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Tuesday, 8 May 2012

Dinars old and new

A recent edition of the German magazine GEO-Epoche ran a special feature on the Vikings in which was stated: “As many as 100 million Arab coins were taken north by the Vikings, and more than 80,000 have been found in Sweden alone.” Notorious as heathen antichrists they may have been, but the Vikings clearly had no issues about symbols of belief from the East circulating in their marketplaces. The Vikings’ little boats boldly visited faraway Islamic cities all the way to Baghdad. Coins from the Islamic world served to bring peoples together for centuries.

In what could be referred to as the Golden Years, the Islamic Dinar was a bastion against inflation. The purchasing power of gold in the Orient remained more or less unchanged for almost 2,500 years, and gold served as a reference point for silver currencies, whose value would tend to fluctuate. “Under Darius the Great (522-486),” recounts coin expert Walther Hinz in his study on Islamic currencies, “a wether cost an average of 5.40 gold marks. The same price is in evidence in Anatolia in the year 1340, to name but one example.”

If you google the Islamic Dinar today you will find over two million listings. Thousands of websites are discussing the use, sale and importance of the traditional Islamic currency. There was a time when the famous 4.25 gram gold coin seemed to have been chased out of Muslim consciousness by the global advent of fiat currencies. The fall of the Islamic world went hand in hand with the decline of coinage. In his book on Osmanli history, Halil Inalcik describes not only the collapse of the Ottoman dynasty, but also the giving-up of gold and silver currencies in favour of paper money in the year 1840.

In Europe, gold and silver linked currencies were accused more and more of being old fashioned and behind the times. The global triumph of the European banks would have been inconceivable without the introduction of strategic endebtment and paper money. But in today’s times of inflation and amid widespread injustice caused by currency speculation, people’s attitudes towards paper money are once again changing.

With the ongoing debt and banking crisis, Muslims also are recalling the meaning of their old units of measurement. It is an important matter, since the unit of the Dinar concerns not only mundane economic affairs, it is also linked to the correct payment of Zakat. The standardisation of weights and the details of exchange rates between units were, in everyday Muslim life, virtually always connected to the necessity to pay Zakat correctly. As early as the reign of Khalif Umar, a fixed standard weight of the coins used was decided on, above all to facilitate easier Zakat calculation.

The ruler Abdulmalik later took the production of coinage into Muslim hands in what was an important currency reform, establishing his own mint. In his essay entitled The Monetary Reforms of Abdulmalik, Philip Grierson describes the efforts made to give the coins a uniform appearance and size. The prerogative of coinage was considered an important symbol of political sovereignty in Islam. In his famous Muqaddima, Ibn Khaldun dedicates a whole chapter to the minting of coins, reminding his readers about the obligations of the political leader: “He must establish the mint in order to protect the currency used by people in their mutual transactions against counterfeiting.”

Today, a world of Dinars is being brought back to life by hundreds of independent players. In principle, any Islamic authority anywhere in the world can bring a new Dinar into circulation with its own design. Leading manufacturers have however agreed on weights and sizes, as well as certain standards of production. The technical achievements of the 21st century allow coins of the highest quality and purity to be made.

In a world of global trade, the quality and authenticity of coins is important. Counterfeit coins are an age-old problem, although today, new security features can be incorporated in the coins which previously were unknown. For example, an elaborate process allows holograms to be sprayed onto gold coins in order to make them immune to forgery. Other suppliers are experimenting with invisible security features which can be detected by users using simple equipment.

Modern Internet payment systems have put paid to the idea that the Dinar is backward-looking romanticism. Dinars are not being minted for the museum’s sake but rather to be collected in Waadias, bought and sold through Wakalas, and sent around the world using modern payment systems. Seen this way, Dinars can form the basis for a sophisticated economic system and a potential world currency, as well as a real-value foundation for investment agreements within the scope of Islamic contracts.

An important facet of all this is the physical existence of the currency, which must be guaranteed at all times. Trading with promises of payment printed on paper is expressly forbidden in Islamic law. Interaction between diverse financial establishments within Islam makes an economic model without the existence of conventional banks absolutely feasible. More and more people are rediscovering this truly ‘alternative’ aspect of Islam, including in the West.

Whether and how you use a Dinar is not a political issue, nor is it an indicator of a liberal or conservative outlook, the Dinar is simply the foundation and accounting unit of Islamic economic law. And in the marketplace, the Dinar can still be used as a means of payment by merchants, consumers, retailers, and the general public at large – regardless of religion. The Islamic market permits free choice in the means of payment. Users trust the Dinar simply on account of its weight and the inherit value it contains.

The Dinar as a unit of measure also resonates with a philosophy which interpreted the introduction of paper money as a key to unfettered capitalism and thus a threat to the creation, as Goethe foresaw. Limiting the power of technology – especially financial technology – is indeed a major dimension of Islamic financial law. Trading justly and with mutual consent is one of the most important Quranic injunctions.

But now there are other reasons to launch currencies covered by gold and silver. Something of a world movement has emerged in support of gold. In the USA alone, 13 federal states want to introduce genuine coins as a statutory means of payment. In Europe, the sale of Dinars and other gold-based private currencies is subject to practical limitations. Germany’s Monetary Act and Medallion Ordinance allow you to produce medallions, but they must be sold with value added tax, making them unable to compete against state-issued coins (statutory currencies).

But even in Germany there are some weighty voices, including in the Bundestag, advocating a free choice of currency without prejudice in favour of government money. According to the liberal standpoint of FDP Bundestag Member Frank Schäffler, only free competition between currencies can prevent states from pumping masses of bad money into circulation. The idea of allowing the rules of the market to apply to currencies is attracting more and more adherents.  

(Globalia Megazine / 30 March 2012)

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