Sound Money - One of the Ties That Binds
News in the past week of a pastor in Florida (United States) that took it upon himself to announce that he'd be burning a copy of the Koran on the tenth anniversary of the attacks on New York on September 11th 2000 has to be an indicator that a void often exists between Islamic and Western societies, or sections of them at least.
I was surprised to lean that there's at least one principle that's shared by these often opposing groups - the concept of sound money. Do a Google search for this term, and you'll inevitably turn up a series of websites based out of the United States talking about the importance to an individual's freedom of ready access to sound money - many believe that sound money is the only real protection against inflation and other threats to an individual's wealth. One of the more high profile advocates of sound money in the United States is the Texan Congressman Ron Paul, while the now defunct "Liberty Dollar" gained widespread notoriety while it was on issue.
Numerous people of the Muslim faith also have a strong fundamental belief in the merits of sound money - the most recent and tangible expression of this can be seen in the launch of new gold and silver coins by the government of the Malaysian state of Kelantan back in August. I was completely intrigued that a state government within a federalised and predominantly Islamic nation in the 21st century had issued precious metal coins - the background story to them, and the other moves towards sound money around the world is thought-provoking indeed. Particularly since most Australians would be blissfully unaware that there are any problems with the value of our money!
The modestly sized gold and silver coins from Kelantan trace their origins back to 2006, and although the Kelantan State Government has attempted to give their dinar a legal tender status, the federal Malaysian government in Kuala Lumpur vetoed the idea. The federal position is that the Malaysian ringgit is the only legal tender in Kelantan, and throughout all of Malaysia for that matter. Despite this setback, the Kelentan dinars have now been issued, some four years after they were first conceived. Five denominations have been struck in 22 carat gold - 1/2 Dinar, 1 Dinar, 2 Dinars, 5 Dinars and 8 Dinars. Five denominations have also been struck in pure silver - 1 Dirham, 2 Dirhams, 5 Dirhams, 10 Dirhams and 20 Dirhams.
For those of you not familiar with Kelantan, the capital is Kota Bharu, it is around 700km - 800km up the Malay peninsula from Singapore, which is around an 8 or 9 hour flight for us here in Perth. The Kelantan state government is presently run by the Islamic Party of Malaysia (PAS), a party that is apparently engaged in an ongoing effort to assume (greater?) control of Kelantan from the United Malays National Organisation, which is the main party in the Malaysian federal government coalition.
The Kelantan State Government has attempted to introduce a series of legal initiatives in recent years that have been in line with the PAS view of how an Islamic society should be run. Several regulations covering how men and women behave in public have been introduced, however several others that are somewhat more controversial (including a penalty of amputation for persons found guilty of theft!) have been blocked by the Malaysian Federal Government.
The reasons behind the introduction of the Dinar and the Dirham are much the same as those principles behind other (non-Islamic) ventures based in the United States - holders of these coins are protected against the declining purchasing power of currencies such as the US dollar, an event with the capacity to "destroy savings".
It seems that many Malays living in Kelantan agree - the first batch of coins valued at some A$700,000 sold out in less than a month.
There are several grass-roots organisations within the United States that are pushing for State governments there to do just this - New Hampshire and Indiana among them. Likewise, other areas of the Islamic world have either issued "coins" or are in the process of doing so. Although there is a list of "freedom-loving American entrepreneurs" that have attempted to "reestablish private alternative medallion currencies" in the past, I thought the Kelantan Dinar and Dirhams stood head and shoulders above all similar projects as they're authorised by a government body, and are actually being accepted in trade by a list of businesses that covers some 29 A4 pages!
Will major nations of the world ever have currencies backed by precious metals again? Mr Steve Forbes (of Forbes magazine) certainly seems to think so.