On 22/5/2008 a barrel of oil briefly broke the $135 mark and prompted many analysts to forecast $200 for a barrel of crude by the end of the year. The high price of oil is despite the fact that more and more oil reserves are either being discovered or being improved to boost productivity. For instance during 2007, 250 million barrels of oil were found in Uganda, 8 billion barrels discovered in Brazil and technology improvement has meant that extraction of oil from Canada’s tar sands — deposits that could rival the Middle East—is commercially lucrative. Furthermore, many respectable institutions are predicting that the recession in the US and the high price of oil will dampen overall world demand for crude in 2008. These tell tale signs indicate that speculation is the main factor behind the price of crude. Big oil speculators are intentionally inflating the price of oil to strengthen the sagging value of the dollar. The fact that oil is traded in dollars is assisting the US to keep its economy afloat.
22/5/2008
Sunday, May 25, 2008
Friday, May 23, 2008
Crude Facts!
In May 2008 the price of oil reached an unprecedented $125 a barrel, Oil has continued to hit record levels since January 2008 as the price of Oil passed the $100 mark when a single trader in search of market fame pushed through a small trade. It has risen by 25% in the last four months and by nearly 400% in the last seven years. The importance the black stuff plays in the modern economy is so crucial that slight changes in prices can affect economies.
Oil past and present
It was British naval power that brought Oil to the international scene. In 1882, Oil had little commercial interest. The development of the internal combustion engine had not yet revolutionised world industry. It was Britain's Admiral Lord Fisher, who argued that Britain must convert its naval fleet from bulky coal-fired propulsion to the new oil fuel. With Germany on the verge of shifting the global balance of power by developing its own oil propelled ship from that point, oil conversion of the British fleet dictated national security priority to secure large oil reserves outside Britain.
WW1 brought to the international scene the importance of oil; it came to be seen globally as the key to military success. In an age of air warfare, mobile tank warfare, and naval warfare bulky coal-fired propulsion gave way to oil. Oil required only 30 minutes for ships to reach top speed compared to 4-9 hours when coal was used, battleships powered by coal emitted smoke which could be visible 10 kilometres away whilst oil had no tell-tale signs. The strategic advantage it gave was insurmountable and the British empires control of oil supplies become became even more important given the fact that Great Britain had no oil supplies at the time. It was the capturing of the rich oil fields of Baku on the Caspian Sea denying vital supplies to Germany that resulted in the end of WW1 and German surrender. William Engdahl geopolitical expert outlined the importance of oil ‘rarely discussed, however is the fact that the strategic geopolitical objectives of Britain well before 1914 included not merely the crushing defeat of Germany, but, through the conquest of war, the securing of unchallenged British control over the precious resource which by 1919, had proved itself as a strategic raw material of future economic development – petroleum. This was part of the ‘great game’ – the creation of a new global empire, whose hegemony would be unchallenged for the rest of the century, a British – led new world order.’ Britain and France concluded a secret oil bargain agreeing in effect to monopolise the whole future output of Middle Eastern oil between them.
Today oil is used for numerous everyday products across the world, most commonly for powering combustion engines such as fuel oil, diesel oil and petrol. Oil is also used as fuel for heating and lighting (e.g. kerosene lamp). The petrochemicals industry produces many by-products such as plastics and lubricants. It also manufacturers solvents (alcohols) through oil, without which there would be no chemicals industry. The free flowing hydrocarbons allow many farming implements and fertilizers.
Oil Markets explained
Crude oil, also known as petroleum, is the world's most actively traded commodity. The largest markets are in London, New York and Singapore but crude oil and refined products - such as gasoline (petrol) and heating oil - are bought and sold all over the world. Crude oil comes in many varieties and qualities, depending on its specific gravity and sulphur content which depend on where it has been pumped from.
Because there are so many different varieties and grades of crude oil, buyers and sellers have found it easier to refer to a limited number of reference, or benchmark, crude oils. Other varieties are then priced around this, according to their quality. Brent is generally accepted to be the world benchmark, although sales volumes of Brent itself are far below those of Saudi Arabian crude oils. Brent is used to price 66% of the world's internationally traded crude oil supplies.
In the Gulf, Dubai crude is used as a benchmark to price sales of other regional crudes into Asia.
In the United States, the benchmark is West Texas Intermediate (WTI). This means that crude oil sales into the US are usually priced in relation to WTI. However, crude prices on the New York Mercantile Exchange generally refer to 'light, sweet crude'. This may be any of a number of US domestic or foreign crudes but all will have a specific gravity and sulphur content within a certain range.
Slightly confusingly, the Organisation of Petroleum Exporting Countries (OPEC) - a cartel of some of the world's leading producers - has its own reference. Known as the Opec basket price, this is an average of seven - always the same seven - crudes. Six of these are produced by Opec members while the seventh, Isthmus, is from Mexico. Opec aims to control the amount of oil it pumps into the marketplace to keep the basket price within a predetermined range. In practice, the price differences between Brent, WTI and the Opec basket are not large. Crude prices also correlate closely with each other.
Oil contracts are brought and sold on international exchanges with the largest being Nymex (New York Mercantile Exchange) in New York and the Intercontinental Exchange (ICE) Futures in London, who today control global benchmark oil prices which in turn set most of the freely traded oil cargo. They do so via oil futures contracts on two grades of crude oil - West Texas Intermediate and North Sea Brent. A third rather new oil exchange, the Dubai Mercantile Exchange (DME), trading Dubai crude, is more or less a daughter of Nymex, with Nymex president James Newsome sitting on the board of DME. All exchanges use the US dollar as the standard to price oil.
Due to the nature of oil requiring extracting and refining participants commonly use futures contracts for delivery in the following month. In this type of transaction, the buyer agrees to take delivery and the seller agrees to provide a fixed amount of oil at a pre-arranged price at a specified location. Futures contracts are traded on regulated exchanges and are settled (paid) daily, based on their current value in the marketplace. The minimum purchase is 1,000 barrels.
Oil prices
So what is it that moves oil prices up and down? Most analysts and experts continue to interpret the price of oil price movements due to fundamentals – in the oil industry the fundamentals are factors that influence the supply of, and demand for, oil. Things such as the increasing demand from China and India, as well as fears that a stand-off between the US and Iran could interrupt supplies; have a bearing on oil prices. Alternatively, financial factors may be at work, such as a hedge fund having to sell a particular oil contract so it does not end up receiving a tanker-load of oil - or a trader deciding it would be fun to be the first to trade oil above $100 a barrel. However most fundamental information is not freely available. Mark Lewis from Energy Market Consultants explained in a BBC interview “We really don't know what the fundamentals are doing at any point in time, the markets are looking for signals from the fundamentals. Some of them are irrelevant, some of them are wrong, some of them are meaningless, but they affect prices nevertheless.” Sean Cronin, editor of Argus Global Markets explained “When the New York oil price broke through $100 a barrel for the first time at the start of 2008, one of the factors cited as being behind it was the assassination of Benazir Bhutto in Pakistan on 27 December 2007, that didn't strike us as making any sense at the time.”
Hence there needs to be a distinction between the factors that raise the oil price because they affect sentiment and the ones that genuinely affect supply and demand for oil. The dotcom boom in the 1990s was over inflated, but as long as everyone believed in it, the price of internet companies continued to rise. Once speculators stopped believing in internet stocks rising, the price went down. Thus Speculators trade on rumour, not fact.
Speculation driving oil price hike
A variety of reasons have been presented for why the price of a barrel of Oil continues to rise. For the study of Oil prices many consultants are paid elaborate rates to predict trend in oil. Many politicians continue to cite China and India as the chief reasons for the current price of oil. Many analysts have cited geopolitics as the chief reason such as conflict in Nigeria, oil peak and the rise of bio fuel. Although these factors have had some bearing on Oil prices they are not the actual causes for the price of oil to reach the current historical level. Speculation by traders is at the heart of the current hike.
Today's oil prices are really determined by a process so opaque only a handful of major oil trading banks, such as Goldman Sachs or Morgan Stanley, have any idea who is buying and who is selling oil futures or derivative contracts that set physical oil prices in this strange new world of ‘paper oil.’ Today 60% of crude oil price is pure speculation driven by large trader banks and hedge funds and with the development of unregulated international derivatives trading in oil futures over the past decade, the way has opened for the present speculative bubble in oil prices.
A June 2006 US Senate Permanent Subcommittee on Investigations report on "The Role of Market Speculation in rising oil and gas prices" noted, "... there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices".
A common speculation strategy amid a declining US economy and a falling US dollar is for speculators and ordinary investment funds desperate for more profitable investments amid the US sub-prime disaster to take futures positions selling the dollar "short" and oil "long." This is where one borrows dollars and sells them for a short period, betting the price of the dollar will fall. Then such a trader would purchase the same dollars at the new fallen price and return the borrowed money taking the profit from the new fallen price to the original higher price. Lehman Brothers, the investment bank, has estimated that fuel is 30% overpriced because of an influx of money into the oil market from investment funds. It believes that hot money accounts for between $20 to $30 of the recent increase in oil prices and that about $40 billion has been invested in the sector so far this year — equal to all the money pumped into oil last year.
Energy Geopolitics
Although the current crisis has in large part been due to speculators moving out of the sub-prime crisis and into commodities there are however a number of Geopolitical factors and trends and we should be aware of that will shape the global situation. The age of oil, produced its own technology, its balance of power, its own economy and its pattern of society. The future of energy security will play a key role on the global balance of power.
These factors are four:
1. The Eastern threat - The Middle East is gradually shifting from being a unipolar region in which the US enjoys uncontested hegemony to a multipolar region. The US will face more competition from China and India over access to Middle East oil. Soaring global demand for oil is being led by China's continuing economic boom and, to a lesser extent, by India's rapid economic expansion. Both are now increasingly competing with the US, the European Union and Japan for the lion's share of global oil production.
This additional demand comes at a time of continuing production problems in a number of oil-producing nations. Production is down in Nigeria after continues attacks on pipelines by anti-government militants, while Iraqi exports through the north of the country have been hit by renewed cross-border raids by Turkish forces against Kurdish insurgents.
Economists warn that continuing high oil prices will impact on the global economy, hitting growth and fuelling inflation. More importantly it will impact America's ability to fuel its own economic growth and in turn become more reliant on China for cheap goods. The American economy used to be the world's powerhouse, but today it is being left behind by emerging economies. To compound its problems, The demand for greater oil is affecting America's ability to pull itself out of its downturn and is creating inflation across the Western world. If China at any time in the future should develop its political will and ambition, it is in a relatively strong economic position to substantially weaken America.
2. The Russian threat - Russia, the leading producer of natural gas and one of the leading oil producers, is the global winner. The relationship between the European Union and Russia is now dominated by Russia and will in the future make Europe dependent on Russian oil and gas. The oil shocks of the 1970s had different effects on different European countries. Britain had some North Sea oil and the prospect of more, as did Norway. Germany and France had little or no oil of their own. Differential shocks in the coming period of oil shortage will make it harder to maintain the Euro-zone.
Vladimir Putin has already used oil and gas as a diplomatic weapon against the European states, which have had to fall into line in June 2007 after making grandiose demands against Russia. Russia even made veiled threats against Britain during the famous spy poisoning case. Russia has also in the last year stopped supplying energy to its neighbours to quell dissent and ensure political allegiances.
Unlike China and India, Russia has a history of political strength and maturity, and the evidence over the last two years is that Russia has begun re-inventing itself as a regional power, after winning back Kazakhstan and Uzbekistan from the American grip and managing the stop the influence of the three revolutions in that region. America is becoming increasingly worried about the growing economic and political influence of Russia.
3. Oil and Petrodollars. One of the achievements of the US in the 1970's was to peg the price of oil to dollars. This meant that oil transactions are carried out in dollars only. This has allowed the US to maintain the dollar as the world premier currency and the currency of choice for foreign reserves.
However one of the key factors behind the rise in the price of oil is the devaluing of the dollar. Now trading countries want more dollars for oil simply because the dollar is worth less - this would have increased the price of oil regardless of the increasing demand for it.
Today the European Union led by Britain and Germany are increasingly calling for pegging oil to the Euro; thereby stabilising the price of oil, and giving a stable revenue to oil producing countries. However, this severely impacts the dollar as a currency and if this was to happen would perpetuate America's economic crisis as the dollar would devalue even more.
Although this is not yet an impending threat, if America cannot bring itself out of its severe downturn, this threat may become more real - particularly if China was to add to this growing call.
4. The importance of the Middle East. Despite current supply shortages of oil around the world and the future restrictions, the importance of the Middle East, will not lessen. In fact it will become the most crucial area in the world.
This is because 66% of the world’s oil reserves are in the Middle East. “Proved" oil reserves are those quantities of oil that geological information indicates can be with reasonable certainty recovered in the future from known reservoirs. Of the trillion barrels currently estimated, 6% are in North America, 9% in Central and Latin America, 2% in Europe, 4% in Asia Pacific, 7% in Africa, 6% in the Former Soviet Union. Today, 66% of global oil reserves are in the hands of Middle Eastern regimes: Saudi Arabia (25%), Iraq (11%), Iran (8%), UAE (9%), Kuwait (9%), and Libya (2%).
Currently of the 11 million barrels per day (mbd) the US imports 3 million barrels per day from the Middle East. But in the years to come dependence on the Middle East is projected to increase by leaps and bounds. The reason is that reserves outside of the Middle East are being depleted at a much faster rate than those in the region. The overall reserves-to-production ratio -- an indicator of how long proven reserves would last at current production rates – outside of the Middle East is about 15 years comparing to roughly 80 years in the Middle East. It is for this reason that George Bush said last April, U.S. dependence on overseas oil is a "foreign tax on the American people."
This is on of the most volatile region in the world; and its importance will only grow stronger. The US is currently very worried about political developments in this region. A return of the Khilafah as predicted by several think tanks can potentially cripple America's economy, at a time where its political leverage is at its weakest since the end of the cold war.
Conclusions
The Oil price crisis once again highlights that the greed of speculators knows no bounds. It was greed that drove many banks to lend sub prime loans to individuals with no ability to repay the loans. It is again greed that is driving speculators to bet on Oil prices with no intention of actually purchasing the oil in order to make profits on the price differences – whatever the affect on the world. Such speculators drove the dot.com bubble, and then moved to the sub prime bubble once it burst and now they are pouring into the last remaining sector commodities – it is for this reason food and oil prices have reached astronomical levels, well beyond the reach of those who need it most. The Western world consumes 50% of the 21st century’s most important resource; oil, it produced less then a quarter of it. It is over consumption rather then China and India that are causing the crisis. The US specifically produced only 8% of the world’s oil but consumes 25% of it.
The Oil crisis also reveals the treachery of the Muslim rulers, whilst China and Russia are manoeuvring to weaken the US Saudi Arabia increases production of oil to ease US oil prices. Without the help of the Muslim rulers the US may not even be a super power, the Muslim lands hold what’s is considered the resource of the 20th century and most likely the resource for the 21st century, they should be the worlds superpower dictating global politics and actually doing what they continuously say they do – carrying dawah to the rest of the world.
As US consumption continues to rise the competition for dwindling energy sources will intensify, this will make the Muslim lands even more important and as with Iraq occupation may well be justified for stable supplies of the black stuff.
Oil past and present
It was British naval power that brought Oil to the international scene. In 1882, Oil had little commercial interest. The development of the internal combustion engine had not yet revolutionised world industry. It was Britain's Admiral Lord Fisher, who argued that Britain must convert its naval fleet from bulky coal-fired propulsion to the new oil fuel. With Germany on the verge of shifting the global balance of power by developing its own oil propelled ship from that point, oil conversion of the British fleet dictated national security priority to secure large oil reserves outside Britain.
WW1 brought to the international scene the importance of oil; it came to be seen globally as the key to military success. In an age of air warfare, mobile tank warfare, and naval warfare bulky coal-fired propulsion gave way to oil. Oil required only 30 minutes for ships to reach top speed compared to 4-9 hours when coal was used, battleships powered by coal emitted smoke which could be visible 10 kilometres away whilst oil had no tell-tale signs. The strategic advantage it gave was insurmountable and the British empires control of oil supplies become became even more important given the fact that Great Britain had no oil supplies at the time. It was the capturing of the rich oil fields of Baku on the Caspian Sea denying vital supplies to Germany that resulted in the end of WW1 and German surrender. William Engdahl geopolitical expert outlined the importance of oil ‘rarely discussed, however is the fact that the strategic geopolitical objectives of Britain well before 1914 included not merely the crushing defeat of Germany, but, through the conquest of war, the securing of unchallenged British control over the precious resource which by 1919, had proved itself as a strategic raw material of future economic development – petroleum. This was part of the ‘great game’ – the creation of a new global empire, whose hegemony would be unchallenged for the rest of the century, a British – led new world order.’ Britain and France concluded a secret oil bargain agreeing in effect to monopolise the whole future output of Middle Eastern oil between them.
Today oil is used for numerous everyday products across the world, most commonly for powering combustion engines such as fuel oil, diesel oil and petrol. Oil is also used as fuel for heating and lighting (e.g. kerosene lamp). The petrochemicals industry produces many by-products such as plastics and lubricants. It also manufacturers solvents (alcohols) through oil, without which there would be no chemicals industry. The free flowing hydrocarbons allow many farming implements and fertilizers.
Oil Markets explained
Crude oil, also known as petroleum, is the world's most actively traded commodity. The largest markets are in London, New York and Singapore but crude oil and refined products - such as gasoline (petrol) and heating oil - are bought and sold all over the world. Crude oil comes in many varieties and qualities, depending on its specific gravity and sulphur content which depend on where it has been pumped from.
Because there are so many different varieties and grades of crude oil, buyers and sellers have found it easier to refer to a limited number of reference, or benchmark, crude oils. Other varieties are then priced around this, according to their quality. Brent is generally accepted to be the world benchmark, although sales volumes of Brent itself are far below those of Saudi Arabian crude oils. Brent is used to price 66% of the world's internationally traded crude oil supplies.
In the Gulf, Dubai crude is used as a benchmark to price sales of other regional crudes into Asia.
In the United States, the benchmark is West Texas Intermediate (WTI). This means that crude oil sales into the US are usually priced in relation to WTI. However, crude prices on the New York Mercantile Exchange generally refer to 'light, sweet crude'. This may be any of a number of US domestic or foreign crudes but all will have a specific gravity and sulphur content within a certain range.
Slightly confusingly, the Organisation of Petroleum Exporting Countries (OPEC) - a cartel of some of the world's leading producers - has its own reference. Known as the Opec basket price, this is an average of seven - always the same seven - crudes. Six of these are produced by Opec members while the seventh, Isthmus, is from Mexico. Opec aims to control the amount of oil it pumps into the marketplace to keep the basket price within a predetermined range. In practice, the price differences between Brent, WTI and the Opec basket are not large. Crude prices also correlate closely with each other.
Oil contracts are brought and sold on international exchanges with the largest being Nymex (New York Mercantile Exchange) in New York and the Intercontinental Exchange (ICE) Futures in London, who today control global benchmark oil prices which in turn set most of the freely traded oil cargo. They do so via oil futures contracts on two grades of crude oil - West Texas Intermediate and North Sea Brent. A third rather new oil exchange, the Dubai Mercantile Exchange (DME), trading Dubai crude, is more or less a daughter of Nymex, with Nymex president James Newsome sitting on the board of DME. All exchanges use the US dollar as the standard to price oil.
Due to the nature of oil requiring extracting and refining participants commonly use futures contracts for delivery in the following month. In this type of transaction, the buyer agrees to take delivery and the seller agrees to provide a fixed amount of oil at a pre-arranged price at a specified location. Futures contracts are traded on regulated exchanges and are settled (paid) daily, based on their current value in the marketplace. The minimum purchase is 1,000 barrels.
Oil prices
So what is it that moves oil prices up and down? Most analysts and experts continue to interpret the price of oil price movements due to fundamentals – in the oil industry the fundamentals are factors that influence the supply of, and demand for, oil. Things such as the increasing demand from China and India, as well as fears that a stand-off between the US and Iran could interrupt supplies; have a bearing on oil prices. Alternatively, financial factors may be at work, such as a hedge fund having to sell a particular oil contract so it does not end up receiving a tanker-load of oil - or a trader deciding it would be fun to be the first to trade oil above $100 a barrel. However most fundamental information is not freely available. Mark Lewis from Energy Market Consultants explained in a BBC interview “We really don't know what the fundamentals are doing at any point in time, the markets are looking for signals from the fundamentals. Some of them are irrelevant, some of them are wrong, some of them are meaningless, but they affect prices nevertheless.” Sean Cronin, editor of Argus Global Markets explained “When the New York oil price broke through $100 a barrel for the first time at the start of 2008, one of the factors cited as being behind it was the assassination of Benazir Bhutto in Pakistan on 27 December 2007, that didn't strike us as making any sense at the time.”
Hence there needs to be a distinction between the factors that raise the oil price because they affect sentiment and the ones that genuinely affect supply and demand for oil. The dotcom boom in the 1990s was over inflated, but as long as everyone believed in it, the price of internet companies continued to rise. Once speculators stopped believing in internet stocks rising, the price went down. Thus Speculators trade on rumour, not fact.
Speculation driving oil price hike
A variety of reasons have been presented for why the price of a barrel of Oil continues to rise. For the study of Oil prices many consultants are paid elaborate rates to predict trend in oil. Many politicians continue to cite China and India as the chief reasons for the current price of oil. Many analysts have cited geopolitics as the chief reason such as conflict in Nigeria, oil peak and the rise of bio fuel. Although these factors have had some bearing on Oil prices they are not the actual causes for the price of oil to reach the current historical level. Speculation by traders is at the heart of the current hike.
Today's oil prices are really determined by a process so opaque only a handful of major oil trading banks, such as Goldman Sachs or Morgan Stanley, have any idea who is buying and who is selling oil futures or derivative contracts that set physical oil prices in this strange new world of ‘paper oil.’ Today 60% of crude oil price is pure speculation driven by large trader banks and hedge funds and with the development of unregulated international derivatives trading in oil futures over the past decade, the way has opened for the present speculative bubble in oil prices.
A June 2006 US Senate Permanent Subcommittee on Investigations report on "The Role of Market Speculation in rising oil and gas prices" noted, "... there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices".
A common speculation strategy amid a declining US economy and a falling US dollar is for speculators and ordinary investment funds desperate for more profitable investments amid the US sub-prime disaster to take futures positions selling the dollar "short" and oil "long." This is where one borrows dollars and sells them for a short period, betting the price of the dollar will fall. Then such a trader would purchase the same dollars at the new fallen price and return the borrowed money taking the profit from the new fallen price to the original higher price. Lehman Brothers, the investment bank, has estimated that fuel is 30% overpriced because of an influx of money into the oil market from investment funds. It believes that hot money accounts for between $20 to $30 of the recent increase in oil prices and that about $40 billion has been invested in the sector so far this year — equal to all the money pumped into oil last year.
Energy Geopolitics
Although the current crisis has in large part been due to speculators moving out of the sub-prime crisis and into commodities there are however a number of Geopolitical factors and trends and we should be aware of that will shape the global situation. The age of oil, produced its own technology, its balance of power, its own economy and its pattern of society. The future of energy security will play a key role on the global balance of power.
These factors are four:
1. The Eastern threat - The Middle East is gradually shifting from being a unipolar region in which the US enjoys uncontested hegemony to a multipolar region. The US will face more competition from China and India over access to Middle East oil. Soaring global demand for oil is being led by China's continuing economic boom and, to a lesser extent, by India's rapid economic expansion. Both are now increasingly competing with the US, the European Union and Japan for the lion's share of global oil production.
This additional demand comes at a time of continuing production problems in a number of oil-producing nations. Production is down in Nigeria after continues attacks on pipelines by anti-government militants, while Iraqi exports through the north of the country have been hit by renewed cross-border raids by Turkish forces against Kurdish insurgents.
Economists warn that continuing high oil prices will impact on the global economy, hitting growth and fuelling inflation. More importantly it will impact America's ability to fuel its own economic growth and in turn become more reliant on China for cheap goods. The American economy used to be the world's powerhouse, but today it is being left behind by emerging economies. To compound its problems, The demand for greater oil is affecting America's ability to pull itself out of its downturn and is creating inflation across the Western world. If China at any time in the future should develop its political will and ambition, it is in a relatively strong economic position to substantially weaken America.
2. The Russian threat - Russia, the leading producer of natural gas and one of the leading oil producers, is the global winner. The relationship between the European Union and Russia is now dominated by Russia and will in the future make Europe dependent on Russian oil and gas. The oil shocks of the 1970s had different effects on different European countries. Britain had some North Sea oil and the prospect of more, as did Norway. Germany and France had little or no oil of their own. Differential shocks in the coming period of oil shortage will make it harder to maintain the Euro-zone.
Vladimir Putin has already used oil and gas as a diplomatic weapon against the European states, which have had to fall into line in June 2007 after making grandiose demands against Russia. Russia even made veiled threats against Britain during the famous spy poisoning case. Russia has also in the last year stopped supplying energy to its neighbours to quell dissent and ensure political allegiances.
Unlike China and India, Russia has a history of political strength and maturity, and the evidence over the last two years is that Russia has begun re-inventing itself as a regional power, after winning back Kazakhstan and Uzbekistan from the American grip and managing the stop the influence of the three revolutions in that region. America is becoming increasingly worried about the growing economic and political influence of Russia.
3. Oil and Petrodollars. One of the achievements of the US in the 1970's was to peg the price of oil to dollars. This meant that oil transactions are carried out in dollars only. This has allowed the US to maintain the dollar as the world premier currency and the currency of choice for foreign reserves.
However one of the key factors behind the rise in the price of oil is the devaluing of the dollar. Now trading countries want more dollars for oil simply because the dollar is worth less - this would have increased the price of oil regardless of the increasing demand for it.
Today the European Union led by Britain and Germany are increasingly calling for pegging oil to the Euro; thereby stabilising the price of oil, and giving a stable revenue to oil producing countries. However, this severely impacts the dollar as a currency and if this was to happen would perpetuate America's economic crisis as the dollar would devalue even more.
Although this is not yet an impending threat, if America cannot bring itself out of its severe downturn, this threat may become more real - particularly if China was to add to this growing call.
4. The importance of the Middle East. Despite current supply shortages of oil around the world and the future restrictions, the importance of the Middle East, will not lessen. In fact it will become the most crucial area in the world.
This is because 66% of the world’s oil reserves are in the Middle East. “Proved" oil reserves are those quantities of oil that geological information indicates can be with reasonable certainty recovered in the future from known reservoirs. Of the trillion barrels currently estimated, 6% are in North America, 9% in Central and Latin America, 2% in Europe, 4% in Asia Pacific, 7% in Africa, 6% in the Former Soviet Union. Today, 66% of global oil reserves are in the hands of Middle Eastern regimes: Saudi Arabia (25%), Iraq (11%), Iran (8%), UAE (9%), Kuwait (9%), and Libya (2%).
Currently of the 11 million barrels per day (mbd) the US imports 3 million barrels per day from the Middle East. But in the years to come dependence on the Middle East is projected to increase by leaps and bounds. The reason is that reserves outside of the Middle East are being depleted at a much faster rate than those in the region. The overall reserves-to-production ratio -- an indicator of how long proven reserves would last at current production rates – outside of the Middle East is about 15 years comparing to roughly 80 years in the Middle East. It is for this reason that George Bush said last April, U.S. dependence on overseas oil is a "foreign tax on the American people."
This is on of the most volatile region in the world; and its importance will only grow stronger. The US is currently very worried about political developments in this region. A return of the Khilafah as predicted by several think tanks can potentially cripple America's economy, at a time where its political leverage is at its weakest since the end of the cold war.
Conclusions
The Oil price crisis once again highlights that the greed of speculators knows no bounds. It was greed that drove many banks to lend sub prime loans to individuals with no ability to repay the loans. It is again greed that is driving speculators to bet on Oil prices with no intention of actually purchasing the oil in order to make profits on the price differences – whatever the affect on the world. Such speculators drove the dot.com bubble, and then moved to the sub prime bubble once it burst and now they are pouring into the last remaining sector commodities – it is for this reason food and oil prices have reached astronomical levels, well beyond the reach of those who need it most. The Western world consumes 50% of the 21st century’s most important resource; oil, it produced less then a quarter of it. It is over consumption rather then China and India that are causing the crisis. The US specifically produced only 8% of the world’s oil but consumes 25% of it.
The Oil crisis also reveals the treachery of the Muslim rulers, whilst China and Russia are manoeuvring to weaken the US Saudi Arabia increases production of oil to ease US oil prices. Without the help of the Muslim rulers the US may not even be a super power, the Muslim lands hold what’s is considered the resource of the 20th century and most likely the resource for the 21st century, they should be the worlds superpower dictating global politics and actually doing what they continuously say they do – carrying dawah to the rest of the world.
As US consumption continues to rise the competition for dwindling energy sources will intensify, this will make the Muslim lands even more important and as with Iraq occupation may well be justified for stable supplies of the black stuff.
Sunday, May 11, 2008
Food Crisis - The Failure of Capitalist Economics and Global Institutions
The spate of food riots seen across the developing world in recent months lays bare the fragility of globalisation and is an indictment on the World Bank and IMF and their dogmatic free market liberalisation agenda.
Several near term factors have combined to propel the price of grains including increasing food demand in industrialising China and Indian, droughts in Australia and Central Europe and perhaps more insidiously greedy market speculation as traders shift into food commodities and away from beleaguered equities due to the effects of the credit crunch in the West. The increasing use of ever greater amounts of vital land to grow bio-fuels to power apparently more environmentally friendly cars in the West has also contributed to tightening supplies.
World Bank and the IMF chiefs have been quick to absolve responsibility citing many of the above issues as the causes for the food crises. The doubling in grain prices has made vital staple foods inaccessible for the billions living in poverty in the developing world. Furthermore it has plunged millions more into poverty - living on less than a dollar a day, as defined by international economists.
Dominique Strauss-Kahn, IMF managing director, and Robert Zoellick, World Bank president, conveniently did not attribute blame for the troubles on the policies of their corruption ridden and failing institutions, however. The World Bank and the IMF have presided over the development agenda of developing countries for decades yet poverty levels in most "Third World" countries have worsened appreciatively.
This is evidenced by rising numbers in poverty in Africa, South Asia, Middle East and Latin America as recorded in the recently published World Development Report, 2008. Given the food crisis it is apt that the 2008 report focused on using agriculture to aid economic development. However, the report peddled the time-old agenda the World Bank and IMF have pushed for decades: poor economies need to reduce tariffs and taxes on agricultural imports and exports and to liberalise domestic markets. It did not matter to World Bank and IMF economists that these same policies have been unsuccessfully pursued by developing countries as part of structural adjustment programmes for decades. It did not matter to them that past crises in developing countries have resulted from over exposure to global commodities price crashes. It did not matter that rich North America and Western Europe heavily protect their agricultural sectors (note the recent rise in US farm subsides and the EU's continued support for its farmers using the Common Agricultural Policy). It also did not matter that the main direct beneficiaries of liberalisation will be net exporters of grain in the US (which accounts for up to 30% of world wheat exports) and Europe and the western multinational agrochemical corporations like Monsanto and Dupont.
Egypt, where people have been killed in several riots, has pursued the World Bank and IMF agenda in detail and has consequently increased dependency on wheat imports from 44% of total consumption in the 1960s to over 50% according to recently available estimates. Self-sufficiency in food supplies has been spurned even though Egypt has one of the highest per capita wheat consumption levels in the world and the majority of its poor households spend between 70-80% of income on food.
Egyptian economists bred of a diet of IMF and World Bank policies have argued that self-sufficiency is unimportant since access to imports will ensure supplies. However, access is meaningless if the price of vital food supplies is beyond the means of ordinary citizens. What responsible government would leave the feeding its people to be met by imports where false incentives can divert production to bio fuels or to feeding cattle or to price speculation from decedent traders siting in western capitals that see food commodity price inflation as a ‘nice earner'. Food supplies, where self-sufficiency is vital, are not like video recorders or cars where demand if not met by imports will cause a national emergency.
The roots of the current food crisis lie with the failed policies of the World Bank and IMF. Policies designed in Washington and London yet not implemented in the US or Europe - both of whom pursue a policy of food security, and therefore need open overseas markets to sell their overproduction. These policies bring the misery of harsh capitalism to the world's most vulnerable who have no welfare state to fall back on.
The ultimate blame though lies with traitorous degenerate rulers in the Muslim world, like Mubarak, who implement these policies wholesale and oblivious to the harm and despair that is being inflected on the weakest in society - those that a responsible state should be most concerned about. These rulers are the key instruments of the Western governments to guarantee their interests through liberalisation of markets and the suppression of the desire for the end of Western dominance and the reimplementation of Islam. The Islamic Economic system implemented by the Khilafah (Caliphate), with Egypt as a potential province (wilayah), has a number of economic Shariah instruments to address the current crisis. It could use land reforms, in the shape of redistribution of unutilised land, to create a vibrant and competitive domestic agricultural sector with investment from the state in developing and upgrading agricultural infrastructure including research and development in new seed technologies. Egyptian wheat consumption levels justify production at twice current levels. It is interesting to note that in the 1950s Korea and Taiwan (two thriving former ‘tiger' economies) built their growth paths on land reforms and rural investment that created an improvement income distribution from agricultural growth.
Several near term factors have combined to propel the price of grains including increasing food demand in industrialising China and Indian, droughts in Australia and Central Europe and perhaps more insidiously greedy market speculation as traders shift into food commodities and away from beleaguered equities due to the effects of the credit crunch in the West. The increasing use of ever greater amounts of vital land to grow bio-fuels to power apparently more environmentally friendly cars in the West has also contributed to tightening supplies.
World Bank and the IMF chiefs have been quick to absolve responsibility citing many of the above issues as the causes for the food crises. The doubling in grain prices has made vital staple foods inaccessible for the billions living in poverty in the developing world. Furthermore it has plunged millions more into poverty - living on less than a dollar a day, as defined by international economists.
Dominique Strauss-Kahn, IMF managing director, and Robert Zoellick, World Bank president, conveniently did not attribute blame for the troubles on the policies of their corruption ridden and failing institutions, however. The World Bank and the IMF have presided over the development agenda of developing countries for decades yet poverty levels in most "Third World" countries have worsened appreciatively.
This is evidenced by rising numbers in poverty in Africa, South Asia, Middle East and Latin America as recorded in the recently published World Development Report, 2008. Given the food crisis it is apt that the 2008 report focused on using agriculture to aid economic development. However, the report peddled the time-old agenda the World Bank and IMF have pushed for decades: poor economies need to reduce tariffs and taxes on agricultural imports and exports and to liberalise domestic markets. It did not matter to World Bank and IMF economists that these same policies have been unsuccessfully pursued by developing countries as part of structural adjustment programmes for decades. It did not matter to them that past crises in developing countries have resulted from over exposure to global commodities price crashes. It did not matter that rich North America and Western Europe heavily protect their agricultural sectors (note the recent rise in US farm subsides and the EU's continued support for its farmers using the Common Agricultural Policy). It also did not matter that the main direct beneficiaries of liberalisation will be net exporters of grain in the US (which accounts for up to 30% of world wheat exports) and Europe and the western multinational agrochemical corporations like Monsanto and Dupont.
Egypt, where people have been killed in several riots, has pursued the World Bank and IMF agenda in detail and has consequently increased dependency on wheat imports from 44% of total consumption in the 1960s to over 50% according to recently available estimates. Self-sufficiency in food supplies has been spurned even though Egypt has one of the highest per capita wheat consumption levels in the world and the majority of its poor households spend between 70-80% of income on food.
Egyptian economists bred of a diet of IMF and World Bank policies have argued that self-sufficiency is unimportant since access to imports will ensure supplies. However, access is meaningless if the price of vital food supplies is beyond the means of ordinary citizens. What responsible government would leave the feeding its people to be met by imports where false incentives can divert production to bio fuels or to feeding cattle or to price speculation from decedent traders siting in western capitals that see food commodity price inflation as a ‘nice earner'. Food supplies, where self-sufficiency is vital, are not like video recorders or cars where demand if not met by imports will cause a national emergency.
The roots of the current food crisis lie with the failed policies of the World Bank and IMF. Policies designed in Washington and London yet not implemented in the US or Europe - both of whom pursue a policy of food security, and therefore need open overseas markets to sell their overproduction. These policies bring the misery of harsh capitalism to the world's most vulnerable who have no welfare state to fall back on.
The ultimate blame though lies with traitorous degenerate rulers in the Muslim world, like Mubarak, who implement these policies wholesale and oblivious to the harm and despair that is being inflected on the weakest in society - those that a responsible state should be most concerned about. These rulers are the key instruments of the Western governments to guarantee their interests through liberalisation of markets and the suppression of the desire for the end of Western dominance and the reimplementation of Islam. The Islamic Economic system implemented by the Khilafah (Caliphate), with Egypt as a potential province (wilayah), has a number of economic Shariah instruments to address the current crisis. It could use land reforms, in the shape of redistribution of unutilised land, to create a vibrant and competitive domestic agricultural sector with investment from the state in developing and upgrading agricultural infrastructure including research and development in new seed technologies. Egyptian wheat consumption levels justify production at twice current levels. It is interesting to note that in the 1950s Korea and Taiwan (two thriving former ‘tiger' economies) built their growth paths on land reforms and rural investment that created an improvement income distribution from agricultural growth.
Your Money Is Not Good Anymore!
The weakening US dollar is not a phenomenon restricted to its borders as its effects are being felt the world over. The fiat currency has insured that America will not suffer in isolation but rather ensure that its grip on power is firmly held in place. Allah (swt) has commanded that the Khilafah adopt the bimetallic standard. Only through the complete implementation of Islam will mankind be removed from the injustice and oppression of man-made systems.
The sharp decline of the US dollar has been felt across the globe. Traders, unsure of the value of paper assets, are bidding up the price of commodities. The Associated Press recently reported that,”Huge price hikes have been caused by a weaker U.S. dollar and financial turmoil that saw investors stash money in commodities such as oil, which hit another record high Monday [April 28, 2008] of $119.93 per barrel.” With a recession looming and inflation on the rise, the US has exported its financial crisis beyond its borders to other countries. How can the currency of one nation wreak so much havoc worldwide?
Currencies and American Control
In the past, a country’s currency would be based on the amount of gold it had in its reserves. Whenever countries would trade with each other, they would transfer gold as a method of payment. In this way, the country’s currency would increase or decrease depending on how much gold remained in its reserve.
In 1944, the Bretton Woods conference changed the way currencies would be valued. Rather than have each currency matched against their gold reserves, they would be matched against the US dollar. In 1971 under the Nixon administration, America completely severed the link between its dollar and gold. With gold no longer backing the US dollar, currencies no longer had intrinsic value but only a legally imposed one. In other words, it would only be a piece of paper with no worth unless its citizens and other countries agreed to hold value to it.
The fiat currency (i.e.: currency made legal tender by sanction and neither backed by, nor necessarily convertible into, gold or silver) has a major part to play in the financial crisis we see today. This currency is open to government manipulation in the pursuit of personal interest. With no limit on the amount of dollars being printed, a government can essentially pay its way out of debt with money created out of thin air. As with any commodity, too much supply in the market will decrease the value of the currency leading to inflationary prices. With so many currencies pegged to the US dollar it is impossible for this to remain an isolated event.
The Hukm Regarding Currency
When it comes to exchanging a commodity with a specific monetary unit, Islam has guided us to the gold and silver standard. It has restricted the Islamic State to using this standard when engaging in transactions.
This specification could be deduced from several matters:
1. When Islam prohibited the hoarding of wealth, it was specifically related to the hoarding of gold and silver despite the fact that wealth includes any property that can be owned. The prohibition in the verse refers to the hoarding of money, since it acts as the generally accepted medium of exchange, and because the hoarding of money is the issue that produces the effect of the prohibition i.e. restricting circulation. The verse has specified the money which Allah (swt) has prohibited us to hoard which is gold and silver. Allah (swt) says:
“And those who hoard gold and silver and do not spend them in the way of Allah, let them know that a severe punishment is awaiting them” [TMQ 9:34]
Therefore, the prohibition is focused on the monetary medium of exchange, which makes the hoarding of gold and silver forbidden, whether it was minted or not.
2. Islam has linked gold and silver to a set of fixed rules. Therefore, when it imposed the Diyyah (blood money), it specified a fixed amount of gold. Also, when it decreed the penalty of cutting the hand of the thief, it specified the minimum value of gold that is stolen which would entail the cutting of the hand. In his letter to the people of Yemen, the Prophet (saw) was reported by An-Nisai to have said: “The blood money for one soul would be 100 camels...and for those who deal in gold it would be 1000 dinars.” Bukhari also reported on the authority of Aisha (ra) that the Prophet (saw) also said: “The hand is cut for the theft of one-quarter dinar and upward.” Therefore, the fact that Islam has linked the Shari’ah rules to gold and silver by text, when these rules are related to money, serves as evidence that the currency is solely restricted to gold and silver.
3. The Prophet (saw) has determined that gold and silver be used as money, and exclusively made them the monetary measure to evaluate goods and services. He (saw) ensured that all transactions were conducted with them as their basis. All trade and marriage transactions were conducted in gold and silver, in their quality as money, and this has been established in the Sahih Ahadith.
4. When Allah (swt) decreed the Zakat on money, He (swt) made it obligatory in gold and silver, and He (swt) determined a Nisab (amount) for the Zakat in gold and silver. Therefore, to consider the Zakat on money as being in gold and silver would establish that currency is gold and silver.
Is There Enough Gold in the World?
The gold existing in the world is enough to return the global economy to the gold standard. Gold has sufficient flexibility to produce the money required to cover trade and other economic needs in the world for the following reasons:
1. Throughout human history, no metal has ever enjoyed an interest similar to gold. All that has been mined in the past centuries continues to be used today, as it does not perish with time. Rather, all that occurs is its exchange in the form of currency or jewellery, or in some other form of manufacturing or re-melting.
2. Gold in all previous times, up to the end of the 19th century, was sufficient for all trade activities as it covered all of the world’s economic needs. Throughout the 19th century, in which economic growth increased to a great level, the world witnessed a great economic increase and a great reduction of prices and increase in wages without any shortages in the quantity of gold currency displayed for use, despite the increased goods and services.
3. Whenever goods and services increase while the quantity of circulating currency remains steady, it enables the currency unit of buying a greater quantity of goods and services. The opposite is also true i.e. if the quantity of goods and services decreases while the quantity of a currency remains steady, the currency unit’s purchasing ability i.e. its ability to buy goods and services decreases. Whatever the case, the circulating currency may be sufficient for currency exchange, no matter how much of it is in circulation.
4. What appears to be a visible shortage of gold is only due to the prevailing global inflation. If the world were to return to the gold standard, gold would no longer be used for trade speculation. Rather, the use of gold would be restricted to trading transactions and economic needs. As a result, stability and discipline would return to currency prices. This is because currency prices and their relation to each other will be determined by gold, thus making all currencies in the world virtually one currency which will lead to the inability of speculation with it and reduce the profits of trading with gold. This will lead to an abundance in gold thereby its shortage will disappear.
Advantages of the Gold Standard
When a state adopts the gold standard, it uses the gold currency in its foreign and domestic transactions. It uses the gold standard, even if it used paper currency as long as the paper currency can be exchanged for gold and this exchange is fixed i.e. a specific unit of paper currency can be exchanged for a specific amount of gold.
This would bring stability to the exchange rates between countries, as gold cannot be manipulated like the fiat currency. This will increase international trade and reduce trade barriers. Businesses which are dependent on imported commodities do not have to fear that these commodities will become too expensive as a result of their currency devaluing. Businesses which export their products do not fear their commodities becoming too expensive for the destined countries as a result of the increase in value of their currency.
It would remove the problem of inflation, as gold is a scarce commodity. The money supply cannot be increased at the will or whim of a government. The prices of goods and services may still increase as a result of gold coming into the state due to a high level of exports. This will lead to economic growth, which would mean more locally produced goods and services being available, which would counterbalance the extra gold coming into the state. As long as the state allows the free circulation of gold (i.e. import and export) then there will be financial and economic stability.
Today, international trade is hindered because of the lack of hard currencies. Many of the currencies are considered too weak and volatile for international trade. Globally, most transactions are carried out in US dollars. However, even in times of war the dollar is not stable, since it is only a fiat currency having no intrinsic value. It is only gold (and silver) that is a truly stable currency. It is only through the bimetallic standard that these barriers to international trade can be removed.
It is only the Islamic State, carrying the ideology of Islam that will adopt such a standard. Moreover, the Shariah has made it an obligation to implement the gold (or silver) standard. When the Islamic State returns it will adopt the gold and silver standard, thus transforming the current international money markets and prevent any single country from imposing its will on the monetary markets.
Our Deen Has Been Perfected
As Muslims, we need to not only inform ourselves but to teach others of this Deen that Allah (swt) has perfected for us since it is not only a mercy for the Muslims but for all of mankind. Allah (swt) says:
“This day, I have perfected your Deen for you, completed My favour upon you, and have chosen for you Islam as your Deen.” [TMQ 5:3]
In Ibn Kathir’s tasfir he explains: “This, indeed, is the biggest favor from Allah to this Ummah, for He has completed their religion for them, and they, thus, do not need any other religion or any other Prophet except Muhammad. This is why Allah made Muhammad the Final Prophet and sent him to all humans and Jinn. Therefore, the permissible is what he allows, the impermissible is what he prohibits, the Law is what he legislates and everything that he conveys is true and authentic and does not contain lies or contradictions.” Therefore, Islam is a complete system and Allah (swt) has provided solutions and guidance for all of man’s problems. Only with Islam which is from the infinite knowledge of The Creator – Al Alim – can man implement a system that will take care of all his affairs in a comprehensive and just manner.
May Allah (swt) allow this Ummah to rise again to the position of honour and dignity that it is destined for and be a light of guidance for all the whole of mankind.
The sharp decline of the US dollar has been felt across the globe. Traders, unsure of the value of paper assets, are bidding up the price of commodities. The Associated Press recently reported that,”Huge price hikes have been caused by a weaker U.S. dollar and financial turmoil that saw investors stash money in commodities such as oil, which hit another record high Monday [April 28, 2008] of $119.93 per barrel.” With a recession looming and inflation on the rise, the US has exported its financial crisis beyond its borders to other countries. How can the currency of one nation wreak so much havoc worldwide?
Currencies and American Control
In the past, a country’s currency would be based on the amount of gold it had in its reserves. Whenever countries would trade with each other, they would transfer gold as a method of payment. In this way, the country’s currency would increase or decrease depending on how much gold remained in its reserve.
In 1944, the Bretton Woods conference changed the way currencies would be valued. Rather than have each currency matched against their gold reserves, they would be matched against the US dollar. In 1971 under the Nixon administration, America completely severed the link between its dollar and gold. With gold no longer backing the US dollar, currencies no longer had intrinsic value but only a legally imposed one. In other words, it would only be a piece of paper with no worth unless its citizens and other countries agreed to hold value to it.
The fiat currency (i.e.: currency made legal tender by sanction and neither backed by, nor necessarily convertible into, gold or silver) has a major part to play in the financial crisis we see today. This currency is open to government manipulation in the pursuit of personal interest. With no limit on the amount of dollars being printed, a government can essentially pay its way out of debt with money created out of thin air. As with any commodity, too much supply in the market will decrease the value of the currency leading to inflationary prices. With so many currencies pegged to the US dollar it is impossible for this to remain an isolated event.
The Hukm Regarding Currency
When it comes to exchanging a commodity with a specific monetary unit, Islam has guided us to the gold and silver standard. It has restricted the Islamic State to using this standard when engaging in transactions.
This specification could be deduced from several matters:
1. When Islam prohibited the hoarding of wealth, it was specifically related to the hoarding of gold and silver despite the fact that wealth includes any property that can be owned. The prohibition in the verse refers to the hoarding of money, since it acts as the generally accepted medium of exchange, and because the hoarding of money is the issue that produces the effect of the prohibition i.e. restricting circulation. The verse has specified the money which Allah (swt) has prohibited us to hoard which is gold and silver. Allah (swt) says:
“And those who hoard gold and silver and do not spend them in the way of Allah, let them know that a severe punishment is awaiting them” [TMQ 9:34]
Therefore, the prohibition is focused on the monetary medium of exchange, which makes the hoarding of gold and silver forbidden, whether it was minted or not.
2. Islam has linked gold and silver to a set of fixed rules. Therefore, when it imposed the Diyyah (blood money), it specified a fixed amount of gold. Also, when it decreed the penalty of cutting the hand of the thief, it specified the minimum value of gold that is stolen which would entail the cutting of the hand. In his letter to the people of Yemen, the Prophet (saw) was reported by An-Nisai to have said: “The blood money for one soul would be 100 camels...and for those who deal in gold it would be 1000 dinars.” Bukhari also reported on the authority of Aisha (ra) that the Prophet (saw) also said: “The hand is cut for the theft of one-quarter dinar and upward.” Therefore, the fact that Islam has linked the Shari’ah rules to gold and silver by text, when these rules are related to money, serves as evidence that the currency is solely restricted to gold and silver.
3. The Prophet (saw) has determined that gold and silver be used as money, and exclusively made them the monetary measure to evaluate goods and services. He (saw) ensured that all transactions were conducted with them as their basis. All trade and marriage transactions were conducted in gold and silver, in their quality as money, and this has been established in the Sahih Ahadith.
4. When Allah (swt) decreed the Zakat on money, He (swt) made it obligatory in gold and silver, and He (swt) determined a Nisab (amount) for the Zakat in gold and silver. Therefore, to consider the Zakat on money as being in gold and silver would establish that currency is gold and silver.
Is There Enough Gold in the World?
The gold existing in the world is enough to return the global economy to the gold standard. Gold has sufficient flexibility to produce the money required to cover trade and other economic needs in the world for the following reasons:
1. Throughout human history, no metal has ever enjoyed an interest similar to gold. All that has been mined in the past centuries continues to be used today, as it does not perish with time. Rather, all that occurs is its exchange in the form of currency or jewellery, or in some other form of manufacturing or re-melting.
2. Gold in all previous times, up to the end of the 19th century, was sufficient for all trade activities as it covered all of the world’s economic needs. Throughout the 19th century, in which economic growth increased to a great level, the world witnessed a great economic increase and a great reduction of prices and increase in wages without any shortages in the quantity of gold currency displayed for use, despite the increased goods and services.
3. Whenever goods and services increase while the quantity of circulating currency remains steady, it enables the currency unit of buying a greater quantity of goods and services. The opposite is also true i.e. if the quantity of goods and services decreases while the quantity of a currency remains steady, the currency unit’s purchasing ability i.e. its ability to buy goods and services decreases. Whatever the case, the circulating currency may be sufficient for currency exchange, no matter how much of it is in circulation.
4. What appears to be a visible shortage of gold is only due to the prevailing global inflation. If the world were to return to the gold standard, gold would no longer be used for trade speculation. Rather, the use of gold would be restricted to trading transactions and economic needs. As a result, stability and discipline would return to currency prices. This is because currency prices and their relation to each other will be determined by gold, thus making all currencies in the world virtually one currency which will lead to the inability of speculation with it and reduce the profits of trading with gold. This will lead to an abundance in gold thereby its shortage will disappear.
Advantages of the Gold Standard
When a state adopts the gold standard, it uses the gold currency in its foreign and domestic transactions. It uses the gold standard, even if it used paper currency as long as the paper currency can be exchanged for gold and this exchange is fixed i.e. a specific unit of paper currency can be exchanged for a specific amount of gold.
This would bring stability to the exchange rates between countries, as gold cannot be manipulated like the fiat currency. This will increase international trade and reduce trade barriers. Businesses which are dependent on imported commodities do not have to fear that these commodities will become too expensive as a result of their currency devaluing. Businesses which export their products do not fear their commodities becoming too expensive for the destined countries as a result of the increase in value of their currency.
It would remove the problem of inflation, as gold is a scarce commodity. The money supply cannot be increased at the will or whim of a government. The prices of goods and services may still increase as a result of gold coming into the state due to a high level of exports. This will lead to economic growth, which would mean more locally produced goods and services being available, which would counterbalance the extra gold coming into the state. As long as the state allows the free circulation of gold (i.e. import and export) then there will be financial and economic stability.
Today, international trade is hindered because of the lack of hard currencies. Many of the currencies are considered too weak and volatile for international trade. Globally, most transactions are carried out in US dollars. However, even in times of war the dollar is not stable, since it is only a fiat currency having no intrinsic value. It is only gold (and silver) that is a truly stable currency. It is only through the bimetallic standard that these barriers to international trade can be removed.
It is only the Islamic State, carrying the ideology of Islam that will adopt such a standard. Moreover, the Shariah has made it an obligation to implement the gold (or silver) standard. When the Islamic State returns it will adopt the gold and silver standard, thus transforming the current international money markets and prevent any single country from imposing its will on the monetary markets.
Our Deen Has Been Perfected
As Muslims, we need to not only inform ourselves but to teach others of this Deen that Allah (swt) has perfected for us since it is not only a mercy for the Muslims but for all of mankind. Allah (swt) says:
“This day, I have perfected your Deen for you, completed My favour upon you, and have chosen for you Islam as your Deen.” [TMQ 5:3]
In Ibn Kathir’s tasfir he explains: “This, indeed, is the biggest favor from Allah to this Ummah, for He has completed their religion for them, and they, thus, do not need any other religion or any other Prophet except Muhammad. This is why Allah made Muhammad the Final Prophet and sent him to all humans and Jinn. Therefore, the permissible is what he allows, the impermissible is what he prohibits, the Law is what he legislates and everything that he conveys is true and authentic and does not contain lies or contradictions.” Therefore, Islam is a complete system and Allah (swt) has provided solutions and guidance for all of man’s problems. Only with Islam which is from the infinite knowledge of The Creator – Al Alim – can man implement a system that will take care of all his affairs in a comprehensive and just manner.
May Allah (swt) allow this Ummah to rise again to the position of honour and dignity that it is destined for and be a light of guidance for all the whole of mankind.
The Bully Gasps As He Drowns
In the Name of Allah, The most Beneficent, The most Merciful
Changing World Scenarios – Their Effects & The Blame Game
Mr. Bush, the Indians and Chinese are not just eating-up the corn and the meat of the earth; they are sipping-up precious potable water; inhaling precious oxygen and guzzling the oil of the earth too. In fitness of things, you must ban the export of your nuclear submarines and bombers to them. Alternatively, you could kill half of them or even bomb half of their industry so that development is stalled! They should be taught to live frugally!
Mr. President, how far do you agree with me? Your development, progress and prosperity for the past more than a century was good for the world, but the recent prosperity of India and China have caused all the troubles of the earth. The two culprits are responsible for your diving Dollar, the sub-prime collapse, the crash of your stock markets, the run in your credit-card market, the cave in of your banks and businesses – all this because of them. They took you to Afghanistan and Iraq for war. And yes, even the Hurricane Katrina, bursting of water pipes in Washington and wild fires are because of India and China.
Your lieutenant Ms. Rice and EU Agriculture Commissioner Mariann Fischer Boel are right, the diversion of corn & wheat for making biofuel is not the culprit for the food riots in the world. It’s the teaming millions in India and China who have begun to eat and have forsaken their habits of starvation, which has caused this scarcity. If only they had continued to remain under-nourished and in malnutrition, the world would have been a better place.
Mr. President, if I read your mind correctly – global warming, greenhouse gases, earthquakes and tsunamis can all be contained if ‘Capitalism’ is followed in true letter and sprit. The stupid Indians and Chinese mistook the word ‘freedom’ to mean that they too can become rich. Indians made mockery of ‘Democratic systems’ like ‘liberty & secularism’ and Chinese are not democratic at all. The ‘democratic system’ we put in place in Iraq and Afghanistan need to be emulated by both. If only Indians and Chinese were to become noble souls like Americans, earth would be a paradise. Terrorism is unleashed on this planet because the middle-class Indians and Chinese are becoming prosperous.
Living in a fool’s paradise, Indians and Chinese don’t realize that World Trade Organisation (WTO), Global Agreement on Trades and Tariffs (GATT), Intellectual Property Rights (IPR), Genetically Modified (GM) Foods, Agricultural Subsidies – Globalisation in all its pristine forms is the real benefactor. Despite all this, food riots are caused because of the prosperity of India and China.
Mr. President, unfortunately now more Americans have to travel by public transport because the rising oil prices are siphoning their wallets. One wonders if the saying, ‘Those who live by the sword die by the sword’ is coming true for you - the Big-Bully. After repeated rebuffs from Iran, cold-shoulders from allies, snubs by India on the nuclear issue and the Iranian President visit – you and your America are clearly sinking. Gasping for breath, the gurgle is amusing to the ears of the world.
The icing on the cake is the coming of the Caliphate. Muslims the world over are inching to their goal – a borderless Islamic State with a Caliph at the helm. Your failed systems must give way to the tried and tested ways of Muhammad’s (peace be upon him) and his lieutenants. It does not need a ghost called Al-Qaeda to topple you; for you are your own enemy.
Abdul Rasheed Qureshi
The author is a practicing advocate in the Supreme Court of India
Changing World Scenarios – Their Effects & The Blame Game
Mr. Bush, the Indians and Chinese are not just eating-up the corn and the meat of the earth; they are sipping-up precious potable water; inhaling precious oxygen and guzzling the oil of the earth too. In fitness of things, you must ban the export of your nuclear submarines and bombers to them. Alternatively, you could kill half of them or even bomb half of their industry so that development is stalled! They should be taught to live frugally!
Mr. President, how far do you agree with me? Your development, progress and prosperity for the past more than a century was good for the world, but the recent prosperity of India and China have caused all the troubles of the earth. The two culprits are responsible for your diving Dollar, the sub-prime collapse, the crash of your stock markets, the run in your credit-card market, the cave in of your banks and businesses – all this because of them. They took you to Afghanistan and Iraq for war. And yes, even the Hurricane Katrina, bursting of water pipes in Washington and wild fires are because of India and China.
Your lieutenant Ms. Rice and EU Agriculture Commissioner Mariann Fischer Boel are right, the diversion of corn & wheat for making biofuel is not the culprit for the food riots in the world. It’s the teaming millions in India and China who have begun to eat and have forsaken their habits of starvation, which has caused this scarcity. If only they had continued to remain under-nourished and in malnutrition, the world would have been a better place.
Mr. President, if I read your mind correctly – global warming, greenhouse gases, earthquakes and tsunamis can all be contained if ‘Capitalism’ is followed in true letter and sprit. The stupid Indians and Chinese mistook the word ‘freedom’ to mean that they too can become rich. Indians made mockery of ‘Democratic systems’ like ‘liberty & secularism’ and Chinese are not democratic at all. The ‘democratic system’ we put in place in Iraq and Afghanistan need to be emulated by both. If only Indians and Chinese were to become noble souls like Americans, earth would be a paradise. Terrorism is unleashed on this planet because the middle-class Indians and Chinese are becoming prosperous.
Living in a fool’s paradise, Indians and Chinese don’t realize that World Trade Organisation (WTO), Global Agreement on Trades and Tariffs (GATT), Intellectual Property Rights (IPR), Genetically Modified (GM) Foods, Agricultural Subsidies – Globalisation in all its pristine forms is the real benefactor. Despite all this, food riots are caused because of the prosperity of India and China.
Mr. President, unfortunately now more Americans have to travel by public transport because the rising oil prices are siphoning their wallets. One wonders if the saying, ‘Those who live by the sword die by the sword’ is coming true for you - the Big-Bully. After repeated rebuffs from Iran, cold-shoulders from allies, snubs by India on the nuclear issue and the Iranian President visit – you and your America are clearly sinking. Gasping for breath, the gurgle is amusing to the ears of the world.
The icing on the cake is the coming of the Caliphate. Muslims the world over are inching to their goal – a borderless Islamic State with a Caliph at the helm. Your failed systems must give way to the tried and tested ways of Muhammad’s (peace be upon him) and his lieutenants. It does not need a ghost called Al-Qaeda to topple you; for you are your own enemy.
Abdul Rasheed Qureshi
The author is a practicing advocate in the Supreme Court of India
Wednesday, May 7, 2008
Why America Must Support The Caliphate?
In the Name of Allah, The most Beneficent, The most Merciful
Changing Worldviews amidst Global Revival of Islamic spirit in Muslims.
It would make good sense for the U.S.A. and its allies to change their attitude towards the coming of the Caliphate. Foreign policies don’t change overnight and especially if nations that have arrogated to themselves the position of ‘world-policing, peace-keeping, protectors of freedom’ etc., because of the iron-clad, rigid mind-set. It would be better for them if they stepped out of their conceit and viewed the ground reality, repositioning their stands so that they are redeemed and not consigned to oblivion in changed situations.
America and its allies have incurred the wrath of nations and masses due to the injustice and mischief that they have committed. Now that the power of the ‘Big Bully’ is waning, the nations of the world are waiting to take revenge. Iran’s standoff with America followed by India’s refusing to take the bait and sign the nuclear deal and yet another snub by India when U.S.A. advised it about Iran and its visiting President; all go to show that U.S.A.’s edict is no more effective. Seeing no coercive steps, more and more countries will rebuff the U.S.A. It’s woes come from unforeseen quarters. As if the economic meltdown was not enough, even the century old water pipes are giving way due to ageing, not to speak of hurricane, tornadoes and wild fires. All this is pointing to an inevitable collapse of the superpower, and America must see this. Perished nations of the past are glaring illustrations of how the high and mighty bit the dust.
The collapse of U.S.A. is not just of a country, it is the collapse of an entire ideology – Capitalism. With it, will go, Britain, France, Germany, Japan…you name it. Now, America should foresee who is likely to take power and what will be its (U.S.A.’s) fate then? If nation states of today get a chance to settle their scores, they will not hesitate to rip U.S.A. apart by the jungle law. U.S.A. well knows that it has caused maximum harm to the Muslims and their countries, plundering every straw it could. If nations remain as independent countries, they will treat U.S.A. with all the contempt their vengeance can muster.
The other option is the re-established Caliphate. Pardon will be the guiding word for the Caliph, as was the case of Mecca when Prophet Muhammad captured it in 630 C.E. If U.S.A. is pardoned for its wrong-doings, only then it can survive, and survive honorably. But that will come only if it gives-up its resistance to the coming Caliphate. One cannot expect it to support it, but don’t oppose it. Even if absolute pardon is not given to U.S.A., the fact that torture is forbidden by Islam and hence the Caliph cannot resort to it, is itself a great respite for U.S.A. and its allies. The future treatment by the Caliphate will depend upon the America’s attitude today towards the Muslims and the Caliphate. That it is coming is a foregone conclusion. The CIA has spoken of the year 2020 for a possible emergence of the Caliphate for the entire Muslim world. Who knows, they may be well off the mark. It may come in months from now.
The problem with the U.S.A. is that it has too many power centers. Not just the American public, even the U.S. President is ill-informed about the ground reality. The surging waves of a unified Muslim world under one Caliphate are overwhelming the globe. U.S. Intelligence is either too engrossed in running after mirages that they call terrorist; or they know of the ground-reality, but are suppressing it through the control of the media. Either way, it is self inflicting for the U.S.A. as a whole. Why do these intelligent-fools not understand that they have lost the war of minds, even if they have won the battle of the media?
Mr. President and people of America, your redemption lies in the Caliphate.
Abdul Rasheed Qureshi
The author is a practicing advocate in the Supreme Court of India
Changing Worldviews amidst Global Revival of Islamic spirit in Muslims.
It would make good sense for the U.S.A. and its allies to change their attitude towards the coming of the Caliphate. Foreign policies don’t change overnight and especially if nations that have arrogated to themselves the position of ‘world-policing, peace-keeping, protectors of freedom’ etc., because of the iron-clad, rigid mind-set. It would be better for them if they stepped out of their conceit and viewed the ground reality, repositioning their stands so that they are redeemed and not consigned to oblivion in changed situations.
America and its allies have incurred the wrath of nations and masses due to the injustice and mischief that they have committed. Now that the power of the ‘Big Bully’ is waning, the nations of the world are waiting to take revenge. Iran’s standoff with America followed by India’s refusing to take the bait and sign the nuclear deal and yet another snub by India when U.S.A. advised it about Iran and its visiting President; all go to show that U.S.A.’s edict is no more effective. Seeing no coercive steps, more and more countries will rebuff the U.S.A. It’s woes come from unforeseen quarters. As if the economic meltdown was not enough, even the century old water pipes are giving way due to ageing, not to speak of hurricane, tornadoes and wild fires. All this is pointing to an inevitable collapse of the superpower, and America must see this. Perished nations of the past are glaring illustrations of how the high and mighty bit the dust.
The collapse of U.S.A. is not just of a country, it is the collapse of an entire ideology – Capitalism. With it, will go, Britain, France, Germany, Japan…you name it. Now, America should foresee who is likely to take power and what will be its (U.S.A.’s) fate then? If nation states of today get a chance to settle their scores, they will not hesitate to rip U.S.A. apart by the jungle law. U.S.A. well knows that it has caused maximum harm to the Muslims and their countries, plundering every straw it could. If nations remain as independent countries, they will treat U.S.A. with all the contempt their vengeance can muster.
The other option is the re-established Caliphate. Pardon will be the guiding word for the Caliph, as was the case of Mecca when Prophet Muhammad captured it in 630 C.E. If U.S.A. is pardoned for its wrong-doings, only then it can survive, and survive honorably. But that will come only if it gives-up its resistance to the coming Caliphate. One cannot expect it to support it, but don’t oppose it. Even if absolute pardon is not given to U.S.A., the fact that torture is forbidden by Islam and hence the Caliph cannot resort to it, is itself a great respite for U.S.A. and its allies. The future treatment by the Caliphate will depend upon the America’s attitude today towards the Muslims and the Caliphate. That it is coming is a foregone conclusion. The CIA has spoken of the year 2020 for a possible emergence of the Caliphate for the entire Muslim world. Who knows, they may be well off the mark. It may come in months from now.
The problem with the U.S.A. is that it has too many power centers. Not just the American public, even the U.S. President is ill-informed about the ground reality. The surging waves of a unified Muslim world under one Caliphate are overwhelming the globe. U.S. Intelligence is either too engrossed in running after mirages that they call terrorist; or they know of the ground-reality, but are suppressing it through the control of the media. Either way, it is self inflicting for the U.S.A. as a whole. Why do these intelligent-fools not understand that they have lost the war of minds, even if they have won the battle of the media?
Mr. President and people of America, your redemption lies in the Caliphate.
Abdul Rasheed Qureshi
The author is a practicing advocate in the Supreme Court of India
Sunday, May 4, 2008
Islam & Food Security [SOLUTION to FOOD CRISIS]
Rising food prices have had a dramatic impact on the world’s poor. This has resulted in anger, violence, and protests around the globe. The factors that have caused this problem are many, but the underlying cause is one: the Capitalist system. Only Islam has the ability to ensure food security for all people, as its solutions are from Allah (swt).
________________________________________
Rising food prices have sparked outrage across the world. The United Nations World Food Programme, which provides food aid to over 70 million people, says that the rise in prices of cereals and fuel caused it to increase its budget for 2008 by 17% – from $2.9 billion to $3.4 billion. Spokesperson Christiane Berthiaume says that people living close to the poverty line, who previously struggled to survive, could very soon find that prices are simply impossibly high.
________________________________________
The food crisis has had the following impact around the world:
EGYPT: Workers rioted for 2 days, where protesters threw petrol bombs at security forces and police fired tear gas at the crowds. When workers attempted to strike as a protest against the high prices, plainclothes security men took control of the factory and forced them to work.
BANGLADESH: About 20,000 textile workers have clashed with police near Dhaka, Bangladesh's capital, demanding better wages to meet high food prices. In a recent press conference, the World Bank President Robert Zoellick stated: "In Bangladesh a two-kilogramme bag of rice...now consumes about half the daily income of a poor family".
INDONESIA: Protesters demanded that the government bring down food prices after the media reported cases of starvation. It is estimated that Bangladeshis and poor Indonesians are now spending 70% or more of their income on food.
HAITI: Food prices rose over 40% in one year, resulting in 10 days of violent protest and the ousting of the Haitian Prime Minister.
Unrest has also occurred in Mexico, the Ivory Coast, Cameroon, Mauritania, Mozambique, Senegal, Uzbekistan, Yemen, and Bolivia.
________________________________________
Food Crisis: Who’s to Blame?
Due to the widespread nature of the problem, it is only natural to examine the role of global policies in causing this crisis. Politicians, analysts, etc are blaming the following:
Bio-fuels: World Bank President, Alistair Darling (Chancellor of UK) and Heidemarie Wieczorek-Zeul (German Development Minister) blamed the rising food prices on the shift in agricultural production from food to bio-fuels (i.e. fuels made from plant sources). The German Minister stated that “increasing production of bio-fuels was 30 to 70% responsible for the rapid rise in food prices”.
Rising fuel costs: John Holmes, a UN official, blamed rising fuel costs; “The rising price of fuel, particularly diesel fuel used to transport food, is also adding to the issue by prompting a simultaneous increase in the cost of food.”
Falling US Dollar: Unlike Canada, developing countries have not let their currencies rise, in order to ensure that their exports continue to be sold in the American market. This makes US dollar denominated items (e.g. fuel) even more expensive to buy.
Growth in India and China: The exponential economic growth due to foreign investments in India and China has increased demand for goods, thereby pushing up prices.
Investor speculation in commodities: Jose Graziano, a UN official noted that, "The lack of confidence in the (U.S.) dollar has led investment funds to look for higher returns in commodities ... first metals and then foods"
________________________________________
Holding Capitalism Accountable
Although the individual factors cited above could likely be responsible, the real issue is examining why such policies are pursued in the first place. The prime concern of the Capitalist economic system is to ensure that man’s freedom of acquiring and selling is guaranteed. As a result, if the investor wants to invest in fuel production instead of food production – then the system must ensure that he is “free” to make that choice without interference. The same thought process underlies the issue of speculation in commodities. Investors will move money from stocks and bonds to wheat, corn, and rice – if they believe they can make more money on rising food prices.
======================
As a result, the current food crisis is a source of celebration for agribusinesses and other corporations. In other words, Capitalism is working as it was designed to – the increase in hunger is not something that the system attends to or cares about. Ensuring food security has no relevance to this mindset. Its sole concern is maximizing profits.
________________________________________
Islam and Food Security [SOLUTION to FOOD CRISIS]
Allah (swt) has revealed:
“We sent aforetime our messengers with Clear Signs and sent down with them the Book and the Balance (of Right and Wrong), that men may stand forth in justice” [TMQ Hadid 57:25]
Observing the food crisis unfolding over our Ummah and much of humanity, we should recognize that this situation is firstly caused by following a law and system that has not been revealed by Allah (swt).
As Allah (swt) has revealed:
“The Deen before Allah is Islam” [TMQ 3:19]
We are aware Allah (swt) is the Creator of all reality. He (swt) created humans, their need for food and also the means and resources, such as plants, animals, etc, to satisfy their hunger. Therefore, only Allah (swt) is qualified to design a system that will ensure the food security of humanity. Subsequently we should not be surprised that the current state of affairs is unfolding, as the secular Capitalist system is man-made and therefore incapable of dealing with the task of ensuring humanity’s well-being.
=================
As a result, when we examine the Quran and Sunnah, we find that Allah (swt) has prescribed many ahkam (laws) that would ensure food security for humanity. These ahkam specify responsibilities of the state, responsibilities of the community, and the responsibilities of the individual.
The Khaleefah is in general responsible for those under his guardianship. Rasullah (saw) said:
“Each of you is a shepherd, and all of you are responsible for your flocks.” [Bukhari, Muslim]
It is the responsibility of the ruler to guarantee housing, clothing and food for every single citizen of the Islamic state, based on the following hadith:
"The Son of Adam has no better right than that he would have a house wherein he may live, a piece of clothing whereby he may hide his nakedness and a piece of bread and some water." [Tirmidhi]
=================
Consequently, the ruler will be diligent in applying the ahkam that pertain to economy, as this will be his best defense on the Day of Judgment. That is, the ahkam of Allah (swt) will address the issue of FOOD SECURITY. Some examples include:
1- "Muslims are partners in three things: in water, pastures and fire" [Abu Dawud]. Muslims have common ownership of pastures and water –the fundamental resources required to produce food. All energy resources are also owned by the people. This means that no individual or company can monopolize its benefits/profits.
===============
2- Land cannot remain idle. Landowners must ensure that their lands remain productive and do not stay idle. If they fail to use the land within 3 years, it is given to someone who will use it. This is based on the ijma of the sahabah (i.e. who acted on sunnah of the Prophet (saw) without mentioning it) on the saying of Umar ibn Al-Khattab (ra): “The one who circles a land has no right in it after 3 years.”
==============
3- Prohibition on price-fixing. In era of rising food prices, the State is forbidden from fixing prices based on the following narrated by Imam Ahmed (ra): “Prices increased at the time of the Messenger of Allah (saw), so they said, O Messenger of Allah, we wish you would price (fix the prices). He (saw) said: “Indeed Allah is the Creator, the holder (Qabidh), the Open-handed (Basit), the Provider (Raziq), the Pricer (who fixes prices); and I wish I will meet Allah and nobody demands (complains) of me for unjust acts I did against him, neither in blood or property.” When States do not follow the sunnah of Rasullah (saw), they find that fixing the price of food actually make the food shortage worse, as food retailers hoard their provisions and sell the goods for high prices in the underground market.
=================
4-Hoarding/monopolizing goods is forbidden. Producers or retailers cannot hoard or monopolize goods in order to cause the price to rise. This is based on the ahadith: “The Messenger of Allah (saw) forbade that a foodstuff be monopolized.” [Athram] and “Whoever monopolized is a wrongdoer.” [Muslim].
Under the Khilafah of Umar ibn-al Khattab (ra), Madinah experienced a famine. Umar (ra) ordered his governor of Egypt, ‘Amr bin al-As, to dig a canal from the River Nile to the Red Sea to transport grain to the Arabian Peninsula. Umar did not eat anything more than oil and dry bread until he was sure that everyone in Madinah was full.
The Muslim community is also responsible for ensuring that all people within the community are fed. This is based on the following narration of the Prophet (saw):
“Any community, whosoever they are, if a person among them became hungry, they will be removed from the protection of Allah the Blessed, the Supreme.” [Ahmed]
The implication of this hadith is that if a hungry person stole from the community, then the community would have no recourse to recover that property on the Day of Judgment.
Each Muslim is also responsible for ensuring that their neighbour is fed based on the following hadith:
“The one who slept (satisfied) while his close neighbour was hungry, and he was aware of that, would not have believed in me truly.” [Al-Bazzar]
Beyond the responsibility of ensuring the community is fed, Islam promotes a lifestyle where people eat less (which is in sharp contradiction to the Capitalist way of life that promotes over consumption). Rasullah (saw) said:
“No man fills a container worse than his stomach. A few morsels that keep his back upright are sufficient for him. If he has to, then he should keep one-third for food, one-third for drink and one-third for his breathing." [Tirmidhi]
This sunnah ensures and promotes a wider distribution of food, as individuals are encouraged to eat what is required.
____________________________________
Raising the issue of hunger with non-Muslims
When discussing the issue of food security with the community at large, we should keep in mind that the Islamic solutions can only be applied based on the aqeedah of Islam. That is, the capitalist mindset of cost-benefit is incapable of implementing the hukm of Allah (swt) because it contradicts it at a fundamental level. Capitalism maintains that man is free, making contradictory for the ideology to prescribe ‘fard’, i.e. responsibilities for people. Allah (swt), through the ahkam shariah, is the only One capable of dictating what is an obligation and what is not. In such discussions, we should be confident in raising this issue. That is, the West likes to talk about rights (e.g. the right to food), but shies away from the discussion of who is responsible for providing this right. The Islamic way of thinking makes responsibilities the primary concern for the individual, as he or she will be held accountable by Allah (swt) on the Day of Judgment for fulfilling these.
"And We have not sent you except as a mercy to mankind.” [TMQ 21:107]
________________________________________
Rising food prices have sparked outrage across the world. The United Nations World Food Programme, which provides food aid to over 70 million people, says that the rise in prices of cereals and fuel caused it to increase its budget for 2008 by 17% – from $2.9 billion to $3.4 billion. Spokesperson Christiane Berthiaume says that people living close to the poverty line, who previously struggled to survive, could very soon find that prices are simply impossibly high.
________________________________________
The food crisis has had the following impact around the world:
EGYPT: Workers rioted for 2 days, where protesters threw petrol bombs at security forces and police fired tear gas at the crowds. When workers attempted to strike as a protest against the high prices, plainclothes security men took control of the factory and forced them to work.
BANGLADESH: About 20,000 textile workers have clashed with police near Dhaka, Bangladesh's capital, demanding better wages to meet high food prices. In a recent press conference, the World Bank President Robert Zoellick stated: "In Bangladesh a two-kilogramme bag of rice...now consumes about half the daily income of a poor family".
INDONESIA: Protesters demanded that the government bring down food prices after the media reported cases of starvation. It is estimated that Bangladeshis and poor Indonesians are now spending 70% or more of their income on food.
HAITI: Food prices rose over 40% in one year, resulting in 10 days of violent protest and the ousting of the Haitian Prime Minister.
Unrest has also occurred in Mexico, the Ivory Coast, Cameroon, Mauritania, Mozambique, Senegal, Uzbekistan, Yemen, and Bolivia.
________________________________________
Food Crisis: Who’s to Blame?
Due to the widespread nature of the problem, it is only natural to examine the role of global policies in causing this crisis. Politicians, analysts, etc are blaming the following:
Bio-fuels: World Bank President, Alistair Darling (Chancellor of UK) and Heidemarie Wieczorek-Zeul (German Development Minister) blamed the rising food prices on the shift in agricultural production from food to bio-fuels (i.e. fuels made from plant sources). The German Minister stated that “increasing production of bio-fuels was 30 to 70% responsible for the rapid rise in food prices”.
Rising fuel costs: John Holmes, a UN official, blamed rising fuel costs; “The rising price of fuel, particularly diesel fuel used to transport food, is also adding to the issue by prompting a simultaneous increase in the cost of food.”
Falling US Dollar: Unlike Canada, developing countries have not let their currencies rise, in order to ensure that their exports continue to be sold in the American market. This makes US dollar denominated items (e.g. fuel) even more expensive to buy.
Growth in India and China: The exponential economic growth due to foreign investments in India and China has increased demand for goods, thereby pushing up prices.
Investor speculation in commodities: Jose Graziano, a UN official noted that, "The lack of confidence in the (U.S.) dollar has led investment funds to look for higher returns in commodities ... first metals and then foods"
________________________________________
Holding Capitalism Accountable
Although the individual factors cited above could likely be responsible, the real issue is examining why such policies are pursued in the first place. The prime concern of the Capitalist economic system is to ensure that man’s freedom of acquiring and selling is guaranteed. As a result, if the investor wants to invest in fuel production instead of food production – then the system must ensure that he is “free” to make that choice without interference. The same thought process underlies the issue of speculation in commodities. Investors will move money from stocks and bonds to wheat, corn, and rice – if they believe they can make more money on rising food prices.
======================
As a result, the current food crisis is a source of celebration for agribusinesses and other corporations. In other words, Capitalism is working as it was designed to – the increase in hunger is not something that the system attends to or cares about. Ensuring food security has no relevance to this mindset. Its sole concern is maximizing profits.
________________________________________
Islam and Food Security [SOLUTION to FOOD CRISIS]
Allah (swt) has revealed:
“We sent aforetime our messengers with Clear Signs and sent down with them the Book and the Balance (of Right and Wrong), that men may stand forth in justice” [TMQ Hadid 57:25]
Observing the food crisis unfolding over our Ummah and much of humanity, we should recognize that this situation is firstly caused by following a law and system that has not been revealed by Allah (swt).
As Allah (swt) has revealed:
“The Deen before Allah is Islam” [TMQ 3:19]
We are aware Allah (swt) is the Creator of all reality. He (swt) created humans, their need for food and also the means and resources, such as plants, animals, etc, to satisfy their hunger. Therefore, only Allah (swt) is qualified to design a system that will ensure the food security of humanity. Subsequently we should not be surprised that the current state of affairs is unfolding, as the secular Capitalist system is man-made and therefore incapable of dealing with the task of ensuring humanity’s well-being.
=================
As a result, when we examine the Quran and Sunnah, we find that Allah (swt) has prescribed many ahkam (laws) that would ensure food security for humanity. These ahkam specify responsibilities of the state, responsibilities of the community, and the responsibilities of the individual.
The Khaleefah is in general responsible for those under his guardianship. Rasullah (saw) said:
“Each of you is a shepherd, and all of you are responsible for your flocks.” [Bukhari, Muslim]
It is the responsibility of the ruler to guarantee housing, clothing and food for every single citizen of the Islamic state, based on the following hadith:
"The Son of Adam has no better right than that he would have a house wherein he may live, a piece of clothing whereby he may hide his nakedness and a piece of bread and some water." [Tirmidhi]
=================
Consequently, the ruler will be diligent in applying the ahkam that pertain to economy, as this will be his best defense on the Day of Judgment. That is, the ahkam of Allah (swt) will address the issue of FOOD SECURITY. Some examples include:
1- "Muslims are partners in three things: in water, pastures and fire" [Abu Dawud]. Muslims have common ownership of pastures and water –the fundamental resources required to produce food. All energy resources are also owned by the people. This means that no individual or company can monopolize its benefits/profits.
===============
2- Land cannot remain idle. Landowners must ensure that their lands remain productive and do not stay idle. If they fail to use the land within 3 years, it is given to someone who will use it. This is based on the ijma of the sahabah (i.e. who acted on sunnah of the Prophet (saw) without mentioning it) on the saying of Umar ibn Al-Khattab (ra): “The one who circles a land has no right in it after 3 years.”
==============
3- Prohibition on price-fixing. In era of rising food prices, the State is forbidden from fixing prices based on the following narrated by Imam Ahmed (ra): “Prices increased at the time of the Messenger of Allah (saw), so they said, O Messenger of Allah, we wish you would price (fix the prices). He (saw) said: “Indeed Allah is the Creator, the holder (Qabidh), the Open-handed (Basit), the Provider (Raziq), the Pricer (who fixes prices); and I wish I will meet Allah and nobody demands (complains) of me for unjust acts I did against him, neither in blood or property.” When States do not follow the sunnah of Rasullah (saw), they find that fixing the price of food actually make the food shortage worse, as food retailers hoard their provisions and sell the goods for high prices in the underground market.
=================
4-Hoarding/monopolizing goods is forbidden. Producers or retailers cannot hoard or monopolize goods in order to cause the price to rise. This is based on the ahadith: “The Messenger of Allah (saw) forbade that a foodstuff be monopolized.” [Athram] and “Whoever monopolized is a wrongdoer.” [Muslim].
Under the Khilafah of Umar ibn-al Khattab (ra), Madinah experienced a famine. Umar (ra) ordered his governor of Egypt, ‘Amr bin al-As, to dig a canal from the River Nile to the Red Sea to transport grain to the Arabian Peninsula. Umar did not eat anything more than oil and dry bread until he was sure that everyone in Madinah was full.
The Muslim community is also responsible for ensuring that all people within the community are fed. This is based on the following narration of the Prophet (saw):
“Any community, whosoever they are, if a person among them became hungry, they will be removed from the protection of Allah the Blessed, the Supreme.” [Ahmed]
The implication of this hadith is that if a hungry person stole from the community, then the community would have no recourse to recover that property on the Day of Judgment.
Each Muslim is also responsible for ensuring that their neighbour is fed based on the following hadith:
“The one who slept (satisfied) while his close neighbour was hungry, and he was aware of that, would not have believed in me truly.” [Al-Bazzar]
Beyond the responsibility of ensuring the community is fed, Islam promotes a lifestyle where people eat less (which is in sharp contradiction to the Capitalist way of life that promotes over consumption). Rasullah (saw) said:
“No man fills a container worse than his stomach. A few morsels that keep his back upright are sufficient for him. If he has to, then he should keep one-third for food, one-third for drink and one-third for his breathing." [Tirmidhi]
This sunnah ensures and promotes a wider distribution of food, as individuals are encouraged to eat what is required.
____________________________________
Raising the issue of hunger with non-Muslims
When discussing the issue of food security with the community at large, we should keep in mind that the Islamic solutions can only be applied based on the aqeedah of Islam. That is, the capitalist mindset of cost-benefit is incapable of implementing the hukm of Allah (swt) because it contradicts it at a fundamental level. Capitalism maintains that man is free, making contradictory for the ideology to prescribe ‘fard’, i.e. responsibilities for people. Allah (swt), through the ahkam shariah, is the only One capable of dictating what is an obligation and what is not. In such discussions, we should be confident in raising this issue. That is, the West likes to talk about rights (e.g. the right to food), but shies away from the discussion of who is responsible for providing this right. The Islamic way of thinking makes responsibilities the primary concern for the individual, as he or she will be held accountable by Allah (swt) on the Day of Judgment for fulfilling these.
"And We have not sent you except as a mercy to mankind.” [TMQ 21:107]
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