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Fiat Standard And Fractional Reserve Banking Amd Home Loans
I asked one question and ghamidi sb answer was not satisfactory at all.
According to Ghamidi sb, Home loans are valid.
I said in this matter he forgot one major factor which is how fractional reserve banking system works in current fiat standard.
Any loan which get issued, is not given by bank from its own money. That money gets created out of nothing. Banks credit that money. So first, that money was non existent and then Banks creates and charge on it. So who gives right to create money to Banks? In islam what is considered momey? Creating new supply of momey requires proof of work. In gold standard that is searching for potential gold location and digging it. Which is costly and risky work. That is behind the value of gold. Now fiat money – paper money is not backed by any asset. It was imposed on people by government forcefully. Ghamidi sb said, “no one forced it and you can still buy things with gold. Paper money is for convenience”. This ignores the fact that before 1971 paper money was backed by gold, convenience was there. But they removed gold backing completely. Why? To have full control on money supply. Now money creation process done and controlled by governments. Who gave them this right? If people needed such convenience then people have had abandoned gold standard. But in 1971 gold standard abolished by govt amendments forcefully proves my point. If any govt want to do war, they can fund the war by billions of loans, that loans is possible entirely due to loans are now not given from existing money but creation of new money. Ghamidi sb response “govt sometimes create more money and all this can be criticised” cannot be valid as it ignores the fundamental question that govt has no right to print the money. No prophet no any khalifa no ruler in entire history of muslim Empire did this. This is pure monopoly of government. I can buy things with gold sure. But what about government creating money. Banks creating money? Can I do that ? No obviously not. There is no right for anyone to create money without proof. Its equivalent to faking the gold and saying its for convenience of the people. And on top of this worst system, create money and charge interest on it. Nice convenience we have.LoL
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7 Replies
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Fiat Standard And Fractional Reserve Banking Amd Home Loans
updated 3 months ago
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7
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To add to this. Ghamidi sb response: “its for convenience” is wrong here because I am not saying remove paper money but that paper money should be backed by real asset like gold. Because of there is no backing of the paper money then there is no limit on the supply of money.
Second, ghamidi sb response: “you can still buy with gold, aawam se haq nai chheenaa” is not accurate. Aawam se haq chheena he. If i want to open a bank of gold based currency, i can’t Because all governments prohibits the legal use of gold as currency. That is simply against the free market economy. That is not just against islamic principal, open up any classical economic text book and they will tell you how this is against the freedom of choice for people. If I cant open a bank with gold currency or crypto currency, and i am obliged to follow the paper money imposed by govt, then you have to show from Divine guidance Quran and sunnah that, its the right given to government that
1..it can impose Monetarily standard and prohibit other metal/crypto as legal use.
2… it can create money out of nothing
Read world war and economic history books and you will know how the private players started to play with momey supply and creating out of nothing to fool the people and fund their wars. Read fractional reserves history and you will know this. I am very passionate on this topic and very sure on mu position and that ghamidi sb and al mawrid team had not looked up on this matter in detail. I want to discuss this with 1-1 either live with any scholar or please give me an email or something so I can contact them directly(email of any of this hassan, sehzad saleem and ammar khan niazi sb would be greaat
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Please kindly reply
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Your question was overlooked because once you replied to it yourself, it was marked as “answered,” and therefore no longer appeared in our active queue.
It seems that you are seeking some form of divine approval to validate a particular type of money. However, determining what should be considered “money” is not a religious matter. Anything that people mutually agree to use as a medium of exchange becomes money. In the barter system, goods were exchanged directly; later, people chose silver and gold as money, and today other forms serve the same purpose. There is no such thing as inherently “real” money—what truly matters is collective trust and agreement.
Manipulation is always possible. To prevent manipulation, laws should be made.
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If it was not clear in first par than let me rephrase it.
Please I request you to read all and then reply.
You said that whatever people collectively agree on money is money. That is the point i am making here.
I will number my points for structured response
1. Whatever people collectively consider money is money. State has no authority to dictate. Now for barter to silver and gold people have collectively freely traded with mutual consent. From 19th century government introduced paper money backed by gold. That was for convenience of the people. Gold in first place already was accepted global currency at that time. Paper was just representation of what gold is. But from 20th century onwards governments started to remove the gold backing from their paper money, to fund their wars they knew that gold backed currency is on control of people and private entities. So they were unable to fund their operations and wars. Gradually that ended in 1971 gold as standard being removed and now government paper money without any backing imposed as standard. Here state has dictated a monetary standard totally from its authority and people had no say on that. During that time people protested and also usa and many europian government banned gold purchasing and transaction at that time to make paper money as standard. Once that standard being implemented chaos and public anger gets cool down. But that doesnt change the fact that government has authoritize the paper money. I am not against the convenience of paper money, but to remove gold backing which was public consensual standard, is what I am saying
This point 1 is to make case: original of government paper money was against human freedom and dictation from state. Divine guidance is against it. I dont have to prove that, because snatching human freedom and dictation requires proof, not other way around.
Point 2:
We can still buy gold and do purchase with barter. Wrong. This partial allowance on transactions has no point. If someone want to open up a bank right now which has gold as backing of paper money, will not be allowed. I will be forced to use governments dictated money as standard of my bank. So there is no freedom of regarding something as money. This is not for convenience, people will issue paper money also backed by gold, that is convenient, but is not allowed by government at any part of the world. This is against freedom of choice, to which we need to prove fron Divine guidance that state has this power kf dictation. Which is not the case and islam is strictly against it.
Point 3: complete control over supply:
Now as government has complete control over it, they print as much they want. They have first access to this newly printed money. When this money gets printed, before it starts circulating in the market, government and private elites sponsored by govt spends it with current value of money. When that extra money supply gets circulated then value of money gets down. This is inflation. Which is form of tax. Government specifically mention this as strategy of taxing people, print monre money to spend and eventually down value the existing supply people had. And according to even ghamidi sb, taxing other than zakat is haram. It has major 2 problems which is: complete monopolize control over supply and taxing people.
Point 4:
Back to the Banking loans. In this paper money Era, banking loans doesnt issued from existing supply. It gets credited. When i take home loan of 20 lakh. 20 lakh is new money being created and given to me. Question is, first bank didnt have money, they created it out of nothing(as there’s no gold backing this is how Banks works, before it wasn’t like that) and they gave me and charging interest on it. Do anyone have authority to print money out of nothing and give it to people. Its completely analogical to, we 5 friends open up a bank and someone needs 20 lakh we gave them fake 20 lakhs, they in return over 10 years gave us 30 lakh real money. This practice of creation of money out of nothing just to give loans, is it permissible? No. It cant be. I can give money only if i have, if i would allowed to be create money like that just to give its complete injustice. And its the part of government dictation.
So according to ghamidi sb, mortgage loans were permissible both ways, from bankers perspective and from receiver perspective. But on above all discussed point I conclude that in current Practice of banking system, all around the world, loans, be it mortgages or not, is inherently haram
All in all this topic requires very detailed response and study. In meezan, burhan, maqamat, whereever ghamidi sb discussed this topic, they overlooked this point of working of banking system and monetary practices and original. They didnt discussed this in any of their books or videos. So mistake and overlooking has been done. Please let me talk on this point to any of the members of al mawrid, especially if they have background in economics.
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Your main point, what I understood, is about the validity of the authority of the government. They have the authority to call something money or ban some kind of money. This authority in them is vested by the will and consent of the majority of the people.
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I want to talk to some member of al mawrid on this issue. I have studied this topic. And more importantly in this area there is no discussion in al-mawrid. This topic requires study. I love to talk to any scholar. Here text format conversations are not ideal.
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