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PROPOSED BY MALAYSIA FOR MID-2003 INTRODUCTION

(Hatten wir das Thema bereits? Gefunden bei Prudential. Die islamische Welt
will anscheinend nach dem Vorschlag von Malaysia ihre eigene Währung basierend auf dem Goldstandard und dem Koran in 2003 einführen.
Welche Auswirkungen ergeben sich auf den Goldpreis, auf den Dollar, für die westliche Welt, wenn eine vierte (bevölkerungsreichste) Währung dazukommt??)

The Koran defines the dinar as 4.25 grams of gold or 72 grains of barley ($44) and the dirham as 3.0 grams of silver or 50.4 grains of barley ($0.45). We will watch Pan-Islamic gold currency advocacy closely in studying our $325 per ounce long-term gold price assumption, since it could increase
monetary demand currently representing 1% of fabrication in coin form, even though we expect it will have marginal impact on the gold market in coming months. Even if the dinar were to be implemented,
participating countries could claim to be trading in dinars, but settle in US dollars, without gold.We see no signs of central bank purchases in anticipation of the proposed implementation of the gold
dinar nor countries minting coins for general circulation.
We believe the problems associated with the dinar, including limited supplies of gold, its weight in daily transactions, inability to change the money supply, reserve replacement for importers, and the
absence of interest payments, make it less easy to use, despite its religious appeal
However, inter-Islamic trade could require the central banks of importing nations to multiply several
times over their current combined reserves of about 1,550 metric tonnes or 49 million ounces, which
represent about 4% of global central bank bullion reserves.
DISCUSSION
Apparently Mohammed Mahathir of Malaysia is making a political statement of sorts.
He wants to introduce the"Islamic Dinar" as Malaysia's official currency to settle with other nations,
while the current Ringgit will remain in circulation. Malaysia plans to buy no gold either to back its
currency or to mint as coins. It could use old-fashioned dollars (non-Koran money) using old-fashioned
fractional reserve banking (forbidden in the Koran) to settle accounts in an"Islamic" manner. Dr.
Latifah, the assistant governor of the Malaysian central bank, told us the reserves are"only a tiny
fraction" of transactions. Our industry checks show no evidence of large scale or unusual physical gold
accumulation in the region. IMF data shows virtually no change in gold holdings among relevant central banks. We expect the gold market to take note of a relatively large country adopting a gold standard of sorts, but to react very bullishly if other nations follow Malaysia, buy central bank gold, or buy gold to mint Dinar coins in volume. Note that a Pan-Islamic currency union requires no formal treaty or equalization as did the euro, since the Koranic standard of 4.25 grams or 72 grains of barley is universal. Iran, Turkey, Oman, and the United Arab Emirates have shown a degree of interest, and the October 22-23 Islamic monetary summit in Kuala Lumpur"appointed a committee" to study the Malaysian proposal without specific actions.
If one in ten of the 1.3 billion Muslims worldwide used one ounce of gold coin per annum, we estimate it would double physical demand for gold in fabrication. If Turkey’s 65 million population needed one ounce of gold per capita for general circulation, it would represent an estimated one-time 50% surge in physical fabrication demand. For this reason we are very attentive to any proposal, however remote, to introduce gold coin in general circulation again.
THE MALAYSIAN PROPOSAL FOR PAN-ISLAMIC CURRENCY AS DEFINED IN THE KORAN
The gold dinar is a currency being proposed for Islamic nations of 4.25 grams of 24K gold. It is
expected, at first, to be used only for foreign trade by Malaysia, with each nation’s sovereign currency
still used for trade within each nation. At first, it is also expected that no physical currency will be traded,
but accounts will be credited or debited in each nation’s central bank in gold or US dollars.
The dinar appears to have mainly three proponents: 1) the Malaysian government, who want to decrease
their economic exposure to the US dollar, seemingly because it was hard to export goods after the Asian
crisis because their currency was tied to the dollar and the currencies of surrounding nations were not; 2)
private companies who have financial interests through dinar and gold trading; and 3) Muslims who
interpret the Koran’s prohibition on fixed interest payments as a prohibition against paper currency. The
scripture requires tithing (zakat) be in physical goods not paper money, checks, or promissory notes,
forbids multip lication of assets, fractional reserve banking, interest, and usury and defines the gold and
silver currency units noted above.
Malaysia’s drive for the dinar is mostly unilateral, with support for nations that suffered asset freezes like
Iran or military embargoes like Turkey did in the 1970s from the U.S. Most Muslim nations will unlikely
be willing to bear the economic burden of implementation, including levying new taxes or cutting
spending to raise money to increase their gold reserves and trading in gold on which they can not earn
interest. Not earning interest may be desirable religiously but not economically.
Iran, Morocco, Bahrain, and Libya have also expressed interest in the dinar, but have not been as
promotional as Malaysia. Outside of Malaysia, there are some minting activities with private companies
to appeal to religious or numismatic interests, but no clear indication of a central bank or treasury actively
pursuing a mint or promoting the dinar. We can find no source that indicates a recent increase in central
bank purchases of gold in the Islamic world.
THE ATTRACTION OF THE DINAR
The Koran prohibits the use of fixed interest payments as usurious, and many interpret this as gold and
silver being only acceptable forms of currency. Paper currency, or fiat money, is a promise to pay a
certain amount of gold (or silver) at a later date, implying a loan at a fixed interest rate on gold.
Therefore, gold and silver are the only acceptable forms of payment. Certain Muslim practices, such as
zakat (giving at least 2.5% of your income to the poor), or mahar (marriage dowry) require a payment
(e.g. gold or silver), not the promise of a payment (e.g. dollars or sterling).
Aside from religious reasons, the dinar offers many economic benefits as well. Under the dinar (or gold)
standard, countries can not inflate their currencies in order to pay debts with cheaper currency. Countries
will also not be subject to the risks imposed by having their product prices controlled by Western (e.g.
US) central banks or organizations such as the IMF, which many countries view as having predatory and
usurious lending practices. A dinar (or gold) standard can also be used to control inflation. Although we
do not agree with the claim, it is also expected that the introduction of the dinar will encourage trade
among Muslim nations, which we estimate to account for 12% of total trade for Muslim nations.
Based on speeches by top Malaysian government officials, we tend to view much of Malaysia’s
motivation as being more economic than religious. In a recent speech, a top Malaysian economic advisor
claimed the allowance of the price of gold to float which began in 1973 was a means for the US to finance
the Vietnam War in less valuable dollars. He also implied that Western banks intentionally caused the
Asian crisis to divert money from Asian capital markets to their own capital markets.
PROBLEMS WITH THE DINAR
Despite its religious significance, we believe the economic difficulties of using the dinar will make it
unappealing and the probability of its implementation small. Despite Islamic prohibitions of using fiat
money and lending and borrowing at fixed interest rates, many Muslim nations have been borrowing and
lending at fixed rates for many years (e.g. government bonds) and none currently peg their currencies to
the value of gold. We believe it would be an unusually large economic hindrance for many of these
countries to change to a system where no interest is paid on their bonds and their currency is pegged to
the value of gold. Depending on your frame of reference, the price of gold may be volatile relative to US
dollars or the price of a US dollar may be volatile relative to gold, but either way, a gold dinar standard
could significantly increase the volatility of the price of the chief export of many Muslim nations, the US
dollar priced barrel of oil.
The IMF’s policy of not lending to countries which peg their currency to the value of gold also does not
support the dinar’s feasibility. While many view the IMF’s lending practices as predatory, many poorer
Muslim nations borrow a great deal from IMF and may be hesitant to cut themselves off from the IMF.
The poorer nations may also have difficulty building and maintaining the large gold reserves required.
Countries which are net importers within Islamic nations would need to buy large quantities of gold to
replace their reserves as they pay for their goods to other nations in dinars (i.e. gold). We estimate that, to
maintain its current level of gold reserves, the average net importer would need to replenish its reserves
annually by the equivalent of 97% of its current gold reserves, or a total replenishment of all importing
nations of 58 million ounces annually or 75% of annual global mine output each year. Although reserve
surplus and deficit will be a zero-sum game among all Muslim nations, the deficit could be particularly
painful for net importers during global economic slowdowns when the gold price typically rises and the
nation has less money to pay for it due to the sluggish economy. If all inter-Islamic trade were done in
dinars, we estimate a $30 per ounce (approximately 10%) rise in gold price in a given year would force
the average net importer to pay 0.04% of its GDP more at the end of the year than it did at the beginning
of the year to replace its gold reserves, with one country (Maldives) as high as 1.06%.
THE COUNTRIES INVOLVED
Malaysia strongly supports the dinar and houses the committee to study its implementation. They expect
to begin trading with it in mid-2003. One state, Kelantan, reportedly adopted the dinar in its economic
policy in October 2002. They expect the introduction to be gradual with no physical currency in use for a
few years. They expect the dinar to be used only for foreign trade with each nation’s sovereign currency
used for transactions within its own nation. They also expect the dinar to cause no significant change to
global gold reserves in the foreseeable future.
In a major conference, “Multilateral Trade in the Gold Dinar”, which took place in Kuala Lumpur on
October 22-23, 2002, an Iranian Central Bank official suggested that Malaysia study the dinar. According
to the World Gold Council, Iran has also offered to use the dinar for bilateral business with Malaysia.
Sheikh Mohammed bin Rashid al Maktoum of the ruling family in UAE is also said to have an interest.
The governments of Morocco, Bahrain, Libya have also expressed an interest in the dinar. Other than
these countries, we have seen no major, visible interest in the dinar from any government or central bank.
THE PEOPLE INVOLVED
Umar Ibrahim Vadillo (United Kingdom)
Author of “The Return of the Gold Dinar”. Considered by some to be the leader of the Murabitun (group
promoting the use of the dinar). President of the World Islamic Mint and e-dinar. While fairly prolific on
issues concerning the dinar, we can find no books or papers or speeches by him about Islamic values
other than those relating to the promotion of the dinar. The Islamic Mint has indicated they have an
agreement with the Royal Mint of Malaysia to mint dinars. The Islamic Mint also indicates it has mints
in UAE and Indonesia since 2000, but we believe they are private mints unaffiliated with the central
banks. The Dubai Islamic Bank ($300 million equity) appears to have an interest, but it is a private bank,
not the central bank of UAE.
Shaykh Abdalqadir al-Sufi Murabit (United Kingdom)
Wrote the preface to Vadillo’s book and strong advocate of the dinar. Many claim him as the modern
“leader” of the fundamentalist Sufi’s. Wrote a few books about fundamentalist Islamic values including
“The Fatwa on Sovereignty” and “The Return of the Khalifate” which “points us back to recovery of the
Ottoman rule so evilly abolished only 70 years ago” (quote from a book review).
Mahathir Mohamad
Prime Minister of Malaysia. Strongly supports the dinar. Cited as urging Muslims not to seek revenge
against Judeo-Christian nations, but to protect themselves militarily and economically with a currency the
Judeo-Christian nations do not control. Other Malaysian advocates of the dinar include Ahmad Sarji
Abdul Hamid, chairman of IKIM (Malaysia's Inst of Islamic Understanding); Ahamed Kameel Mydin
Meera, wrote"The Islamic Gold Dinar" in 2002; Tan Sri Nor Mohammed Yakcop, Special Economic
Advisor to the prime minister.
Necmettin Erbakan
Former prime minister of Turkey. Removed from office in 1997 for his alleged attempts to implement
Islamic policies while the country wanted to maintain a secular go vernment. Strong advocate of the
dinar.
Recep Tayyib Erdogan
Informally, the current leader of the Turkish ruling AK party. Was a popular former mayor of Istanbul
but in 1998 was removed from office and prohibited from becoming prime minister (which is being
considered for review) for reading a controversial Islamic poem. States that although he is a devout
Muslim, his party is secular and EU membership is his party’s primary goal. States Turkey needs not,
“…men with well-groomed beards who can recite the Koran perfectly, but people capable of running the
country efficiently.”
Islamic Development Bank
Contrary to what some sources state, the value of the Islamic dinar distributed by the Islamic
Development Bank is NOT tied to the value of gold. Its value is pegged to the special drawing rights
(SDRs) of the IMF, which are tied to the value of a basket of currencies, NOT gold. Members:
Afghanistan, Albania, Algeria, Azerbaijan, Bahrain, Bangladesh, Benin, Brunei, Burkina Faso,
Cameroon, Chad, Comoros, Djibouti, Egypt, Gabon, Gambia, Guinea, Guinea-Bissau, Indonesia, Iran,
Iraq, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Lebanon, Libya, Malaysia, Maldives, Mali, Mauritania,
Morocco, Mozambique, Niger, Oman, Pakistan, Palestine, Qatar, Saudi Arabia, Senegal, Sierra Leone,
Somalia, Sudan, Suriname, Syria, Tajikistan, Togo, Tunisia, Turkey, Turkmenistan, Uganda, UAE, and
Yemen.
WEBSITES
http://ourworld.compuserve.com/homepages/Abewley/zakat3.html - argument to restore the zakat with
dinars
http://www.bday.co.za/bday/content/...ct/1,3523,1155583-6078-0,00.html - African newspaper article
explains Malaysia’s intentions with the dinar
http://www.babinmedia.com/zambezi/news/zt541e.html - African newspaper article on the dinar; includes
argument for Saudi Arabia using the dinar if the US freezes Saudi dollar assets
http://www.pwcglobal.com/extweb/frm...ADCCE061ADDAB05E85256C240063A3DE -
PriceWaterhouseCoopers Asia briefing on Malaysia’s intentions to introduce the dinar and the interest
shown by Morocco, Libya and Bahrain
http://80.75.0.12/Description.asp?Da=10/26/2002&Cat=9&Num=12 - Iranian newspaper article on the
dinar, includes Iran’s interest in having Malaysia set up a secretariat to study the dinar
http://www.alislami.co.ae/ - Dubai Islamic Bank website; contains good explanations of Islamic banking
http://www.islamiq.com/news/jan2002/article.php4?news=4_20020123 - Islamic news article on e-dinar;
states Islamic Mint has an agreement with Malaysian Mint to mint dinars
http://www.uaecb.gov.ae/ - UAE Central Bank website; no reference to the dinar, but the 2000 annual
report mentions issuing a “commemorative coin” (e-dinar website claims they received permission from
the UAE central bank to mint dinars in 3Q 2000)


We have compiled a table of hard currency reserves, GDP and months of hard currency reserves in
response to inquiries of the capitalization of the Muslim countries mentioned in our December 2 report
"GOLD: PAN-ISLAMIC GOLD AND SILVER CURRENCY SYSTEM AS DEFINED IN KORAN
PROPOSED BY MALAYSIA FOR MID-2003 INTRODUCTION; NO SIGNS OF MINTING COINS
OR BUYING GOLD RESERVES IN VOLUME YET" and their ability to support a gold dinar.
We estimate the average Muslim nation in our study holds 0.8 months of hard currency reserves, and
Malaysia and Iran, the two proposed dinar-trading partners, hold 2.0 and 0.4 months, respectively.
The Muslim nations' collective hard currency reserves are above the world average at 0.8 months of
GDP with 6.3% of total hard currency reserves in gold compared to world averages of 0.04 months of
GDP with 14% of total hard currency reserves in gold.
DISCUSSION
We received a number of calls relating to our December 2 report “GOLD: PAN-ISLAMIC GOLD
AND SILVER CURRENCY SYSTEM AS DEFINED IN KORAN PROPOSED BY MALAYSIA
FOR MID-2003 INTRODUCTION; NO SIGNS OF MINTING COINS OR BUYING GOLD
RESERVES IN VOLUME YET” inquiring about the ability of the Islamic countries to finance the
dinar. We explored this by comparing each country’s “capitalization” with its gross domestic product
and estimating how many months of hard currency reserves each central bank holds. We also calculated,
for each country, the population and per capita values for hard currency reserves and GDP.
We considered “capitalization” to be the country’s total hard currency reserves (gold plus foreign
currency reserves). If each country were to use a gold standard for its currency, and remove its system of
fractional reserve banking, it would need to hold enough gold reserves to support the nation’s total money
supply. We then calculated the months of reserves by dividing the reserves by the nation’s monthly GDP.
We estimate the average Muslim nation holds 0.8 months of GDP as hard currency reserves*. The two
countries which are expected to trade in dinars in mid-2003, Malaysia and Iran, hold 2.0 and 0.5 months
of hard currency reserves. The countries with the largest number of months of gold reserves are Lebanon
(4.8 months), Libya (4.7 months), Kuwait (4.5 months), UAE (3.4 months), Yemen (3.1 months), Bahrain
(2.6 months), and Jordan (2.2 months) *.
The countries with the largest hard currency reserves * in 2001 were Malaysia ($34 billion), Indonesia
($30 billion), Turkey ($26 billion), Algeria ($23 billion), Saudi Arabia ($19 billion), Iran ($16 billion),
and Libya ($16 billion).
The countries with the largest GDPs in 2001 were Indonesia ($687 billion), Turkey ($443 billion), Iran
($426 billion), Pakistan ($299 billion), Egypt ($258 billion), Saudi Arabia ($241 billion), Bangladesh
($230 billion), Malaysia ($200 billion).
The countries with the largest populations in 2001 were Indonesia (231 million), Pakistan (148 million),
Bangladesh (133 million), Nigeria (130 million), Egypt (71 million), Turkey (67 million), and Iran (67
million).


http://www.islamicmint.com - Islamic Mint website
http://www.e-dinar.com - e-dinar website
http://www.e-gold.com - e-gold website
http://www.e-fidex.com - e-fidex website
http://64.239.81.148/Muslim_Activist.html - descriptions and reviews of books by Vadillo and Murabit
http://www.geocities.com/Athens/Delphi/6588/gpreface.html - preface to Vadillo’s “Return of the Gold
Dinar” by Murabit
http://neac.gov.my/ - Malaysia’s National Economic Action Council website; contains news articles and
speeches, including Mahathir’s speech on the dinar at the October 23 conference in Kuala Lumpur
http://www.bogvaerker.dk/Muslim_Activist.html - descriptions and reviews of books by Vadillo and
Murabit
http://www.ianaradionet.com/E_newstext/newst_jy27.html - Islamic news article relates to Turkey’s
removal of Erdogan from office
http://www.islamonline.net/english/Views/2001/06/article16.shtml - Islamic news article relates to
Turkey’s Erdogan and his intentions to enter the EU as his first priority
http://www.gold-eagle.com/editorials_98/taylor112598.html - gold news website 1998 editorial on the
dinar and its potential
http://www.isdb.org/ - Islamic Development Bank homepage
http://www.bernama.com/B2002/arch_n...ml?2002_10_23/business/bu2310_12 - Malaysian news
article on the introduction of the dinar
http://www.zpub.com/aaa/dinar.txt - introduction to the dinar from a forum website
http://ccdev.lets.net/materials/dinar.html - introduction to the dinar from a forum website
http://enm.iiu.edu.my/dinar2002 - information on August 19, 2002 conference “Stable and Just Monetary
System - The Islamic Dinar”
http://www.usagold.com/wgc.html - gold news briefs from the World Gold Council; includes Iran’s stated
intentions to enter into bilateral trade agreements with Malaysia using the dinar
http://ourworld.compuserve.com/homepages/Abewley/zakat3.html - description of zakat and its