the other hand, REAL Money (in other words Gold and Silver) will always maintain its value and prevail in times of crises irrespective of governments, ideologies or place in history. Why is this so? Because FIAT money is subject to government and central bank manipulation whereas real money cannot be influenced by small interest groups and is only subject to supply and demand resulting from millions of people freely interacting with each other. This is why no interest group has ever been able to manipulate the value of REAL Money and why government and central banks thought it necessary to move away from REAL Money towards FIAT Money in order to manipulate the money supply. Why? Because they needed more money than they had access to. They thus debase the money’s purchasing power through inflation and enable the exponential concentration of enormous WEALTH AND POWER into the hands of a very few institutions and individuals. No matter what anybody says, inflation is a hidden tax. Rather than increasing our direct taxes (which is not a popular thing to do and therefore not liked by politicians as the current administration in the US has demonstrated abundantly), governments prefer to take our money indirectly through inflation. This is why politicians love the creation of money from nothing and why they are in partnership with the banking cartel. How can we as average citizens best measure inflation? Certainly not through the official government and central banks statements which put inflation consistently too low. While the US government and the Fed have pegged inflation at a few percent per year over the last six years, housing prices in the US have practically doubled between 2001 and 2005. As we have seen before, rising prices are a direct reflection of inflation or loss in purchasing power. In reality therefore, inflation in the US has been running at well above 10% per year as opposed to the official figures of a few percent per year we are made to believe. Another good measure of inflation is compound money growth (referred to as M1 to M3) .While the European Central Bank still publishes reasonably accurate figures on compound Money growth (above 10% per year), the Fed has stopped publishing such figures several years back. For good reasons – they would make even simple minds suspicious at the rate the US administration has been borrowing and creating money from nothing. 3. The Hidden Objectives of the Federal Reserve System If we believe the official doctrine, the purpose of the Central Banks and the Fed is to stabilize our banking system and our economy. If these were indeed their true objectives, they do a very poor job at it and have consistently failed to meet their stated objectives. These have however never been their true objectives. The true objectives of the Fed were fourfold (with the fourth objective underlying the first three) and are completely unrelated to their publicly proclaimed objectives. They are: I. To consolidate and increase the power of the big banks on Wall Street (the exact opposite of what the Fed was supposed to achieve back in 1913) II. To reverse the trend towards private capital formation thus countering a trend in the early 1900 whereby corporations and individual were saving part of their earning to invest in future projects. III. To arrange government bail-out at the expense of the tax payers for those cartel members that get into trouble – a process that has gone out of control in the ongoing credit crisis. IV. To increase their power by buying influence through the river of unearned wealth generated by the first three objectives Now let us examine each of these hidden objectives in more detail. A. The Money Trust: In the early 1900, the American people and Congress were very concerned about the concentration of financial power in New York which was commonly referred to as the ‘money trust’. Congress set up a special committee chaired by Senator Nelson Aldrich to come up with new banking regulations to break the ‘money trust’ and disperse financial power away from New York. In 1910, Senator Aldrich together with 6 other highly influential bankers representing the financial empires of the Rockefellers, the Morgan’s, the Warburg’s and the Rothschild’s set out on a secret journey to Jekyll island and in nine days hammered out the fundamental principles of what would later become the Federal Reserve System. In their time, these 7 individuals represented directly and indirectly 25% of the entire wealth of the planet. In 1913, the first Federal Reserve Bill which was sponsored by Senator Aldrich (who later by the way became the grandfather of Nelson Rockefeller) was voted down in Congress because Senator Aldrich who was the Republican Whip in the Senate was known to represent the interest of big business. This was however just a minor set-back. They scrambled around the paragraphs a little bit and, on the insistence of Paul Warburg, added some excellent provisions to the revised bill that would seriously restrict the power of the Fed. When his colleagues asked him: Paul, what are you doing we do not want these provisions in our bill, his reply was classic: fellows he said, our objective is to pass the bill, we can fix it up later. They then found two millionaire democrats to sponsor the bill, spoke openly against the bill that they had written and got it passed two years later by a large majority except for some lone voices. This mainly became possible because of these excellent provisions that were added on the insistence of Paul Warburg which finally won over the support of Brian Jennings (the head of the populist movement) who had previously resisted all efforts to establish a central banking mechanism. And they indeed did fix it up later. Since its inception, the Federal Reserve Bill has been amended over 100 times and all of these excellent provisions were long ago removed and many more were added that greatly expanded the power of the Federal Reserve. As we are witnessing today, the biggest increase in the power of the Fed is happening right now in the context of the so-called credit crisis. Did they achieve objective 1? Yes, they did indeed. While there are big banks in the South and the West, these banks are nothing compared to the Megabanks in New York. So they get an A on their scorecard. I mentioned before that this meeting was taking place in total secrecy. When these 7 men met for their journey to Jekyll Island at the Hudson railway station across from Manhattan (where senator Aldrich has sent his private railroad car for the journey), they were instructed to come alone, not to dine with each other on the night of their departure, not to greet each other should they meet accidentally and, once on the train, to use first names only (two of them actually used code names to increase the effect of camouflage). For many years after this meeting, all of these men denied such a meeting ever took place. Only 20 years later, some of them wrote books and articles about what happened on Jekyll Island. Why was secrecy so important and what is wrong with some bankers going on a journey and discussing banking regulations? Ladies and gentlemen, these were the representatives of the Money Trust writing the Federal Reserve Bill whose objective was to break the Money Trust! This is like inviting the fox to build the hen house and install the security system! As one of them confessed many years later, should it have become known that these 7 men were meeting to discuss banking regulations, it would have caused waves in Washington, in Wall Street and even in London. Secrecy therefore was absolutely essential; otherwise their Bill would have had no chance whatsoever to pass in Congress. Before we proceed to discuss objective 2, let us now examine in more detail the composition of the group of people that created the Federal Reserve Bill. Around the table on Jekyll Island, there were representatives of the Rockefellers, the Morgan’s, the Warburg’s and the Rothschild’s. Is there something strange about the composition of this group? Ladies and gentlemen, these were competitors. Just a few years back, they were beating their heads, blood all over the place, fighting for dominance in the financial markets of the world. Now these same people are sitting peacefully around a table and coming to an agreement of some kind. Does this arouse your curiosity? What is happening here? To understand this better, we need to look at American history in the late 19th and early 20th century which was often referred to as the dawning of the cartels. US Corporations which became big and powerful as a result of intense competition and for this reason were outdoing their European counterparts, started to form cartels to protect them from competition and loss of market share. It was William Rockefeller the 1st who said: Competition is a Sin! This brings us to the astounding realization that the Fed is in reality a banking cartel. You will not find this interpretation in any text book. Contrary to the objectives of Congress who wanted to disperse and dilute financial power away from New York, the Fed has in reality greatly increased the power of its New York member banks. And to secure this increase in power, it has gone into partnership with the government – something cartels often do to protect their interest and secure their market share. To camouflage the true intentions behind the Federal Reserve System, they then had to come up with an appropriate name for the sake of appearances. First they decided to call it Federal to create the impression as if it was a government operation (which decidedly it is not). Secondly, they added the word Reserve to make it appear as if there were Reserves somewhere (there are no reserves anywhere) and finally they added the word System to create the impression that it was a system of 12 regional and equally important banks where in fact it was from the beginning dominated by the New York cartel. From its beginning, the Federal Reserve System was based on secrecy, deception and misleading appearances. It is an appearance of the 4th kind: things which are not yet appear to be. B. Private Capital Formation In the late 19th century, corporations and individuals began to set aside part of their profits to invest in future research and development projects. This is called private capital formation. At that time, the banks were greatly concerned about this trend and tried to figure out ways how to lure businesses and individuals back into the banks to loan them money. They realized that the only way to do this was by lowering interest rates. You might say why didn’t they just lower interest rates? From today’s perspective, this is a perfectly legitimate question since the modern Fed has the power to move interest rates up or down, completely at their discretion. In those days however, money was still based on gold and silver and on that money there was no lever to influence interest rates. As we have seen previously, interest rates on real money (in other words gold and silver) were determined by supply and demand resulting from the interactions of millions of people. It was therefore impossible for any interest group to move interest rates up or down. So they said that they needed a flexible currency to better serve the interest of businesses and individuals. What is a flexible currency? Ladies and gentlemen, a flexible currency is money made out of nothing. With this kind of money, it is completely in the power of Central Banks to move interest rates up or down. This was the beginning of fractional banking. At first, they lowered the reserve requirements in gold and silver down by 30%, then by 60% and, under president Nixon in the early 1970, removed them altogether thereby finally creating a pure FIAT currency. By lowering interest rates, they were able to lure businesses and individuals back into the banks because everybody thought it crazy not to loan money at these low rates. What people however tend to forget is that interest rates will also go up and economies will not just expand but also contract. And when economies contract, interest rates tend to go up and people are pressed harder and harder to service their debt. Did they achieve objective number 2? Yes, they did indeed. Today, most businesses and individuals are indebted to the hilt just barely hanging on by the flesh of their teeth. Bankruptcies are at an all-time high, more money is spent on servicing corporate debt than is handed out to shareholders in dividends and the whole world is in a state of global recession. Stock markets are collapsing across the world, individuals and public institutions such as pension funds see their wealth disappear faster than ever and governments incur debts at an alarming rate. They clearly get an A on their report card for eliminating the trend towards private capital formation. As a matter of fact, as we can witness in the so-called credit crisis, our modern world is built on debt and the freezing-up of credit brings it to the point of collapse. While governments across the planet are busy bailing out banks, the next disaster is already looming on the horizon. As a secondary effect to the credit crisis, large corporations loose business deals because their customers cannot finance them, they find it increasingly difficult to meet payroll requirements and to service their debts to the banks. These secondary effects of corporate bankruptcies which are just around the corner will, in my opinion, be much more severe than what we are witnessing today in the banking sector. I am referring to the giants of the producing economy, companies such as GM, GE and Ford. All of what is happening today came about because the Banking Cartel was so successful in reversing the trend towards private capital formation. They get an A on their report card for achieving objective 2. 3. The Game Called "Bail-Out" The third objective of the Federal Reserve System is called corporate bail-out. It works like this: if a bank is in trouble or a large corporation or third world country which owes a lot of money to the Banking Cartel gets into trouble, the Fed goes to Congress and tells them that they have to bail out the bank or corporation because if they do not, thousands of Americans will loose their jobs and, who knows, the bank is so big that, if it fails, it might act like a domino and bring down all other banks with it. I am sure you can see the obvious parallels to what is happening today. Just switch on the TV or open the newspaper and you will be bombarded with the latest bail-out news from all over the world. Morgan Stanley, AIG, Freddie Mac, HBOS, Bank of Scotland to just name a few. Since Congress does not want to be responsible for all of these horrible things to happen, they begin to use tax payers’ money to bail out the banks and corporations in trouble. The game called bail-out which started on a small scale in the early 1970 has since then taken on historic proportions and consumes funds which we cannot even begin to imagine – the zeros simply become too numerous to count. As we have painfully learned over the last few months, the European governments have just pledged 2.7 trillion USD of our money to support their ailing banking system while the US government has already spent some 300 billion USD on their crumbling financial companies and has pledge an additional 700 billions to be spent in the near future. Without even considering the commitments by the Russian and other governments, these figures are by any measure staggering, but will not even be closely enough to contain the current crisis (as the free-falling stock markets around the world clearly demonstrate). Once the full impact of the credit crisis will hit the giants of the producing economy such as GM or GE, corporate failures will grow exponentially and no government, irrespective of its fiscal policies and financial power, will be able to contain the mess and stop these companies from going under. At that point, the current credit crisis (which is still reasonably contained) will begin to mushroom into a global economic meltdown. And the reason for all of this is the use of excessive leverage and the greed of the big banks. While the governments bail out the culprits of this historic disaster without even punishing them, we are the ones footing the bill through massive inflation. And nobody is on the barricades protesting – no revolution anywhere in sight. What is happening – are we all going to take it lying down or are we getting up to fight for our rights, our lives and the lives of our children? Ladies and gentlemen, it is time to wake up. If we wait much longer, there will be nothing left worth fighting for. They did indeed do a marvellous job at deceiving us and get an A on their scorecard for achieving objective 3. D. Usury as the Key to Power – The Core of FIAT Banking Let us use a simple example to best illustrate usury and the effect it has on you and me and the world economy at large: When analyzing the construction of a house where 30k USD are used for the purchase of the land and architect fees and 70k USD go to the builder, we assume that the owner would then make a down payment of 20k USD and would borrow 80k USD on a 30 year mortgage at fixed interest of 10%. After we calculate that the bank will thus earn 172k USD in interest payments on money made out of nothing (which represents 2.5 times of what the builder gets for all the material and labour), we must conclude that this is clearly excessive and that any kind of interest on any loan of FIAT money should therefore be forbidden. You might argue that one should not forget the time value of money given the long period of 30 years during which the banks cannot use this money and the work and sacrifice that went into saving it. But not this money ladies and gentlemen: nobody worked or sacrificed for this money - this money was created from nothing. You now have to multiply this with every house, every factory, every office building, every personal, corporate and government loan, every warehouse, every farm equipment, every ship, every airplane, every investment and you come up with a vast river of unearned wealth which is perpetually flowing into a gigantic lake of unimaginable wealth. You might think these people get richer and richer and richer. Not so. This is not the purpose of this money. This money is used to purchase influence and power. Once you have all the money you can possibly spend in a lifetime, what is left? Power! They do not buy the hardware, they buy influence. They use this money to buy the people and organizations that we depend on for advice and leadership. They buy governments, publishing houses, newspapers, movie industries, public interest groups, NGOs, political organizations, consumer groups, boy scouts, girl scouts – you name it. Any organization that exercises any form of influence is a target for control. And the process has already progressed at an alarming rate and will soon be complete. In the so-called third world, this process has already been completed. These governments have already been bought outright and they could not possibly exist without this money. Ideologies are irrelevant – where is the money! The have used this money to turn inefficient dictatorship into efficient dictatorships, ineffective armies into effective instruments of control and repression. They don’t care about the people whose standard of living has not changed one iota (if anything it went down); they only care about achieving Control. In that process, they have not only pumped enormous sums into developing countries, they have actually depleted the wealth of the developed countries which is also part of the plan. In many ways they simply waste money to artificially lower our living standards. A strong country will resist control. A weak country however, where people are hungry and have no shelter, will be much easier to control. What then is the ultimate objective of the banking cartel? It is the establishment of the New World Order with one Military (UNO, the Blue Helmets and Nato), one World Court, one World Taxing Authority, one World Currency and one World Government. This is their ultimate objective – the Brave New World revisited. And they are almost there. What we are witnessing today which is falsely labelled a world credit crisis is purposefully engineered as the final step in the consolidation of world financial power before the New World Order will finally descend on all of us. Ladies and gentlemen, make no mistake these people are scientists and are brilliant in what they are doing. They have not become what they are by being idiots. They are the highly trained Masterminds who prepare the New World Order in front of our eyes and we don’t even see it. It is time to wake up, ladies and gentlemen, before it is too late. And time is running out faster than you might think. This is what all of this is about: to consolidate the wealth of the world into their hands and to use this wealth for control of the world. Nothing less than that: we are witnessing today the final act in an unfolding drama of historic proportions wherein a tiny group of people will soon rule the entire world. And if all of the above objectives for some unimaginable reason do not bring about the desired results, they can still resort to yet another weapon at their disposal which has been used most effectively in the past century: a new World War. In the same way that World War I was used to break with the old world and jump-start FIAT economies and World War II to overcome the Great Depression (which incidentally was caused by the arising of FIAT economies following World War I), World War III might well become necessary to prepare the grounds for the New World Order should all of the above measures fail to bring about the desired results. This is where all of this is headed. In the light of the above, we simply cannot afford to remain complacent. Now we have to ask another legitimate question: what, if anything, can we still do. 4. Sharia Economics and Real Money First, we obviously have to move away from FIAT Money (money made out of nothing) towards REAL Money (money with intrinsic value). Why is this so important? Because the core function of money is that of a temporary store of value to preserve purchasing power over long periods of time, and FIAT money is simply a terrible store of value as recent history has shown us again and again. Just think of what has happened to the Reichsmark after World War II – it devalued to nothing in a matter of months. REAL Money: today, the increasing influence of speculative investors in the bullion market projects a distorted picture of wild swings in the ‘price’ of bullion (as measured in paper currencies). In the past, when gold and silver were currencies, their inflation-adjusted price in terms of today’s dollars did not change over long periods of time. The only changes in the ‘price’ of bullion resulted from changes in supply and demand patterns. This happened for example when Christopher Columbus discovered the Americas, thereby enabling the massive ‘repatriation’ of gold and silver to Europe and thus increasing the supply side within a stable demand environment. The obvious result was a slow and gradual decline in the inflation-adjusted paper value of bullion over several hundred years. Only when true FIAT currencies came into being in the 20 century (before that, all FIAT currencies were at least fractionally backed by gold and silver), became the price of bullion exposed to rapidly changing fluctuations. These fluctuations in the paper-value of bullion are the direct result of the diminishing role of gold and silver as currency: I am often asked how gold and silver can be used as investment instruments. This question reveals a basic misconception of the role of bullion and stems from our focus on interest-based and speculative profits where money is used to make money. Gold and silver are stores of value and not investment instruments. It is thus not possible to earn a ‘return’ on gold and silver. It is however possible to protect one’s wealth over extended periods of time without having to fear loss of purchasing power. What does this mean for halal investment practices? First, it implies the use of REAL rather than FIAT Money. In the Koranic interpretation, all FIAT money is haram - the only permissible money must have intrinsic value and must be based on gold and silver. Secondly, we have to move away from commercial banking practices to Sharia-compliant investments. Why? Because first and foremost, Sharia economics forbids the use of money to make money! What does this imply? It means for example that more than 600 trillion USD worth of derivatives, which represent almost 20 times the monetary value of the yearly global economic output, should be redirected to the productive economy because today these instruments are exclusively used to make money with money (which is haram and forbidden). Just imagine for a moment what would happen if only a small part of this money were invested into production and trade (at present, only a few trillion USD out of the global money supply of > 600 trillion USD flow into the productive economy). This would mean that ordinary people would finally reap the benefits of their labour and risk-taking and that the flow of global capital would reverse out of the hands of a very few into the hands of many. Today, production has been largely outsourced to developing countries to take advantage of cheap labor costs and is widely considered ‘dirty’ and non-essential for developed economies. Free trade (whatever little of it is left in the face of the globally monopolized and cartelized flows of goods) has been relegated as a form of tourist attraction to developing and third-world economies. In our modern economies, the vast majority of all profits are either made by using money to make money (i.e. through bets in the form of derivatives where one can even bet on the weather or how soon Barack Obama is going to be killed once president – apart from being sickening, this is worse than Roulette) or by collecting interest on ‘nothing-money’ loaned to governments, businesses and individuals. It is a total reversal of the historic role of money away from the productive economy to a purely financial economy. The economy of modern power centres such as London or New York is mostly reduced to money making money. In these modern power centres, one looks in vain for industrial production or free trade – attributes which used to be the hallmark of the power centres of the past. We therefore need to turn away from the financial to the productive economy and must reverse the harmful trend of using money to make money. Second, Sharia economics forbids any form of loans, be they interest-based or interest-free (i.e. all loans are considered usurious). Let me explain this in more detail since I get a lot of questions on this point (particularly why interest-free loans are haram). In an interest-based loan, the lender gets an undue advantage (or increase) because of the interest paid by the borrower. In an interest-free loan, the borrower gets an undue advantage, because he uses the money of the lender for his projects and pockets all the gains without letting the lender participate in the benefits. In both cases, there is undue increase with one side of the equation getting the short end of the stick. This is why all loans are haram. This implies that the core business of modern banking (both commercial and Islamic banking), namely the risk-free loaning of ‘nothing money’ against interest or guaranteed profit, is haram: first because the banks use money created from nothing to generate a massive and risk-free inflow of unearned wealth, and secondly, because any risk-free profits, including loans of any kind, have been forbidden since Biblical and Koranic times (please note that most so-called Islamic instruments are as risk-averse as their commercial counterparts). What then are Sharia compliant investments? As we have seen before, Sharia-compliant investments must be based on REAL rather than FIAT Money. Some people argue that any commodity with intrinsic value can serve as real money. Although this is correct from an academic point of view, most commodities with the exception of bullion and oil do not own one essential attribute of REAL Money: they are not universal. Since oil is rather difficult to store for an average person and the only precious metals available in sufficient quantities to serve as money are gold and silver, the choice is self-evident. Secondly, it implies that all forms of financing must be based on shared profit/risk schemes where the investor participates in the gain or loss of a project together with the ‘borrower’ and where the ‘borrower’s’ seed assets are protected against ex-appropriation. All types of modern loans therefore disqualify. In interest-based banking, all collateralized assets go to the lender once interest payments on a loan cannot be maintained (as we all know very well and might have experienced ourselves), and the borrower looses his or her assets. In Sharia compliant investments, this could never happen. Sharia compliant investments therefore must always be based on shared profit and risk and must extend into the productive rather than the financial economy. This is the core attribute of Sharia compliant investments, and on that attribute, we need to reconstruct a new understanding of what correct financial investments really mean. To close our discussion, we need to consider what we as average citizens can do about all this. In a very direct way, all of us can combat the usurers by not loaning money from them and by putting pressure on our respective governments to increase their fiscal responsibility and reign in their long-term obligations to the banking cartel (because they incur debts on our backs). This is how all of us can together begin to erode their power base and eventually bring them to their knees. Why? Because the creation of all FIAT money starts with debt – in the absence of debt, FIAT money cannot be created. Remember that in the very beginning of my talk I pointed out that FIAT money comes into existence through the creation of debt. Ladies and gentlemen, we still have time to fight. Even though time is quickly running out, we can still meet as we do; we are still free to discuss the deconstruction of the world financial system and the abolishment of Central Banking. But time is quickly running out. If we continue to wait on the sidelines, we play into their hands. Ladies and gentlemen, it is an all out war without mercy or consideration for the enemy. If we don’t fight, we will most certainly become the victims. As one of the founding fathers of the US constitution is on record to of saying: why stand we here idle when our brethren are already in the field? At the end of this conference, Umar Vadillo will show you how this reconstruction can happen in the practical setting of an Islamic government using Islamic money within the context of Sharia-compliant investments. Dr. Zeno Dahinden
