The session has just started. Please, send your questions.
Topic:
With the flame-like turbulence in the American economy that have ignited a world economic crisis, the fundamentals of the US economy is being questioned as well as the pace and period of recovery it will need.
One of the cornerstones that the American superpower was build upon is economic strength. With the current American and international economic crisis, do you think the US will cease to be the world's sole superpower?
After the session ends, you can view the whole dialogue through the Recent Sessions, or the archive.
Best,
Muslim Affairs Team
Answer
.
Name
Mahmoud
- Egypt
Profession
Question
I wonder how is it a financial crisis while the US dollars is still strong. For example, two months ago the US dollar was 5:32 Egyptian pound, and now it is 5:50, that means it is getting stronger?
Answer
In the Name of Allah, Most Gracious, Most Merciful
All praise be to Allah, and peace and blessings be upon His messenger.
The external market is different from the domestic market. Domestically, it is a financial crisis ,because banks and financial institutions failed to fulfill their obligations towards their depositors and their financial seekers.
Externally, the increase in the price of the dollar does not reflect healthier domestic dollar but rather weaker EURO, weaker British Sterling and Egyptian pound. In other words, the increase of the dollar against the Egyptian pound does not reflect the strength in American dollars but the weakness of the Egyptian pound.
Name
Afdal Hussain
- India
Profession
Medical Doctor / Business Man
Question
As-Salam Alikom,
As many people's of the world knows that the US capitalism is based upon Riba. And now we are seeing the downfall of their system. My question is about India, with its Brahmin population, is with the every steps of US. Will the Indian economy go together with the US ?
Answer
The Indian economy does not have the same fundamentals as the American economy. The financial sector does not represent as a high percentage in India as it is the United States of its economy, and the interaction between financal sector and the real sector is dominated in America by a lot of borrowing and accumulation of debts.
The Indian economy does not have as much relatively speaking dependence on borrowing and debts as in the American economy. So the Indian economy will be affected heavily by the economic crisis but not the effect of what is happening in the United States.
Name
Mowen
-
Profession
Question
Is it true that the current US financial crisis was due to its war in Iraq and Afghanistan because most of its resources were spend in increasingly high cost of the infamous war over there?
Will the US economy recover or this is the beginnings of the inevitable decline/marginalization ,if not disintegration, of US economy due to the growing economy of China and India?
Answer
Definitely, the high cost of the words and the high amounts of public debts caused by financing the war in Iraq contribute to the crisis and to the decline of the dollar internationally.
The other big factor is the real estate methodology of financing which was carried on during the period 2003 until the end of 2007. This methodology was based on inflating the debts on real estate financing that goes beyond the ability of payments of the borrowers.
Along with the securitization system that is based on sale of debts between banks and financial institutions, the fall down of final borrowers in real estate created domino effect that depleted what is left over of the resources of the big lenders. This kind of complexity created the current crisis.
It is not going to be the end of capitalism but it is an end of an era of finance giant domination that requires a correction that brings the economy back to the real part of it and reduces the role of financial giants.
Name
Amro
- Egypt
Profession
Question
Do you think that Islamic Banking will be completely integrated in the finance and economics of Western market? how do you see the future of Islamic banking?
Answer
Islamic banks have never been integrated with the Western financal sector in the area of debt trading. That is why they are very little affected by the current crisis. The fact that Islamic banks work in the same arena with conventional banks never meant that Islamic banks use the same debt-based methodology that creates huge amount of transactions within the financial institutions themselves.
Islamic banks did not participate in the game of debt trading and securitization; this protected them from the domino effect that is caused by inter-bank transactions
.
The future of Islamic banks is as bright today as it was before the crisis, and is not expected to be brushed aside by the fall of many interest-based financial institutions.
On the other hand, the current crisis is a big lesson to some Islamic bankers and their shari’ah advisors who attempted over the last five years to imitate the debt-based transactions through tawarruq and similar transactions and contract in which the commodity used as vehicle is not intended by a final user.
It may convince them to stick to the principle that financing should only be made available to final users of murabaha and other sale-based contracts of Islamic finance. This way there will be no creation of debts outside the ability of final users of goods and services.
Name
Abdulkhabeer
- Panama
Profession
Attorney at Law
Question
How can an Islamic Economic system resolve the problems of the economic injustice that exists in the world?
Answer
The Islamic solution to the issue of economic injustice is not based on complications of wealth or violations of basic human rights including the rights to private ownership, and this implication in the form of entitlement, right to invest, and of course liability that results from owning a property.
Essentially there are two areas where the Islamic economic system focused systemic emphasis: one the area of use of one’s resources for production; it allows owners of properties to use their properties in creating wealth and income provided that properties are used in creation of value.
Value (wealth and income) can only be created by generating a flow of goods and services, lending money does not create a flow of goods and services. Therefore Shariah does not allow the unreal claim of assigning part of the production to the lender. This means that properties under the Islamic system shall all be used in creating a flow of goods and services and no properties shall be used for debt trading.
The second area is the area of distribution. The Shari’ah requires that every wealth and income owner must contribute at least 2.5 % of properties they own toward helping other persons in the society and in humanity at large.
These two areas are integrated together in such a way that financial and human resources will not be used for profiteering owners of wealth away from actual contribution to increasing the actual amount of goods and services in the economy.
Name
Saleh
- United States
Profession
Question
Dr. Monzar, are there any Islamically acceptable commercial finance companies in the United States?
Answer
Yes, there are some finance companies in the US. They provide finance for businesses on the basis of murabaha or leasing.
Name
Che
-
Profession
Question
What is the impact of the current financial crisis on the political leverage of the United States? How will it affect the American political power?
Answer
It will definitely affect American imperialistic political power. It has already convinced European to go their own way and stop financing the American institutions.
It is also apparent that the lesson is also understood by China and India, as well other countries in the world. I think it is probably the end of the military ventures of the United States in the policing the world.
Name
Mohamed Ali
- United States
Profession
Student
Question
Would the Western society ever get rid of the practice of usury?
Answer
No, I do not expect that the Western society will ever abolish by law the practice of Riba-based transactions. What I expect to happen is to trim this practice and reduce some of its outrageous extensions in the area of creating piles of inter-institutional debts and in the area of speculations without having a real commodity/service base.
Finally, remember that Allah gave the devil extension of its life until the end of the human race.
Name
Leo of Tripoli
-
Profession
Question
How far do you think the impact of the economic crisis will be on reshaping and restructuring international financial institutions?
Answer
I do not think that the World Bank and the International Monetary Fund will be restructured as a result of the current crisis although the impact of American influence on them may decline further.
On the other hand, the American mega banks will no more play determinant role in international finance. The current crisis will reduce the ability of the American financial institutions to influence the world market to a large extent.
Name
Abdelhakim
-
Profession
Question
Is the American style of Economic capitalism hegemonic by nature or did it follow and feed one an already powerful political hegemony?
Answer
Seventy five percentage of the American history is dominated by wars whereby the military industry plays a basic role in providing the road to overcome past crisis.
However, this was not the case in the 1929 crisis nor in the current one. The reason in my opinion is that both crises are financial in nature and the depth of them is beyond the ability of the American government to patch employment through creating an external war.
In 1929 the solution came in building an infrastructure system by Roosevelt and his new deal. In the current crisis we need to re-build the internal services system in the United States that includes improving medical, education, and communication for the American people instead of depending on a military industry solution that is unable by its nature to reach or to touch the life of the average American family.
The current crisis has already made a loud voice to bring an end to financial capitalism to the benefit of focusing attention on the real side of the economy (in contrast with financial side).
Name
Mona zahra
-
Profession
Question
Will this crisis have an impact on any change in the dynamics of power inside the international financial institutions?
Answer
I think that the current crisis will reduce the power of the financial gigantic institutions in favour of producers of goods and services like companies that deal with computers, software, oil and other goods. So the new era is not going to be a financial era.
Name
Mohammed-Fawzi Amadu
- Ghana
Profession
Business Consultant
Question
What characteristics of Islamic Finance would have been helpful in controlling the current sub-prime crisis ? Is it too idealistic to think that Islamic Finance has a solution to this crisis? Barak Allah feek
Answer
Islamic finance provides two basis principles that I believe should make the foundation of any long-term system that avoids any repetition of the current crisis. Essentially eliminating any way of trading debts. Debts should not be traded or discounted or securitized from one financial institution to another. The second point is by eliminating all financial market transactions that are based on pure speculation without any base of real market transaction.
This means that most short sale, most future commodities, currencies and metals, most derivatives will be reduced to dealing only with the real base of a transaction that entails not finance alone but exchange of hands on real goods and services.
This way the financial sector of the economy will be providing services that enhance real production and trade rather than being itself independent in creating enrichment and profiteering to transactors while depriving the real producers and traders from the ability to reach into finance.
This is definitely a long-term solution. The immediate remedy of this crisis resides in baling out the final users of finance not the wrong-doers who created the crisis.
Name
Editor
-
Profession
Question
The session has ended. We would like to thank Dr. Monzer Kahf for taking the time to answer your questions, and all those who participated in the dialogue.
We apologize for not being able to answer all the questions due to time limitation.
