This article begins with a brief introduction by Dr. Saifullah. The text is from a position paper written by the Islamic Party of Britain. Usually, in the west, the term usury is used when excessive interest is charged on a loan. In this paper, all interest charges are called usury.
First of all, the Asian economic "tigers" did not become paupers. Even after the meltdown, the citizens of these countries still enjoy a standard of living which is much better than they enjoyed a decade ago. The Asian "tigers" are not moving away from the capitalist model, in fact, they are liberalizing their economies further and economic recoveries are occurring in most of these nations.
Second, this is an overly simplified, as well as inaccurate, explanation of the Asian Economic crisis. Debt was a part of the problem, however, it was not the cause of the Asian financial meltdown. The financial crises in the east and south-east Asian economies could have been avoided had these economies been on flexible exchange rates. The problems in Thailand, as well as the other Asian countries, was the result of the fact that these countries DID NOT have fully convertible currencies. The official exchange rate policy of many Asian countries was one of pegging to the U.S. dollar. Hong Kong, for example, maintained parity tied to the US dollar. Other countries formally pegging their exchange rates to a basket of currencies; however, the effective weight of the US dollar in these baskets was so high that their policy can be characterized as an implicit peg to the US currency. In Malaysia, for instance, the currency moved in a 10% range of 2.7 to 2.5 ringitt to the US$ for most of the years between 1990 and the beginning of 1997.
The policy of pegging the exchange rate ensured the stability of the nominal exchange rate relative to the US currency, it also ensured that a change in the nominal and real value of the dollar relative to the Japanese Yen and the European currencies had the consequence of affecting the real exchange rate of the Asian currencies pegged to the US dollar. Specifically, the dollar was on a downward nominal trend relative to the yen and mark between 1991 and 1995 reaching a low of 80 yen per dollar in the spring of 1995. During that period, the Asian currencies pegged to the U.S. experienced a real depreciation of their currencies, as they were depreciating relative to the Japanese and European currencies. However, after the spring of 1995, the dollar started to rapidly appreciate relative to most world currencies (the yen/dollar rate went from 80 in the spring to 1995 to over 125 in the summer of 1997, a 56% appreciation). As a consequence, the Asian currencies that were tied in nominal terms to the dollar also experienced a very rapid real appreciation. By early 1997, several regional currencies, including the baht, were seriously overvalued and the overvaluation was a factor in the worsening of the current accounts of many countries in the region. Real depreciations appeared to be necessary to adjust the current account position of the deficit countries. To make matters worse, foreign investment poured in which prevented currency depreciations even if domestic inflation was higher than world inflation. This led to nominal currency appreciation; this, in turn led to a real appreciation that was partly the cause of the large and growing current account imbalances, and hence the collapse of these economies.
The Asia Homepage has a large selection of articles which go into the Asian meltdown in great detail.
It is amazing how quickly Dr. Saifullah changes the subject from the Asian economic crisis to homosexuality! Also, are you suggesting that there were no money lenders in the Islamic world prior to the 'monkeying' of Western values?
In gist, the values of an authoritarian state change when either the dictator changes his mind or when a new dictator replaces him. Democracies, at least, have constitutional law that protects basic (natural) rights regardless of what the majority desires.
China is an example of Islamic political hypocrisy. The "Islamic" Republics of Pakistan and Iran have extensive dealings (especially weapons) with the Chinese government while the Chinese Army abuses the human rights of the Muslim Siang Kiang Uighurs!
Lastly, has anyone ever wondered why a third world country remains a third world with a perpetual budget deficit even after IMF has 'helped' them out of their economic problems?
A brief introduction is in order. The Islamic Party of Britain was founded in 1989 to promote the "Muslim" agenda in the United Kingdom. To date, they have not received much support from Muslim voters, nearly 90% of whom vote for Labour Party candidates. Now we turn to the article.
Low interest rates are beneficial to the majority because these low rates enable producers, as well as consumers, to increase production, consumption, and capital formation, causing the economy to grow. As a result, personal income and the standard of living increases.
Lower interest rates = lower deficit
Actually, most governments, especially in the developing world, attempt to use seignorage (also known as "printing lots of money") to fund their deficits. Government deficits are an economic fact of life. The timing of government receipts and expenditures do not coincide, therefore, even if a government has a "balanced budget" at the end of its fiscal year, there will be deficits and surplus at different points of time throughout the year.
Low interest rates reduce the government deficit in two ways. First, as mentioned in this article, it costs the government less to service (pay interest) on its outstanding debt. Second, and most important, is the government receives higher tax revenues, when the interest rate is low, because the citizens of the country are producing, consuming, and investing more because the economy is growing. Government expenditures are lower because the need for social programs decreases as the economy grows and creates jobs.
Wrong. At a zero interest rate (real or nominal), there is no incentive for anyone to buy the government debt (hold bonds). The government could not continue to fund its debt under these conditions.
Sounds like situational ethics to me!
How urgently is this message needed in a world where the "debt crisis" threatens to destroy and annihilate our civilisation, were open warfare is increasingly the consequence of the anxiety and suffering that spring from third world debt. Politicians have seldom looked at money-lending at interest as the cause of widespread poverty in the midst of plenty, because whilst this practice was once forbidden by Judaism, Christianity and Islam alike, it has become universally accepted in the modern world of secularism.
It has been argued that money is a "producer good" and that the lender should receive a share of the extra wealth that these goods produce.
Absolutely, the lender should receive at least the time value of his or her money. Why would anyone loan money for free? Think about it!
This is the "Labor Theory" of value which was first formulated by David Ricardo and then used by Karl Marx. This theory calls Capital "stored up labor". Therefore, my savings are labor that I provided my employer at an earlier date.
The nominal value of money may be unrestricted, however, the market will most definitely determine the real value of money.
A society which does not have financial institutions would be in even worse shape. In this case, those who have money would very powerful and could lend money at very high rates. This is the situation in many rural regions or India and Pakistan where money lenders (and yes, there are Muslim moneylenders) often charge as much as 120% interest PER DAY!
Public debt is "owned" by various government agencies (intergovernmental debt), pension and mutual funds, and private citizens.
Banks are intermediaries. There are people in society who have accumulated wealth and there are also people who have ideas and ambition, but no funds. The banks link these people together for the mutual benefit of each.
Another issue is the question of "tangible"wealth. Money, as well as gold and silver, are valuable because we attach value to them. They have no inherent worth. In fact, I remember when gold was around $900 an once and silver was around $55 and once - both are worth a fraction of that today.
I disagree. The banking system in particular and market capitalism in general has improved the lives of many people throughout history and has lifted many out of poverty. I am glad that the bank loaned me money to buy a house. I could never accumulate enough money to buy a house without a loan, especially when a large portion of my income would go to a landlord in the form of rent - which I would have to pay for my entire lifetime under your system!
Once again, history indicates that banking is far from "stupid" but, along with the free market, is the most effective means of improving a nation's economy and the lives of its citizens.
I find it interesting that "Islamic Banking" does not charge interest, however, they do charge a "User fee" for borrowing. What is the difference?
Responses to Islamic Awareness
Answering Islam Home Page