If the Global Economic Council (Gleco) wants to worsen the  Greater Depression in the rest of the world, Asia does not mind. Asia is decoupling.

Irredeemable, at least unbacked, paper money and fractional-reserve banking have brought us in August 2009 in the early stages of The Greater Depression. (1)

Timothy Adams and Arrigo Sadun are arguing this morning in the Financial Times that the planet is still in a position to escape The Greater Depression. The planet can do so, argue Adams and Sadun, by setting up a Gleco to oversee the proper functioning of the global economy and the stability of the international financial system by providing close political support and strategic guidance to all international financial institutions. (2)

Adams and Sadun forget that the Chinese currency, the yuan or renminbi, is an emerging hard currency with free-floating gold reserves.

The signing last week of a Free Trade Agreement between China and the Association of South-East Asian Nations (ASEAN) will give the region new momentum for growth and for decoupling from the West. (3)

The decoupling process may be strengthened by an emerging hard currency in the region, China’s yuan. ASEAN has been China’s fourth largest trade partner (3, again)

China is increasing its gold reserves in order to achieve FreeGold, a free-floating price of Gold as an alternative to the dollar regime. FreeGold makes Gold the natural vehicle to temporarily or eternally store one’s wealth in, in order to be able to later convert it into tangible wealth.

Four of the six Gulf Co-operation Council (GCC) states will in 2010 set up the Gulf Monetary Council (GMC), a precursor to the Gulf Central Bank which, the latter, will issue the GCC single currency. (4)  As oil, the GCC commodity par excellence, is the only commodity in the world that is large enough for Gold to hide in, Gold is hiding in there. (5)

China is seeking to set up a free-trade zone with the GCC. (6)

By 2010, when the GMC will be set up, China will be in a free-trade-zone with the Association of South-East Asian Nations (ASEAN). (7)

In 2010, ASEAN will also have free-trade zone with India. The agreement setting up that zone was also signed last week. (8)

Asia, with the exception perhaps of Japan, will then be using the yuan as trade-settlement currency.

The Chinese want the world to know that they are increasing their Gold reserve in order that the product (the “fruit”) of their wealth be consolidated with a view to further fructifying. (9)

If FreeGold were to be further postponed, the dollar-regime will only be further marginalised.

At the end of the day, the regime will then fall into disuse. Tomorrow, it will no longer be possible to compromise between the dollar and Gold. Overthrowing the dollar regime will no longer even be necessary. (9, again)

If the Gleco wants to worsen The Greater Depression in the rest of the world, Asia does not mind.

Asia is decoupling from that remnant of the planet.

Ivo Cerckel
honestmoney@maktoob.com
http://twitter.com/ivocerckel/

NOTES

(1)
irredeemable digital liquidity & fractional-reserve banking are fraudulent – Let the system collapse now!
http://bphouse.com/honest_money/worthless-digital-liquidity-and-fractional-reserve-banking-are-fraudulent-%e2%80%93-let-the-system-collapse-now/

(2)
Global economic council should oversee all
By Timothy Adams and Arrigo Sadun
Published: August 16 2009 18:51 | Last updated: August 16 2009 18:51
http://www.ft.com/cms/s/0/f253db24-8a8b-11de-ad08-00144feabdc0.html
SNIP
How do you transform the International Monetary Fund, an institution until recently widely criticised for its lack of legitimacy and representativeness, on the verge of irrelevance, into the international community’s premier tool for fighting the global crisis? Simply by throwing the full support of world leaders behind it.
How do we ensure that this unprecedented support and co-ordination at the international level does not evaporate once the crisis is over? By transforming bodies such as the Group of 20 and Group of Eight leading nations into a global economic council (Gleco). This new international body should oversee the proper functioning of the global economy and the stability of the international financial system by providing close political support and strategic guidance to all international financial institutions.

(3)
China-ASEAN Looking to New FTA, and Decoupling from US and EU
By CSC staff, Shanghai, Published:August 17,2009
http://www.chinastakes.com/2009/8/china-asean-looking-to-new-fta-and-decoupling-from-us-and-eu.html
SNIPS
The China-ASEAN FTA will give the region new momentum for growth and a decoupling from the West
+
The decoupling process may be strengthened by an emerging hard currency in the region, China’s yuan. ASEAN has been China’s fourth largest trade partner. China wants to test its strategy of making the yuan a trade settlement currency in the FTA. In 2008, China-ASEAN trade reached US$231.12 billion, over 1 trillion yuan. Once the FTA is launched in 2010, the total trade among China and ASEAN members should reach US$4.5 trillion. Yuan trade settlement will bring business to financial institutions in the area.   

(4)
Four Gulf states sign deal on monetary union
By Paul Handley (AFP) – Jun 7, 2009
http://www.google.com/hostednews/afp/article/ALeqM5hunVGu3zlcK6uA_cia8bmLdrk4KQ
SNIP
RIYADH (AFP) — The oil-rich Gulf Cooperation Council took a major step towards a single currency union on Sunday when four members signed a pact to create a joint monetary council after years of hesitation.\

(5)
http://bphouse.com/honest_money/gold-and-oil/

(6)
Leaders: China seeks friendly ties with Islamic countries
http://news.xinhuanet.com/english/2009-08/14/content_11883651.htm
SNIP
BEIJING, Aug. 14 (Xinhua) — China would cement friendship and cooperation with the Islamic countries based on the Five Principles of Peaceful Co-existence, President Hu Jintao said Friday afternoon.
+
Chinese Premier Wen Jiabao also met with the crown prince on Friday.
+    [Wen] said China would like to actively consult with the Gulf Cooperation Council (GCC) for early consensus on signing a free trade pact.

(7)
China, ASEAN to have full free-trade area by 2010
http://news.xinhuanet.com/english/2009-08/11/content_11864830.htm
SNIP
BEIJING, Aug. 11 — China-ASEAN (Association of Southeast Asian nations) Free Trade Area would be completely operative in 2010 as scheduled, according to sources from the Fourth Pan Beibu Gulf Economic Cooperation Forum held recently in Nanning city, the capital of south China’s Guangxi autonomous region.

(8)
India signs partial free-trade pact with ASEAN (Roundup)
Business News
Aug 13, 2009, 10:29 GMT
http://www.monstersandcritics.com/news/business/news/article_1495230.php/India-signs-partial-free-trade-pact-with-ASEAN-Roundup
SNIP
Bangkok – The Association of South-East Asian Nations (ASEAN) Thursday signed a partial free-trade agreement with India which is expected to boost annual bilateral trade by an estimated 13 billion dollars over the next six years.

(9)
Chinese Mercantilism?
Posted by Ivo Cerckel on April 25th, 2009
http://bphouse.com/honest_money/2009/04/25/chinese-mercantilism/

Business cycles are therefore not rooted deep within the free-market economy and booms and then busts do not just simply happen. But one phase of the cycle flows logically from the other.

The initial phase from which everything follows central bank stimulation of bank credit expansion. (2) 

It is inflation, especially in the form of credit expansion, that sets the stage for financial contractions and deflations – i.e., for depressions. (3)

By inflation, entrepreneurs misallocate capital resources into areas that would not attract investment if the money supply remained stable. (4)

This misallocation is called “malinvestment”. (5)

THE HOLY KORAN & PREVENTION OF INFLATION

We have established that the business cycle with its booms and busts is caused by central bank stimulation of bank credit expansion.
The question how the Holy Koran teaches that booms and busts must be prevented becomes then the question how the prevent inflation, especially in the form of credit expansion.

As Milton Friedman, a Nobel Prize winning economist, once said, “inflation is always and everywhere a monetary phenomenon”.

The Holy Koran says in Verse 161 of Surah An Nisaa’:
That they took usury, though they were forbidden; and that they devoured men’s substance wrongfully;- we have prepared for those among them who reject faith a grievous punishment.\

This blogger asks:
When one party gives something of value
and the other party pays him with something,
in this case paper, of no value,
and when one party’s wealth is created out of thin air,
while the other party has to slave and earn to pay off the ill-gotten credit or loan,
is this not devouring of other people’s wealth?

This means that money in Islam must have intrinsic value.
If not, the buyer is devouring the seller’s wealth.

There is moreover 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.  (6)

In order for Islamic finance to help break the vicious cycle of boom and bust, Islamic finance must return intrinsic value to money.

Ivo Cerckel
honestmoney@maktoob.com
http://twitter.com/ivocerckel/

NOTES

(1)
‘Islamic finance can help break the vicious cycle of boom and bust’
Mushtak Parker | Arab News
Monday 17 August 2009 (26 Sha`ban 1430)
http://www.arabnews.com/?page=6§ion=0&article=125545&d=17&m=8&y=2009

‘(2)
Murray N. Rothbard, Economic Depressions: Their Cause and Cure
http://www.lewrockwell.com/rothbard/rothbard183.html

(3)
George Reisman, “Capitalism – A Treatise on Economics”, Ottawa, Illinois: Jameson Books, 1998, 3rd ed., p. 938

(4)
http://en.wikipedia.org/wiki/Austrian_business_cycle_theory

(5)
Murray N. Rothbard, “Man, Economy, and State – A Treatise on Economics”, Auburn, Alabama: Ludwig von Mises Institute 2001, (originally published 1962), p. 861

(6)
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