The Golden Rule and the Gold Standard

In his book, “The Gold Dinar and Silver Dirham: Islam and the Future of Money,” Imran Hosein makes a compelling argument in favor of returning to the Gold Standard, a concern shared by many non-Muslim economists. 

Avik Roy writes in the National Review, “Investors see over and over again the pattern by which governments depart from hard-money policies (such as the gold standard) in order to engage in deficit spending, and then devalue their currencies in order to reduce the value of the debts they then incur. It is a story that all too frequently ends in credit default and economic collapse.”

Hosein similarly promotes the minting of Islamic gold dinars in order to produce what he calls a riba-free economy. Since paper money is subject to inflation and devaluing currency, a debt-based society must indulge in charging or paying interest, which is against Islam, and often results in financial slavery. Islamic law requires that debts be paid with items that have intrinsic value, such as dates or precious metals. 

Such views are viewed as threatening to the money lenders. The International Monetary Fund (IMF) prohibits gold-backed currencies for its member states. Thus, those who promote gold-backed money are often thought of as economic terrorists. 

Nevertheless, as the dollar continues to decrease in value, demand for gold has increased. Many countries have started minting Islamic coins, which have become very popular for trading as currency. Today, a gold dinar sells for $250 while a silver dirham is worth $6.53. Even in places like Norwich, England you can purchase a haircut or lunch using these Islamic coins, as a result of local community organizing.

Large banks and nations still use gold to settle their debts. The gold is (or was) stored at the Federal Reserve Gold Depository in New York City, or the similar institutions at the Bank of England and Bank of France. In 2009, an international scandal erupted when a German gold bullion dealer discovered that a gold bar was fake. 

What Really Happened reports in “Robbing Mali to Pay Germany” that: “Because many of the fake gold bars had the marking of US sources, nations began to ask for audits and tests of the gold bullion held in their name by the New York Federal Reserve. To the surprise of many, the New York Federal Reserve refused! Indeed the New York Federal Reserve refused the German government permission to simply look at their bullion!”

The German government has now demanded that their physical gold be repatriated back to Germany from both the Bank of France and the New York Federal Reserve. Switzerland also intends to repatriate all of their gold held by the New York Federal Reserve and other central banks.

“Both the Bank of France and the New York Federal Reserve have stated that the process of returning the gold will take years… The delay makes the situation clear. Neither the Bank of France nor the New York Federal Reserve actually have the gold Germany deposited.” 

Mali is one of the world’s largest gold producers. Together with neighboring Ghana they account for 7-8% of world gold output. As Germany started demanding their gold back from the Bank of France and the New York Federal Reserve, France (aided by the US) decided to invade Mali to fight “Islamists” working for “Al Qaeda.” 

Why are France and the US bombing Mali instead of just buying the gold they need? The problem is, China is able to outbid France and the US. Like the US and French interference in Sudan, this war is being waged to prevent China from investing in African minerals. Gold mining has also led to political unrest in the Congo. No doubt the Islamist struggle for Mali is deeply connected to the nation’s quest for self-determination, including the right to mine and sell gold in a way that benefits the people of Mali.

Even in the absence of war, gold mining is hard and dangerous work that comes with huge ethical considerations brought to light by environmentalists and fair labor activists. The Environmental Protection Agency (EPA) estimated last year that the cost of cleaning up metal mines in the US alone could reach $54 billion. Major jewelry companies have come under pressure to show a traceable supply chain for their gold. JCK magazine reports: 

“The No Dirty Gold campaign calls gold mining one of the “world’s dirtiest industries,” claiming that one ring’s worth of gold production creates 20 tons of mine waste. The mining industry disputes that characterization and that figure, but no one doubts that gold mining—particularly its use of cyanide—affects the environment… Dirty gold mining has also brought health concerns and land disputes to communities surrounding the mines.”

“Typically, men live in gold mining camps for a month or two at a time, working 12-hour days, seven days a week. At the end of a 6- to 8-week shift, the men rotate out of camp to their homes for two weeks of rest. These long periods away from families have led to the rise of commercial sex workers in small villages near the mining areas. HIV infections are then spread into the general population when miners infect their spouses and unborn children. High rates of HIV infection have been recorded in every gold mining country, especially South Africa where some mines have reported one in three miners infected.”

As Muslims press forward, advancing the use of gold currency as halal money, we will need to balance our enthusiasm with concern for ethical investments that do not harm the environment or exploit workers. We must also become alert about the question of whether the gold we buy was stolen through war or if it was acquired in a fair manner.

“O ye who believe! Do not appropriate each others’ property and wealth in a manner that is unjust and unfair: Rather, let business be transacted in a manner that brings mutual satisfaction.” (Quran 4:29)