Dinar Kelantan Solid Gold Coins
Dinar Kelantan Gold Coin is also referred to as an envisioned bullion gold coin. Other terms that are in used relation to Kelantan Gold are Gold dinar and Islamic dinar. Currently, these coins have not been issued as an official currency by any state. Even though there is unauthenticated information that there are about 22 countries that allow the use of the coins on a personal basis.
The gold is mainly found in only four nations, typically where it is minted. Some online transactions allow the use of dinar and dirham, but this occurs on the internet only. This projected gold coin has the objective of reviving the historical gold dinar, which was the leading coin of early Islam. It consisted of minted silver coins (dirhams) or Gold coins (dinars).
The Value of Dinar Kelantan Solid Gold Coins
The value of one dinar has been priced to be the equivalent of 4.25 grams of pure gold. There is also the smaller denomination that is called the daniq. The equivalent of daniq is about a sixth of the dinar. On the other hand, dirham has the equivalent of 2.975 grams of pure silver. The two coins are differently valued in accordance with their present market value. It is worth noting that the coins are either minted at fractions of the weights. They can also be minted in multiples of the weight.
Afterwards, they are valued depending on how they were minted. The coin that was minted as multiples would be valued in multiples of the coin equivalence. At some point, one of the leaders established a standard to enhance transactions involving the two currencies. The measure was set by Umar Ibn al-Khattab and equated 7 Islamic Dinars to 10 Dirhams.
Rarity, Availability and Collection of Dinar Coins
In 2006, Kelantan launched gold dinar coins, thereby becoming the first nation to do so. The coin has some features on its face, including date of production, Kelantan state crest, and the purity and weight of the gold used. The DEK (dinar Emas Kelantan) has exact similarities to the original dinar in terms of the purity of the gold used and weight. The coins are traded at the Kelantan Corporation Bhd (Permodalan Kelantan Bhd). They are also sold in all the 9 Ar-Rahn Islamic pawnshops in the state. Traders can, therefore, trade and buy the coins in all the Ar-Rahn outlets in Kelantan Province.
Uses of Dinar Coins
Even with the availability of the coins in 9 Ar-Rahn Islamic pawnshops, it is said that the coins are neither public nor are they legal tender. Only the government of Kelantan allows their use in carryout business transactions, but this is illegal according to Malaysian federal law.
Gold dinar is commonly used for:
Paying for mahr and zakat per the establishment within the Islamic law.
Used by people as a manner of value saving.
Used for purchasing of merchandise from the outlets.
Used in holding accounts, which usually include making and receiving of payments.
The Architecture of the Gold Economy – an Academic Perspective.
University Malaya 28-01-2002
The background of this discussion is the recent historical announcement by the Prime Minister of Malaysia, saying that he wants to use the Islamic Gold Dinar in place of the US dollar for overseas trade settlements. Many people are of course stunned by this announcement, asking, “What do you mean by a gold coin, we are now in the 21st century, with Visa card, MasterCard, and electronic currencies?”
The Prime Minister has continued to speak about this subject, the Islamic Gold Dinar, and the tone of his discourse has increased, both in depth and in the breadth of the affair. He is talking about the IGD as being the main instrument for the creation of an Islamic Trading Bloc (ITB), adding another dimension to the matter, because this is not just a question of currency, this is the creation of something that brings other countries into the picture. Recently in Yemen he made another announcement, which is an intellectual jump from his previous discourse on the subject, when on 16 July 2001, he said, “We want to go back to a gold currency, which has intrinsic value, because paper money has no value.” This is a well-known criticism of paper currencies, but it is the first time that I am aware of the Prime Minister of a country that actually issues paper money, saying that paper money has no value.
All of this has caused some ripples among his closer circles, and I am perfectly aware of the state of bewilderment that this has provoked. To come closer to this matter, let me say something of my involvement in this affair. For years, the World Islamic Mint started minting the Dinar and the Dirham, starting in 1992. The conception of the World Islamic Mint was part of a wider idea called the World Islamic Trading Organisation. This is the realisation that we need to create an alternative to the current economic ethos that also reflects the fact that we are Muslims, and also changing a pattern that has been characteristic of the 20th Century, which is this phenomenon called Islamisation.
The first Dinars and dirhams of this age were minted in Granada in Southern Spain, by a group of European Muslims. It is perhaps part of the picture that we were in this unusual situation, and were forced to look at the matter in this particular way. The emerging European Muslim community is made up of people from Britain, Spain, Germany, Italy, almost all converts over the last 25 years, with the numbers rapidly increasing over recent years. When we entered Islam we did not have any culture to cling on to, we could not go to our parents and ask how to do this, we had to look at the matter as if for the first time, all over again. We were the youngest of all muslim nations, and also the most innocent, and were able to ask the most simple questions, “Where is the currency, what has happened?” We were under the impression that we were leaving a sinking boat, called western culture, and we found the Muslims rushing to jump into it, and we asked, ‘Where are you people going? Do you not realise that you have treasure in your hands, and you are trying to imitate something that does not work?’
It was clear that from our background we were looking at the matter from a very different angle, so we came to the questions of the deen without any prejudice, we were more open to it. Looking at the Dinar and the dirham and asking where they were, was just asking the most innocent of questions. As you are aware, the Dinar has no nationality, it is made of gold, it is the same in Morocco as in Malaysia, or China. It has no inflation; a chicken at the time of Rasulullah, salla’llahu alayhi wa salam, cost one dirham, and today you can buy a chicken in Kuala Lumpur for one dirham. So one thousand four hundred years later, inflation is zero. There is a famous study by Professor Roy Jastram from Berkley University, who wrote a book in 1976, a famous classic of the Gold Standard theorists, called The Golden Constant. He examined the price of gold against a basket of commodities for four hundred years up to 1976, and he found that the purchasing power of gold is constant. Despite wars and economic crises, despite natural disasters, the purchasing power of gold remained the same.
The present monetary system did not appear by any intellectual or academic discourse or debate, nor by the political consensus of nations. Essentially we are where we are today because of the extraordinary events of the late sixties and early seventies, when the Bretton Woods Agreement was broken, because the USA went bankrupt. They had printed too many dollars, and they could not pay for them. In 1968, when General De Gaulle said to his finance minister that France could no longer tolerate USA exporting their inflation to France, flooding them with dollars, driving big cars and waging wars at everyone else’s expense. He told him to get all the dollars in the country and send them back to the US, in return for the gold. As happens in any panic, no one wants to be the last in the queue; within two months, 60% of the gold reserves in Fort Knox disappeared. The USA had to take new measures – illegal measures in terms of contractual law – and forbade individuals to exchange dollars for gold. Later on, even central banks could not exchange dollars either. In 1969 General De Gaulle was ousted, and Georg Pompidou came to power, and together with Willi Brandt created the first policies of the European currency, called the ECU.
This initial attempt of General De Gaulle brought about a crisis for the dollar, leading Nixon in 1971 to break the parity of $35 per ounce that had been the agreement since the second world war. So we entered into this regime of floating currencies, where each one has a floating rate with the other, which clearly gives an enormous advantage to the bigger economies over the smaller ones for the obvious reason that they give you pieces of paper and you have to give them oil, gas, minerals etc. But you cannot go back to them with a Ringgit and buy even a Coca Cola in New York.
You do not have to be very intelligent to understand that a principle under which one country has the unique privilege – what General De Gaulle called the exorbitant privilege of the United States – to print money that becomes the currency of the world, has an unfair advantage over every other country. It is like trying to play the board game Monopoly, and one of the players says. “I am going to print the money”. Everyone else will say, “Hang on a minute! That is impossible, you will obviously win!” These are the circumstances that we are in. Dr Mahathir has realised that the dollar is not sustainable; but he is not the only one. He is perhaps the first Muslim leader to have voiced this matter, but the present leaders of Russia are talking along similar lines, about replacing the US Dollar.
There is an extraorDinary academic debate that has arisen with the Nobel prize winning economist Robert Mundell speaking about commodity currencies. People like Professor Deutsch in Germany speak about commodity currencies also, in the sense of establishing a true monetary system. We do not have a monetary system at present, as Robert Mundell reminds us, what we have at present is a disorder which is causing chaos. The most recent victim of this is of course Argentina, who followed the discipline of pegging their currency against the US dollar and it still did not work.
A regime of gold simply means that money has definition, it is fixed in exactly the same way that we consider the kilogram. A kilogram is a kilogram. Just imagine the chaos if there was a Malaysian Kilogram and an Indonesian kilogram. Then you trade with China and they have another kilogram. So then you can forget about trading, the merchandise becomes irrelevant. What will become important is the exchange rate between the different kilograms; that will become the issue. You will open the door to an incredible speculative market of people who start rigging and manipulating these flexible kilograms for their own interest.
There is naturally an enormous rationale as to why we should continue with the US dollar, and an enormous body of literature has been built up as you know perfectly well, saying that the system we have is totally rational and it works perfectly well. They even go further an apply ethical principles to the matter and say that this is the just system, the true free market, you are really letting people choose. There is even an institution that have been created for the sole purpose of sustaining this system. That is the IMF. Robert Mundell for one is very critical of this institution, he has defined its an instrument, and arm, of American policy, because it is very clear from a monetary point of view that the IMF had very clear aims, and that was to demonetise gold.
The IMF created the SDR’s, the Special Drawing Rights, in 1969, immediately after the crisis of the dollar, when the dollar was first exposed. What they tried to do was to solve what they perceive to be the problem with gold, the so-called shortage of gold, by creating a substitute for gold, what they called the SDR. It was originally called gold paper, because it was backed by gold. But it only took two years, till 1971, for the backing of the SDR’s by gold to be completely broken. The IMF then embarked on a world-wide crusade to eliminate gold as a currency in favour, naturally, of the USA. The embarked on a campaign of policy-making that dictated and further influenced national policies suggesting that they must get rid of the gold, and replace their gold reserves by US Treasury bonds that give interest. They presented gold as something that was expensive to hold, unnecessary, and this became the orthodox view, until we arrived at the situation we are in now.
There is of course a rationale behind it, but there is also another way of thinking about this whole matter that suggests that this system is unsustainable. This is what I want to explore with you. I do understand that the gold is still seen as an archaic matter. If you read Friedman, one of the many Chicago economists who have looked at the matter, he will tell you naturally that gold is a thing of the past. My point is, an the reason why I have entitled this talk “The Architecture of the Gold economy – an Academic Perspective” is that I want to examine how to look at this matter in a way that will make sense to us. Because obviously something does not work, and yet it is presented as a rational process, so maybe this way of looking is wrong. So how can we approach this matter in a different way?
The Dinar is not a financial tool, it is a commodity. It is of the same nature as a kilo of potatoes. It has a price determined intrinsically by the market. It is not a promise of payment. Financial institutions and the economy that has arisen around the financial institutions see gold as a problem. If you wanted to boil down their criticism to a single concept, the main problem is what they describe as the shortage of gold. This means that gold does not allow the increase of the monetary basis because you cannot print more of it. Since gold does not allow the flexibility of creating more credit and money in times of crisis, it is rejected, and the focus, instead of being on the nature of the crisis, is shifted to simply fixing the crisis. We are in a state of permanently fixing the economy, the question of what is causing the crisis is never looked at. The central banks, in pursuit of their primary task, which is fixing the crisis, define gold as secondary, or irrelevant or costly; therefore gold is put aside.
Within this rationale, there is no argument. Gold is bad for the economy. But the question really is – which economy? Is this all the economy there is? In the last ten years it has become fashionable to speak about the real economy and the speculative economy. People have begun to understand that despite growth in the GNP of a country, the money still does not filter down to the bottom of the society, and the gap between poverty and wealth is getting bigger. There must be another way of measuring the economy; how can it be that the industrial output of the USA has gone down, while the GNP has gone up? How do we measure this growth? If I sell you a Microsoft share for 100, and you sell it back you me for 120, and I sell it back to you for 150, and you sell it back to me for 180, 200…we can go on like this forever and we are both getting richer, but we have not added a single service or product to the welfare of the community.
We differentiate between that, and the growth created by trading and by providing services. There is a real economy defined as real people with real trading, with real commodities, in real markets with real money. The size of the speculative economy compared to the real economy is in the region of one to a hundred. The size of the speculative economies have grown enormously in the last few years. My point is that the gold does not help the speculative economy, it is belongs to the real economy. The domain of the gold coin is the real economy. If we are going to understand how the Dinar can be implemented, we have to be able to understand which sector of the economy is most likely to profit from the introduction of this currency. To understand that, we have to go a little bit further than just the currency, and we have to look at what I describe as the Gold Dinar Economy, which is another name for the real economy.
When Dr Mahathir spoke about the Islamic Trading Bloc, immediately there were some reactions within his closest circle. The central bank came to him and whispered that this is too expensive. This is a perfectly valid statement from their point of view, I would say exactly the same thing. In a brief meeting with him recently, I said to him, “The islamic Dinar may be expensive for the central bank, but the most expensive thing for the poor is the US dollar.” He looked at me and smiled; he understood what I meant.
We have to be able to understand the natural resistance of the financial institutions to the. And yet we have to be able to understand where and how the gold can grow. Let us for a moment go back to our past and look at where the Dinar existed. It is impossible for us to think that we are going to bring the Dinar and fit it into a totally alien environment. It would be more logical to imagine that the Dinar will exist in a consistent environment that is familiar, or shall we say welcoming, to the Dinar. That environment from the past has its own institutions that we have lost. The Dinar existed in a ambience in which there were markets – open markets, not supermarkets and there is a big difference.
In defining the world of Islamic Trading we will find certain key features, and one of them is the money itself; that is the Dinar, with its electronic version, e-Dinar. So you have the Dinar in your pocket and then you have the electronic version for the payment system; and for this we have created e-Dinar, which is the first alternative to the banking system in 300 years. It is not a bank, because we are not mixing money with credit. We separate these two things. And we are frankly better than the banking system, because we can make a transaction using e-Dinar at a maximum cost of 50 cents US. You can transfer one million dollars worth of gold from Kuala Lumpur to New York for 50 cents. And this can be done in just three seconds – not three days, three seconds. So we are not just an alternative to the banking system, we are better, and we are not part of their system. This is based on Dinar and Dirham, not paper currencies, so there are benefits upon benefits.
The above is presented for historical interest and does not represent any viewpoint of the presenter.