Honest Money

On Tuesday 16 December 2008, the Kuwait Times reported that inflation is surging in Saudi Arabia. (1)

One way to control inflation is to raise interest rates.

On Wednesday 17 December 2008, the Kuwait Times nevertheless reported that Saudi Arabia cut its interest rates “as the world’s largest oil exporter feels the repercussions of the global economic slowdown.” (2)

There is a Hadith of Prophet Muhammed (Peace and Prayers Be Upon Him) in the Sahih Muslim which teaches:
“Abu Said Al Khudri reported Allah’s messenger as saying: “gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt. (When a transaction is) like for like, payment being made on the spot, then, if anyone gives more or asks more, he has dealt in riba, the receiver and the giver being equally guilty.”

This Hadith of Prophet Muhammed establishes two things:

ONE ‘money’ in Islam is either precious metals such as gold and silver, or commodities such as wheat, barley, dates and salt.

TWO when gold, silver, wheat, barley, dates and salt were used as money, their value was ‘inside’ and not outside’ the money. Hence, it is established that ‘money’ in Islam must possess intrinsic value. (3)

Gold, silver, wheat, barley, dates and salt are no longer being used as money.

Therefore, Saudi Arabia is using interest rates.

And therefore, Saudi Arabia has lost all direction.

Ivo Cerckel
Siquijor, 17 December 2008

(1)
Saudi consumers urge action on high prices
Published Date: December 16, 2008
http://www.kuwaittimes.net/read_news.php?newsid=NjE0MTc0MzUz
SNIP
Like other countries in the Gulf Arab region, Saudi Arabia has been battling a surge in inflation which peaked at almost 11 percent in the summer but has eased only slightly since then to 10.35 percent in September.

(2)
Saudi cuts interest rates by 0.5 percent
Published Date: December 17, 2008
http://www.kuwaittimes.net/read_news.php?newsid=NjYwNzUyMzQ2
SNIP
RIYADH: Saudi Arabia’s central bank yesterday slashed its key interest rate by 0.5 percent as the world’s largest oil exporter feels the repercussions of the global economic slowdown, bankers said. The Saudi Arabian Monetary Agency (SAMA) reduced its repurchase rate to 2.5 percent from 3.0 percent, the fourth cut in its benchmark rate since October. The move comes ahead of a meeting by the US Federal Reserve on Tuesday expected to further reduce US interest rates, and as Saudi Arabia’s economy slows on the back of a sharp fall in oil prices.

(3)
Imran N. Hosein, “Explaining the Disappearance of Money with Intrinsic Value”, paper delivered at the International Conference on the Gold Dinar Economy, held in Kuala Lumpur on 24 and 25 July 2007, p. 1