GOLD RELOADED: ISLAMIC OR POSSIBLE NEW WORLD CURRENCY

Recent figures

The most recent World Gold Council (WGC) Quarterly Report indicates a gold demand of 1053.9 tonnes for the third quarter of 2011, that is an increase of 6% compared to the same period last year. This equates to US$ 57.7bn, an all-time high in value terms. According to the World Gold Council’s Gold Demand Trends report, this increase was driven by investment demand which rose by 33% year-on-year to 468.1 tonnes, generating record quarterly demand of US$ 25.6bn.

The report mentioned another significant development: investment demand in Europe reached a record quarterly value of € 4.6bn, equating to 118.1 tonnes – a year-on-year increase of 135%. The increase in overall investment demand was all the more impressive given the sharp gold price correction in September, which encouraged a wave of profit taking among bar and coin investors. Virtually all markets saw strong double-digit growth in demand for gold bars and coins.

Other significant figures are to be found in the banking area, since the report mentioned that the central banks acquired 148.4 tonnes of gold, almost 7 times more than the previous interval, and 2011 acquisitions may reach 450 tonnes, thus attaining a maximum for the last 40 years, that is since the ceasing of the Bretton Woods system due to the US ceasing to peg the dollar to a gold value[1].

As expected, WGC did not mention the main banks that acquired gold, due to “confidentiality restrictions”, but specialized statistics show that in the last two years, the central banks became net buyers of gold, after more than two decades of being massive sellers. The trend resulted in an increase of the gold prices up to 1920 US$ per troy ounce, a six times increase in a 10-year period. The main reason for this trend is considered to be the European debt crisis and most of all, the lack of confidence of the investors in the EU governments’ ability to find a solution to the problem.

Calls for alternative systems

The so-called “new gold rush” is seen by many analysts not only as a lack of confidence in the so-called “paper money”, but also as a trend towards the development of alternative payment systems, which would better protect people against speculations and financial “bubbles”. This would require real and virtual marketplaces where people could actually use their own gold as a means of payment.

Analysts also note the development of a serious lobby calling for an end to a mandatory money system in Europe, which is seen to represent a forced payment system. In Germany, Frank Schäffler, a FDP politician and Bundestag member, has long being promoting the freedom to choose one’s means of payment. Recently, Ulrich Schlüer, a member of Switzerland’s National Council for the Swiss People’s Party, has submitted a Parliamentary initiative to amend the Swiss Constitution, in order to “create an official Swiss Gold Franc constituting a set of coins, each of which has a fixed gold content”.

The impossibility to return to a Bretton Woods type system was also noted, since a linking of the money growth to gold (thus bringing in a necessary fiscal discipline) is no longer implementable in the developing world today. Even if it were achievable to reinstate retroactively a partial gold standard, the deceleration of the economical expansion and money supply growth caused thereby would bring about rather an earlier than a later economic and financial collapse. While the total gold inventory ‘above-ground’, including all bullion, jewelry and coins, is around 160,000 tons worldwide (according to current market value, about $4 billion), the worldwide paper value including money, stocks and shares, bonds, derivatives is estimated from $250 up to $400 billion.  A new gold standard would mean among other things, that a retrospective backing of the worldwide paper value by gold would cause a 50 to 100-fold increase in the gold price – a factual impossibility.

The Islamic monetary system: millenium-old and gold-solid

In the current circumstances of a continued crisis, many analysts are studying with new attention the solutions proposed by the Islamic world, namely the return to a world unique currency based on gold and silver.

The gold dinar and the silver dirham are the traditional currency of the Muslims and, according to the Muslim historians, they were used and accepted as a means of payment during more than 1200 years, that means the longest accepted bi-metallic currency in man’s history. For Muslims, the use of gold and silver is mandatory in the payment of the Zakat (a 2.5 % tax calculated on excess wealth), and also in normal daily payment transactions. The Koran specifies that a means of payment must possess an inherent value that corresponds to its purchasing power, and the “paper money”, since it is only a promise of payment and bears an interest, is forbidden and cannot be used in payment transactions, because Muslims may not profit from interest (Riba) [2]. Moreover, the Prophet Muhammad said: “There will certainly come a time upon mankind in which there will remain nothing useful besides a dinar and a dirham.”

Apart from its novelty as the first supra-national standard of bullion coins, the symbolic significance of the Gold Dinar derives from another source very close to the hearts of the Muslim world: the Koran. The dinar and the dirham are the only two currencies mentioned directly in the holy book, in chapter Aaale Imraan, verse 75 and chapter Yousaf, verse 20. Such a mention establishes a very strong emotional bond between it and the followers of Islam, a bond greatly enhanced by the fact that it was the same dinar, and the dirham, which has passed through the blessed hands of the Holy Prophet Muhammad and his companions. It is this dinar, which he had earned, spent and traded.

The name Dinar was originally taken by the Arabs from the Roman Denarius. Similarly, the silver Dirham came to the Arab world from the Persians, where its usage had been derived from the earlier Greek coin, Drachma. These coins were used in Arabia in 610 A.D., when Muhammad bin Abdullah received his first revelation, and thus set in motion a chain of events culminating in the creation of Islam’s first model welfare state in the City of Medinah. In addition, this model ensured open access for everyone to the market place, and to all trading and distribution channels, without discrimination, or undue regulatory hindrances. The city became the nucleus of an economic marvel of its time that would lead the Arab civilization to become a hub of global economic activity. And the success of this society depended on a single factor, the same factor which is always the only necessary ingredient to real economic progress: increased production and manufacturing, increased agricultural output, and increased trade – all of which became possible because the non-productive avenues of capital appreciation through usury and the usurious system of financial derivatives were shut down, causing capital flow into real productive uses.

In the 695 A.D., the Caliph ‘Abdalmalik minted the first dirhams and thereby established the official standard from ‘Umar Ibn Al-Khattab. In the following years, on the order of the Caliph, the dirham was produced in all the regions of Islam with the inscription, “Allah is Unique Allah is Eternal”. In addition he ordered that all human and animal figures be removed from the coins and that these be replaced by letters. This order was carried out literally to the letter over the next 1200 years. Gold and silver remained the official currency of Islam until the fall of the Caliphate at the beginning of the 20th century.

The Murabitun: finance as part of a religious doctrine

The gold and silver coins were brought to the XXIth century and into the electronic world trade through a complex development mixing religious and financial research, led by the Murabitun movement, a modern, Western offshoot of Sufi Islam and possibly the only religious sect in history whose defining article of faith is a financial theory.

The name Murabitun means “People of the Ribāṭ” and derives from the Islamic movement led by Yusuf ibn Tashfin, which restored Islam in Andalusia. The term Ribāṭ (“fortified outpost”) is defined by Ibn Rushd al-Jadd (the grandfather of Ibn Rushd) as “holding fast to outposts of the Islamic lands in order to protect the Muslims therein,” and also refers to the outposts themselves. Its root appears in the Koran as the command rabitu (“be firm on the battlefield” Sura Ali ‘Imran 3: 200.).

The founder of the Murabitun movement is Shaykh Dr. Abdalqadir as-Sufi (a convert to Islam born Ian Dallas in Ayr, Scotland). In the 1960s, he worked as an actor and promoter, making the scene in London and Paris and hanging with Allen Ginsberg, the Beatles, and other hippie icons. Increasingly disillusioned with the counterculture, Dallas wound up in Morocco, where he met the Sufi spiritual leader Sheikh Muhammad ibn al-Habib and became a Muslim, influenced by Sheikh Muhammad’s vision, namely that the modern revival of Islam would come from Westerners. Ian Dallas, now Abdalqadir, was anointed to take the lead.

Back in London, Sheikh Abdalqadir slowly gathered acolytes from among the drifting spiritual seekers of the day. Murabitun legend has it that pop star Cat Stevens (later Yusuf Islam) got his first exposure to Islam from Sheikh Abdalqadir, when both of them used to hang out at T. Rex singer Marc Bolan’s house. Others became hardcore followers, donning djellabas and turbans and helping the sheikh shape Murabitun belief into a curiously worldly mysticism – a radical Islam tinged with elements of classic European anarchism, moderate feminism, refined anti-Semitism, and dense Heideggerian phenomenology.

It wasn’t until the mid-1980s, however, that the members of the Murabitun truly began to set themselves apart from the run of post-hippie spiritual movements. Sheikh Abdalqadir came to believe that if there was anything a group of Western Muslims was best positioned to contribute to the world, it was an Islamic cleansing of the global financial system. And so he set his closest followers – in particular Umar Ibrahim Vadillo (formerly Fernando Vadillo, Spanish scholar) – the task of studying classic Islamic texts on money, with a view to drawing out their modern implications. The result, published in 1991, was the “Fatwa Concerning the Islamic Prohibition of Using Paper-Money as a Medium of Exchange.”[3]

After periods in Spain and Scotland, Shaykh Dr. Abdalqadir as-Sufi moved to Cape Town, South Africa in 2002, from where he offers guidance to the Murabitun movement and to the world Muslim community in general. The Murabitun remains a Da’wa movement, inviting people of all races and social walks to accept Islam. Their gatherings are characteristically multi-racial, and their largest numbers of adherents are from the indigenous tribes of Southern Africa and the Central American Indians, while indigenous European Muslims of the first and second generation also feature prominently. They are avid proselytizers, supported in part by Dubai’s royal Maktoum family, and they’ve established significant communities in Germany, England, South Africa, Indonesia, and Spain (though none is quite so impressive, perhaps, as the Murabitun outpost in Chiapas, Mexico, a community of 600 local Indians converted in the midst of the Zapatista uprising).

The Murabitun economic model advocates a revival of the forms of trading and social welfare practiced during the first generations of Muslims and for most of the history of Islam, proposing that these are the natural modes of human activity and rejecting the dialectical categorization of “ancient” or “modern”, a set of opposites whose application to Islam they consider irrelevant and misleading.

These models have been formulated in detail and include Awqaf for the funding of social welfare institutions, mosques and other public facilities; markets governed by rules such as the prohibition of charging rent for market-space; guilds as the natural form of professional organization; and caravans, representing the movement of goods from point of purchase to point of sale as opposed to monopoly distribution. The Murabitun trace the bi-metallic currency back to the Messenger Muhammad and the first Muslim community; its specific weights and purities were formally recorded by ‘Umar Ibn al-Khattab. They also cite the Dinar’s mention in the Qur’an, its use in the universally accepted fiqh (Islamic jurisprudence) to define the terms of Zakat, and its mention as currency throughout the entire body of Islamic Fiqh.

e-Dinar: where Islam meets the US and the Internet

At the end of the XXth century, the Murabitun economists joined the American promoters of the e-gold in developing the e-dinar project, presenting it as a unique solution to both Islam’s religious constraints and the international financial crisis.

After almost a century, the e-gold promoters came to challenge the most influential economist of the 20th century, John Maynard Keynes, who declared the gold standard a “barbarous relic,” unfit for the complex monetary demands of modern economies.

In Keynes’ widely held view, the problem with pegging currencies to fixed amounts of gold was that it limited government’s ability to adjust the money supply, which among other things made economic crashes much more brutal than they had to be. The onset of the Depression drove the point home, and central banks spent the next 40 years gradually weaning themselves off gold. Finally, in 1971, President Richard Nixon pulled the plug on the world’s last metallic national currency: the gold-backed dollar. Ever since, the major currencies have all floated anchorless, backed only by “the full faith and credit” of their issuing governments.

The main American promoters of e-gold, Douglas Jackson (e-gold) and James Turk (GoldMoney) realized, at the beginning of the XXIth century, that classic gold money and the core mechanisms of the Internet are in fact strikingly analogous technologies. The international gold standard was one of the technical wonders of the highly globalized late-Victorian era – a sophisticated, elegant mechanism for transmitting value from one end of the civilized world to the other. National monies existed, of course, but in effect were just local network protocols running on top of the internetwork layer that connected them all. Or as the Nobel Prize-winning economist Robert Mundell has put it, “Currencies were just names for particular weights of gold.” The dollar, for instance, was fixed by statute at 23.22 grains (about one-twentieth of an ounce), the pound sterling at 113.0016 grains, and so on. Local payments were made in local units, but all cross-border deals ultimately were settled through international bank-to-bank shipments of the universal currency – bullion.

Today, in a world that is returning to economic interdependence after a century of hot and cold global warfare, the closest thing to universal money is the US dollar. But as with most proprietary standards, many argue, the dollar introduces costly inefficiencies into the system – from the distorting influence of US monetary policies on non-US markets to the simple fact that final clearance of dollar payments still takes place only during East Coast banking hours.

The e-gold promoters see it as the ideal currency of the global e-commerce, since it is as nonproprietary and international as the Internet itself. In turn, the “Internet” gold is new and improved, fortified by the rigor of free-market discipline and the openness of digital networks and invulnerable to government manipulation, bubbles or crashes.

The e-dinar story began in the 90’ies, when the Murabitun economists developed e-dinar company, which minted its own silver coins and gold coins (1992). In late 1998, the company joined Douglas Jackson (CEO of e-gold), in an agreement that would make e-dinar a self-contained front-end sitting on top of the e-gold database. After finalizing a partnership with e-gold in 2000, e-dinar established their own mints in the United Arab Emirates and Indonesia. In July 2004 they formally separated from e-gold and launched as self-dependent e-payment system. As of June 2008, e-dinar owns 100% of all issued e-dinar shares.

Currently, e-dinar is incorporated in Labuan, Malaysia, as e-dinar Ltd., and in Dubai Internet City, UAE, as e-dinar FZ-LLC. The company is providing a 100% gold- and silver-backed online payment system and related exchange services. Its main business partners are Taurus Investors Ltd., Switzerland, and the Malaysian State Government of Kelantan.

The main political promoters of the Islamic Gold Dinar (IGD) ant its internet version, the e-Dinar, were Dr. Mahathir Mohamed, former Prime Minister of Malaysia, Dr. Necmettin Erbakan, former Prime Minister of Turkey, and King Hassan II of Morocco, during their terms of office or rule issued public statements in favor of the Gold Dinar as a currency for Muslim nations. Dr Mahathir and King Hassan II also initiated programs and activities towards the currency’s implementation.

The number of e-dinar customers increases with 50% each year. The e-dinar gold is stored in Dubai, a city known as “The City of Gold”, and with a long history of gold trading. e-dinar is used primarily as a store-of-value rather than a payment system. e-dinar accounts are promoted as online savings accounts which offer an alternative to Islamic banking.

e-dinar representatives say that they observe a steady broadening of the general customer base, particularly in Germany, Eastern Europe and Malaysia. In Europe, in order to satisfy the growing demand, they incorporated a Swiss wholesale company for the marketing and distribution of Emirates Gold products, (http://www. emiratesgoldeurope.com) in the spring of 2009. While e-dinar retains the character of a retail company, Emirates Gold Europe works as a pure wholesaler.

One of the Murabitun movement’s moments of triumph came in August 2010, when the Malaysian state of Kelantan adopted the Gold Dinar as the official state currency, alongside the Malaysian Ringgit. In its launching ceremony, for the first time after many decades, Zakat was again distributed by a Muslim government in Shariah currency, and state employees were given the option to receive a percentage of their salaries in the Gold Dinar. Another dinar initiative has been started by a division of the world Murabitun movement, by the name of Blackstone Foundation in North Carolina (USA) that adopted the Dinar and Dirham within the ranks of their community. A third initiative in Austin, Texas was Dinar Wakala, which offers the sale of Dinar and Dirham coins, and is also developing a bullion depository institution, called a “Wakala”, which is the Arabic for Agency. Dinar Wakala is producing the first full series of Dinar and Dirham coins of America.

Other recent developments indicate the same trend of increased attraction towards gold and silver (with e-counterparts) as an alternative financial system. In October 2010, the Malaysian state of Perak announced that it after Kelantan, Perak will become the second state in Malaysia to introduce the gold dinar and silver dirham currency, as well as to begin minting gold dinar and silver dirham coins.

At the end of the same year, the portal www.dinarexchange announced the launch of a new Mastercard, loadable with e-dinars.

Last October, Qatar Holdings, the company operating the wealth of the Qatar royal family, announced that it will invest approx. 1 Bn US$ in European Goldfields, a London-listed mining company that operates the largest gold mine in Greece. European Goldfields also has mining rights in Romania, and Qatar Holdings is also looking for opportunities in Africa and Russia.

Europe: Muslim lawyers in favour of the e-dinar

One of the main supporters of the e-dinar in Europe Muslim Lawyer Net, the influent organization of the Muslim lawyers, led by Abu Bakr Rieger, which organized briefings about the e-dinar since the early phases of the project.

At the 4th conference in Potsdam, in 2001, Muslim Lawyers and the invited guests were informed about the e-Dinar. The new transfer system was explained to the lawyers by one of the founders of e-dinar, Dr. Habib (Zeno) Dahinden of Switzerland, who stressed that the 100% gold-backed system allows money-transfer in real time and represents a significant challenge to the classical banks. In addition, several key aspects of the system have important Islamic relevance. In conjunction with the conference, a group of Ulama from all over Europe met to stress the importance of the fiqh (Islamic jurisprudence) concerning money and economic questions. They issued a document in which they suggested, among other things, Calling on Muslim ‘ulama and traders to join in and embark upon returning respect for the shari’ah currency [the gold dinar and silver dirham] according to their capacities and their possibilities for doing that”.

Abu Bakr Rieger is also the author of a book entitled Weg mit dem Zins (Away With Interest), where he discussed the topic of the prohibition of interest, about which not only the Islamic but also the Jewish and Christian traditions have a common view.  Rieger evoked authors such as the Christian monetary ethicist Jörg Guido Hülsmann, who considers paper money and the constant expansion of the money supply to be a moral problem and an instrument of “false inflation”.

In a recent article[4], Abu Baker Rieger stressed that, “in practical terms a genuine emancipation from “old” money could be difficult. Global political movers are fatally disinterested in potential economic alternatives, even in times of dire need. The ties between politics and finance are too close. But the fact is, a means of payment which is accepted and secure, but which also works on a day-to-day basis, is of fundamental importance to any genuine economic alternative.

On the Internet there have been for some years attempts to use units of gold in payment systems. This principle, itself enabled by the Internet, would make the banking system in part unnecessary. Units of gold are sent globally in a matter of seconds, with very low fees. Mobile phones have also long been capable of handling such transactions. The Establishment views these gold-based service providers as bitter rivals. One of the best known networks in America, E-Gold, was closed down after accusations that it had violated money laundering laws. But despite this, a global network could not only replace old-fashioned banking, it could also effectively link free money with free markets”.

Future trends

When assessing the possibilities of the gold currency (and e-currency) to become a significant alternative for the classical monetary system, and even a solution to the crisis, the analysts point out that such a development may be difficult to foresee on short term, due to the power of the current system, but not quite impossible.

The Murabitun authors of the e-dinar project stressed that it has the potential to subvert the Western finances. Shortly after 9-11/2011, when Sheikh Abdalqadir issued a declaration excoriating Osama bin Laden and the Taliban, he mentioned that “a true study of the Qur’an and the Sunna shows us that capitalism will not be abolished on the battlefield but in the marketplace where it is practiced.” At his turn, Umar Vadillo declared his opposition against terrorism saying: “You want to be radical? You don’t need to blow up the bank, just burn your bank account. And for that you are going to need an alternative. What is the alternative? E-dinar.

An advantage for the gold currency might come in the context of the growing rift – brought by the disproportional rate of sovereign debt levels and foreign currency reserves – between the well-to-do countries in Asia, the Subcontinent and South America (the good) and the not so well-to-do countries in Europe and the US (the bad and the ugly). Analysts point out to a fundamental shift of power away from the developed countries to a new economic power axis extending from China through India, the Middle East, Africa and South America – the so-called BRICS countries. The results of this shift in economic power are increased regionalization and a reversal of economic focus away from export at all costs towards internal development and consumption (one can observe this new trend most clearly in China and India).

According to a 2010 report from Goldman Sachs, China might surpass the US in equity market capitalization terms by 2030 and become the single largest equity market in the world. By 2020, America’s GDP might be only slightly larger than China’s GDP. Together, the four BRICs may account for 41% of the world’s market capitalization by 2030, the report said.

In late 2010, China surpassed Japan’s GDP for the first time, with China’s GDP standing at $5.88 trillion compared to Japan’s $5.47 trillion. China thus became the world’s second-largest economy after the United States.

Based on a Forbes report released in March 2011, the BRIC countries numbered 301 billionaires among their combined populations, exceeding the number of billionaires in Europe, which stood at 300 in 2011.

This is a development of geopolitical significance, and it has intensified frustrations in Washington. The US have been concerned about the growing economic and political strength of the BRIC countries for several years. In 2008, for instance, the US National Intelligence Council produced a document titled “Global Trends 2025″ that predicted: “The whole international system – as constructed following WW II – will be revolutionized. Not only will new players – Brazil, Russia, India and China – have a seat at the international high table, they will bring new stakes and rules of the game”.

One of the signs of regionalization is the wide-spread adoption of barter and alternative currency systems in Europe and the US. People feel increasingly betrayed by their governments, have lost their faith in the banking system and the financial elite at an alarming rate and see the only saving grace in resorting to their own solutions. Alternative currency systems flourish in Germany and the US, barter systems are growing in Eastern Europe and Gold and silver are increasingly seen as the only true and lasting alternative to paper-based banking. The rising popularity of precious metals as a medium of exchange and store of value is monitored with suspicion by governments. Not surprisingly, because if widely accepted it would severely limit the capacity of the government to generate income by printing money.

The large-scale financial and economic crisis was described by Italian economist Loretta Napoleoni[5], (Rogue Economics, Seven Stories Press, NY, 2008), who concluded that the post-globalization era will require, among other, a clear separation between the state and the individual.

The signs for the advent of a new post-globalization era are already visible First, the massively increased sovereign debt levels which are quickly separating the bad and the ugly from the good and, secondly, the increased formation of regional power centers.

a) Debt. Governments all over the world have tried to buy their way out of the financial crisis by creating debt at an alarming rate. While economic conditions in developed countries have not really improved since the start of the crisis, the size of government debt has changed dramatically. Before the crisis, sovereign debt was already staggering, today it is beyond hope.

Everybody is so concerned about the debt crisis of the PIIGS countries (Portugal, Ireland, Italy, Greece and Spain), but we dare not even think what might happen if the US (where government debt is reaching 100% of GDP) or Japan (which has the highest sovereign debt to GDP ratio worldwide) would default. While a sovereign default of the PIIGS countries would certainly be traumatic for their citizens, Europe and the rest of the world could easily survive such an event. If the US however would default on its sovereign debt, the economic world as we know it today would cease to exist, because the US dollar would in that process be devalued close to zero and thereby destroy more than half of all monetary value in existence.

b) Regionalization. The BRIC countries on the other hand, even though they also have increased their debt ceilings to combat the financial crisis, have enormous foreign reserves and sovereign wealth funds which insulate them to a significant extend from the risk of sovereign default. While the BRIC countries have accumulated high levels of foreign reserves due to their singular focus on export at all costs and have managed their debt fairly well, the developed countries continue to spend beyond their means, amass unmanageable debt levels while at the same time facing decreasing levels of savings and sovereign reserves.

The BRIC (that became BRICS, with South Africa joining the group in 2011) countries, by their very existence, their rapid economic growth and degree of independence from Washington, are contributing to the transformation of today’s unipolar world order — still led exclusively by the United States — into a multipolar system where several countries and blocs will share global leadership. This is a major aim of BRICS, which recognizes it’s a rocky, long road ahead because those who cling to empire are very difficult to dislodge before they swiftly disintegrate.

BRICS as an organization had a most unusual birthing. The group was brought into the world, so to speak, without the knowledge of its members. The event took place in 2001, when Jim O’Neill, an economist with Goldman Sachs created the BRIC acronym and identified the four countries (Brazil, Russia, India and China) together as a lucrative investment opportunity for the company’s clients based on the enormity of their combined Gross Domestic Products and the probability of increasing growth. Neither Brazil, Russia, India, nor China played a role in this process, but they took note of their enhanced status as the BRICs and recognized that they shared many similarities in outlook as well as significant differences in their types of government and economic specialties.

The main similarity was that they were emerging societies with growing economies and influence, and they viewed Washington’s unilateral world leadership as a temporary condition brought about by accident two decades earlier due to the implosion of the Soviet Union and most of the socialist world. They all seek a broader, more equitable world leadership arrangement within which they and others will play a role. At the initiative of Russia’s then-President Vladimir Putin in 2006, BRIC began what became regular meetings at the ministerial level that evolved a couple of years later into what is in effect a political organization. There are some differences and rivalries within its ranks that have been kept within bounds, such as between China and India (which is also close to the U.S.), and, to a lesser extent, between Russia and China. Brazil and South Africa are everyone’s friends. All five BRICS states — three of whom possess nuclear arsenals — maintain essentially cordial relations with the U.S. and try to avoid antagonizing the world superpower.

*

Looking down that road the next few decades, it is imperative to contemplate two potentially game-changing events that will heavily impact global politics, and the future of world leadership.

1. The rate of petroleum extraction will soon reach the beginning of terminal decline, known as peak oil. This means more than half the world’s petroleum reserves will have been depleted, leading inevitably to much higher oil prices and severe shortages. Under prevailing global conditions, this will greatly exacerbate tensions between major oil consuming countries leading to wars for energy resources.

One resource war already has taken place — the Bush Administration’s bungled invasion of Iraq, which possesses the world’s fourth largest reserves of petroleum and tenth largest of natural gas. Since the U.S. with less than 5% of world population absorbs nearly 30% of the planet’s crude oil, who’s Washington’s next target – Iran? Behind the U.S.-Israeli smokescreen of alleged Iranian aggression and supposed nefarious nuclear ambitions, reposes the world’s third-largest proven oil reserves and second-largest natural gas reserves.

2. Equally dangerous, and perhaps much more so, is the probability of disastrous climate change in the next few decades, the initial effects of which have already arrived and are causing havoc with weather patterns. This situation will get much worse since the industrialized world, following slothful U.S. leadership, has done hardly anything to reduce its use of coal, oil and natural gas fossil fuels that are mainly responsible for climate change.

The U.S. seeks to forestall the development of a genuine multipolar system by making limited concessions to the emerging nations that will that leave Washington in charge for many years. Washington’s latest scheme, introduced a year and a half ago by Secretary of State Hillary Clinton, is the so-called, “multi-partner,” not “multipolar,” world — suggesting the Obama Administration’s intention is to serve as “senior” partner of a global leadership “coalition of the willing,” as it were, that will in effect strengthen Washington’s singular role.

Washington intends to function as the principal world power for as long as it can, since it is still an enormously wealthy, militarized state with powerful industrialized allies including the European Union countries (and NATO), the UK-Australia-Canada-New Zealand nexus, Japan, South Korea, Taiwan and others.

However, the ongoing global diversification of economic and political resources toward the emerging countries appears to be leading inevitably to multipolarity. To quote “Global Trends 2025″: “The unprecedented transfer of wealth roughly from West to East now under way will continue for the foreseeable future…. Growth projections for Brazil, Russia, India, and China indicate they will collectively match the original G-7’s share of global GDP by 2040-2050.  China is poised to have more impact on the world over the next 20 years than any other country. If current trends persist, by 2025 China will have the world’s second largest economy and will be a leading military power”. Actually China became the second largest global economy in August 2010, 15 years before 2025.

The time of decision about the architecture of future world leadership draws nearer. At some point in 10 or 20 years a reluctant Washington may have to settle for a prominent position in a multipolar world construct. In this new architecture, it is more than probable that new international classic and internet finance systems would appear, and the “solid” support of tangible assets (as gold and silver) will no doubt find a more significant place than it has now.


[1] The last official gold standard, which was anchored in the Bretton Woods agreement, was dissolved by President Nixon in 1971, removing the partial backing of the US dollar by gold. This was also the formal end of gold as the ‘reserve currency’. The paper money reproduction since 1971 resulted in inflation and usurious interest rates, and also in the soaring price of gold.

[2] Muslim jurists claim that Islamic prohibition of usury is merely a continuation, or refinement, of similar disdain towards the practice in the earlier Judeo Christian traditions. In fact, the Arabic word Riba used in the Koran is similar to its Hebrew counterpart Ribit, used in the Old Testament.

[3] “After examining all the aspects of paper money,” Umar Vadillo writes, “in the Light of the Qur’an and the Sunna, we declare that the use of paper money in any form of exchange is usury and therefore haram.”

[4] Abu Bakr Rieger: Gold Rush – Speculative Bubble or Political Issue?, 02.08.2011, published by the portal islamicmint.com

[5] Loretta Napoleoni is an expert on terrorist financing and money laundering, and advises several governments and international organizations on counter-terrorism and money laundering. Napoleoni is a regular media commentator for CNN, Sky and the BBC. She is among the few economists who predicted the credit crunch and the recession, and advises several banks on strategies to counter the current crisis.

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