The session has just started. Please, send us your questions.
After the session has ended, you can view the whole dialogue by clicking Recent Sessions, or the archive.
Yours,
Muslim Affairs
Answer
.
Name
Amro
- Egypt
Profession
Question
As-Salam Alikom, how far do you think the success of the golden dinar ? and do you think that using euro instead of US dollar will reduce the vulnerability of many Muslim countries to US economics?
Answer
Dear Br. Amro
Assalamu Alaykum wa Rahmatu Allahi wa Barakatuh.
I don't think the idea of golden dinar is viable, to use metal again does not make sense economically especially that we even passed the age of fiat money to electronic money. And to peg a currency to gold and store gold in central banks does not make sense either.
Using a basket of currencies that may change from time to time for the reserves of the third world might be the best solution for their inter countries trade.
For Muslim countries, especially the oil rich cash surplus countries, their pegging to USD is going to be of great harm to their people and economies even though in the short run it is to the benefit of their government budget especially that they have already great reserves and investment in the American economy and treasury bills. It seems that for may reasons the cash surplus countries are been subsidizing the American economy at the expense of their own long term future prosperity.
Name
Asim Moin
- Pakistan
Profession
consultant
Question
sir, looking at the broader picture, is this the consequence of "Full of Riba" (interest based) western economy? which is totally haram in islam... thanks
Answer
Dear Br. Asim
Assalamu Alaykum wa Rahmatu Allahi wa Barakatuh
Riba has a great contribution to the current crisis but it is alone not the sole element in it, of course Riba contributed through creating layers of financial transactions that resulted in a domino effect of institutions and the economy at large, but there is the lust for profit that casued over streaching of finance to persons who cannot continue paying their debts, their also the expanded consumerism in the American society that shares in creating unbearable debt burdens, etc.
Name
Mumhammad
- United Kingdom
Profession
Manager
Question
Asalam oAlaikum Dr Kahf. I am a student of islamic banking and Finance and beleive that the solution of the current economic crisis potentially lies in Islamic Economics. What lessons can oventional system learn from this recent turmoil and what contribution Islamic economics can make to ease the situation? Thank You
Answer
Assalamu Alaykum wa Rahmatu Allahi wa Barakatuh
Two main points are essential in this regards: elimination of debt trading in the Islamic econo-finance system is important. This is an essential result of the prohibition of Riba.
Once debts are no more discounted and traded, the financial market cannot be stretched beyond what the real sector can bear. In fact financing shall always be less that real market transaction because financial institutions require that certain portion of the transaction be financed by the parties themselves from equity.
This avoid the chain repercussion of any debt failure and this is a major cause of the trouble of major finance institutions in this crisis. The second lesson is never finance non- real transactions. that is eliminating most of the derivatives and their transactions that are essentially speculative and do not add value to the economy.
Besides these two points we have the moral issues of Islamic economics, but that is a little remote from the finance mentality and it is long term by definition and nature.
Name
Abdallah
- Egypt
Profession
Question
Salam Dr,
To what extent is the Middle East Economy dependent on the American one and do you expect a near crash in ME markets (for the current crisis and the decreasing interest in oil) ?
Thanks
Answer
Dear Br. Abdallah,
Assalamu Alaykum wa Rahmatu Allahi wa Barakatuh,
Although many Arab countries tie their currencies to the US$ but their economies are not in fact largely dependent on the American economy. They depend largely on their own resources and the momentum of domestic infrastructure and construction sector. Further, I don't think that finance markets in the gulf, Egypt, Turkey and other Arab countries are dependent on the American financial market, I think whatever these emerging markets are facing now is caused by local policy and construction rather than on the effect of the American finance sector, especially a good proportion of the banking system in the Gulf countries has already moved to Islamic finance that in fact shielded it from the current credit crisis that is basically a debt and mortgage crisis and Islamic finance in the ME does not trade debts.
Name
Hassan
-
Profession
Question
Do you think the Gulf countries will be affected by the collapse of the dollar? Why do they opt for the US currency, and not a united one for them as very rich countries with almost strong economy?
Answer
Dear Br. Hassan
Assalamu Alaykum wa Rahmatu Allahi wa Barakatuh
No I don't think so, The Gulf economies depend on oil and gas these are, for the short run renewable resources. The pegging to the dollar has historical reasons and it does not seem easy for these countries to disconnect from the Dollar not in the coming few month.
Besides, unless oil prices go below $ 50 WHICH IS UNLIKELY the oil price still more than compensate their budgets for the cheap dollar. Then who is the looser in the Gulf countries because of the decline in the Dollar: Expatriates, salaried people and domestic consumers, but not the government! so why should a government in these countries untie its currency from the Dollar?
Name
Sameer
-
Profession
Question
How do we small investors protect our selves from the collapse of the dollar. unfortunately, we are in Islamic countries that fully deal with the dollar as if its own national money. Are there some indicators that may previously tell us there is a cute decline in the US dollar to come?
Thank you.
Answer
Dear Br. Sameer
Assalamu Alaykum wa Rahmatu Allahi wa Barakatuh,
This is unfortunate, I think it may be better for all investors to move away from the dollar, be more real and invest in real market rather than in the financial market.
I don't see any advance signs of improvement in the price of the Dollar and any change in relation to Euro or GBP would only be a sign of a decline in the latter's economies not an improvement in the dollar's.
Name
Hajar
-
Profession
Question
Why this crisis with the dollar? I mean what makes a big bank in a country like the US, with its huge money markets and transactions, get bankrupted?
Is this a sign America's economic dominance over the globe will become weak? Will the US empire collapse soon?
Answer
Dear Hajar
Assalamu Alaykum wa Rahmatu Allahi wa Barakatuh,
don't bet on the collapse of the US economy, it will not collapse. The crisis will be overcome and the American economy will jump forward. The finance sector of it will definitely be restructured because it has overstretched itself too much.
This overstretching is itself the reason why a big bank may collapse because it give too much credit more than it can collect and to many people from whom debts cannot be collected.
The US economy will have to learn to come down to earth and depends on its real production and less on pure financial quick gains. And it will learn this lesson for sure.
Best Regards,
Wassalam
Monzer Kahf
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.
