by Muhammad Ohiul Islam
We have experienced a worldwide economic recession originating in US real estate and banking sector and in a while permeated to every financial sector with the international financial system. It’s a matter of surprise that why the bubble economy that has been accused of being accursed villain played its evil role for the downturn BUBBLED UP. Why did the knowledgeable economists and financial analysts not pop the bubble in the first place? Why they let this happen and most importantly how they failed to notice the bubble? What failed them? Is the new era lacking rationality that was promulgated by economic theorists in early 20th century? Such questions surge up our minds and budge the door that parts RATIONALITY and MORALITY. Monetarists, New Classical Economists, New Keynesians and all other economists from various schools of economic thoughts with tons of scientific methodologies to derive valid conclusions failed to draw attention to the omen of economic downturn. Again, why? We have reasons to believe that they did not suddenly turn dumb. Now on the moral grounds, judged with a little knowledge of philosophy and psychology I dare to state all the Economists, Intellects, Analysts failed US because they had the ILLUSION OF “MORE IS BETTER AND MORE IS TO BE GOT”.
What is this uppercase more in the last line of the paragraph above? If more is different from MORE, then the latter term must be clarified. MORE is given to mean the GREED in us to gather/earn or at least yearn for more than what we need. I and not anyone can draw clear boundaries to contain the NEEDS within. But the term GREED is not deniable in this case. Recall that in 1971 the U.S. declared that the US dollar is no more backed by gold and the currency was made FLOATING (Have you recognized that BUBBLES do a lot of FLOATING?). That was a breakdown or release from Bretton-Woods system of Exchange rate and currency. I used ‘breakdown’ to mean the cancellation of old system and ‘release’ to mean how some evil advantages a group of money-freak enjoyed. Well rest of the story of BUBBLES is known to many today. The floating currency ruling the economic and financial world, allowed the US to borrow against treasury bonds from foreign nations. The American Dream was lived for a few decades before the final shake. The bubble(s) popped. Before popping out it waged 2/3 major wars just after the beginning of the new millennium. I will limit to what the GREED has led us to. Floating exchange rate granted US lives to borrow and spend as much as they want. Unfortunately, the flow of money to satisfy the evil of greed was TAKEN FOR GRANTED. But the final breakdown GOT THEM BACK ON THE GROUND. The Rationalist economists also recognized the omen of this incident, but they trusted their ways too much that it became their belief; a belief that would never fail them. But it did fail them. They were like drowning men grasping at a helping hand, the further they reached out for it the further it was moved back. They never actually could reach it…
Fair enough!
Some would say so. Many suggest that the recession will recover itself. But the distresses and the miseries caused by the depression, the loss of dignity and morality, faith to the system will hardly be recovered. Because all know that a broken glass even if mended, cannot get rid of the mark of the breakage. Many of us heard about the Islamic Economy. It’s something gaining trust in Muslim populated areas in Europe and in many parts of Asia. Why Islamic Economy? The bubble fairy belies. Islamic Economy has one thing that conventional capitalist economy lacks. That is Trust. This Trust is not bubble. This trust does not pop. Well, now let us turn to what his holiness says on this.
This part is a contribution of Lorenzo Totaro
Vatican Says Islamic Finance May Help Western Banks in Crisis
March 4 (Bloomberg) -- The Vatican said banks should look at the rules of Islamic finance to restore confidence amongst their clients at a time of global economic crisis.
“The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service,” the Vatican’s official newspaper Osservatore Romano said in an article in its latest issue late yesterday.
http://www.vatican.va/news_services/or/or_quo/text.htm
The notable things are derivable from the bold words in the above paragraph. Ethical Principle or trust is one thing that Islamic Economy contains. And thanks to Osservatore Romano for mentioning true spirit. With true spirit people can be held back from going crazy about unreachable dreams and the financial institutions from “breeding” loans out of loans.
Author Loretta Napoleoni and Abaxbank Spa fixed income strategist, Claudia Segre, say in the article that “Western banks could use tools such as the Islamic bonds, known as sukuk, as collateral”. Sukuk may be used to fund the “‘car industry or the next Olympic Games in London,” they say.
Pope Benedict XVI in an Oct. 7 speech reflected on crashing financial markets saying that “money vanishes, it is nothing” and concluded that “the only solid reality is the word of God.” The Vatican has been paying attention to the global financial meltdown and ran articles in its official newspaper that criticize the free-market model for having “grown too much and badly in the past two decades.”
The Osservatore’s editor, Giovanni Maria Vian, said that “the great religions have always had a common attention to the human dimension of the economy,” Corriere della Sera reported today.
Let us check upon the bold letters again. Islamic bonds and Islamic financing is prevalent in German Turkish populated areas in Germany. This system is spreading and has a far-reaching effect on the national and international economic system.
There are many other financial securities, bonds, etc. allowed in Islam alongside Sukuk.
His holiness posited that money vanishes just as we told that the bubble pops. The solid reality is the word of god. What is this word of god? Since its all spiritual we are turning to, the word of god is presumably the Islamic way (or religious way) of financing with TRUST rooted deep down in this faith.
Pope says the economy grown too much and badly. The economy, like bubbles, has been stretched too much to get torn apart. And it has been torn apart. We can see the transgressors have stretched beyond its size. The growth is certainly false one. That is why there is now apertures like loan-scandals, recession, shutdown, lay-off, loss is appearing to us.
Giovanni Maria Vian, the Osservatore’s editor infers the best conclusion, and I have chosen for mine, the great religions have always had a common attention to the human dimension of the economy.
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