World Islamic Trade Organisation

World Islamic Trade Organisation: briefing
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» Committee: Economic Affairs
Meeting Report Information
Date of Meeting: 16 Apr, 2003
Minutes:

SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS
16 April 2003
WORLD ISLAMIC TRADE ORGANISATION: BRIEFING

Chairperson: Mr BJ Tolo (ANC)

Documents handed out:
WITO briefing (Appendix)

SUMMARY
The World Islamic Trade Organisation briefed the Committee on the current trade situation and concluded that it is unfair in that it favours only a few countries. They suggested that the world should adopt a single uniform "currency" that will be used in trade. This would replace the US dollar and make trade fair. He also indicated that Islamic countries support the idea of having a gold dinar as the currency to be used across the world. In the discussion that followed Members appeared not to support such a new currency. They raised concerns over non-gold producing countries and the possibility that the new currency could result in the emergence of a few dominant gold-producing countries. Members expressed favour at having some uniform currency which would accommodate tourists.

MINUTES
Mr UM Vadillo: Founding President, WITO, observed that the US dollar is a very important and dominant player in the market place. He also indicated the awesome power that the dollar has. He gave an example of instance where the US gives a piece of paper to a country and gets oil in return. He observed that this is unfair trade in that a country receives a worthless piece of paper and parts with its valuable resources. Mr Vadillo cited the economic situation as an example. Currently, the Zimbabwean dollar is worthless as a currency. He put the blame for this state of affairs on the US dollar. He indicated that if Zimbabweans were to choose between their dollar and a gold currency they would choose the latter. He also indicated that the floating exchange rates are also unfair to the poor countries. He then suggested that a case should be made for a gold dinar to be used in all future payments

Mr Vadillo drew Members' attention to the fact that in ancient times gold was used to pay for everything that was traded in the market. He suggested the reintroduction of the gold dinar in the place of the US dollar. He supported his suggestion by saying that a gold currency would back itself and would not be affected by inflation. Gold is a commodity in itself. Gold would give value to the person in possession of it and would have the added advantage of being a currency.

Mr Vadillo said that two types of economies exist. There is the "speculative economy", which is represented by the stock exchange. This economy prospers out of making money from money. He compared this to the "real economy", which is represented by gold. This emphasises creating wealth while adding value to the people's pockets. Trade has to be conducted in an open market supported by a real economy. He suggested that the market place should be open to all and not only to the privileged few. Once trade is restricted to the rich few it ceases to be trade and becomes what he calls monopolistic distribution. He observed that the adoption of a gold currency would open up the markets and result in free trade. Trading in gold currency would also create entrepreneurs, Mr Vadillo said.

Mr Vadillo told the Committee that he was aware of the challenges that await the introduction of gold currency. For instance, he was aware of the fact that a gold currency would be inflexible. Governments would not be able to make more currency on demand as they due in the present situation. He also indicated that banks do not like the idea of a uniform gold currency. However, he encouraged Members to look at the greater picture: the eradication of disparities between countries and the addition of value to the people's lives.

Discussion
Dr EA Conroy (NNP) asked why the currency has to be in gold and not silver, bronze, one uniform paper currency or any other commodity. He also asked what would happen if a person wants to buy something the value of which is less than the value of the gold he has. He asked if the currency would have to be broken down into smaller pieces. He furthermore asked the presenter if he did not foresee problems with countries that have no gold. He was of the view that the suggested system would also result in the establishment of a very few powerful gold producing countries.

Mr Vadillo accepted that any commodity would do as a form of currency. He also indicated that the gold currency would be supplemented by silver coins. This would ensure that where the item a person seeks to buy is less in value than gold, the silver coins would be used as payment. With the result of the creation of a group of few rich countries, Mr Vadillo gave an example of countries that produce wealth out of their own labour. He was of the view that such labour would also give them an edge when trading with other countries.

A Member asked if the presenter did not foresee serious political consequences should the gold currency replace the US dollar. She welcomed the initiative to have a uniform currency as this would solve many problems that tourists, for instance, encounter in foreign countries.

Mr Vadillo argued that the USA would do anything possible to undermine the initiative. However, he felt that, provided that the users of the new currency are united, the threats from the US would be futile. He alluded to the fact that if US companies, for instance, want to buy something from Africa, Africa has the right to insist on payment by a gold currency. Moreover, he was of the view that the US cannot force any country to trade with its neighbour in dollars. He said that it is up to the traders to decide what currency they want to used.

Mr Lever was concerned about the finite nature of gold. He said that this would compromise the government's ability to carry out its projects. With respect to paper money (as opposed to the proposed currency) the government could always print more money to finance its projects.

Mr Vadillo accepted that gold has its limitations in that one can not expand it as one thinks fit. He agreed that with the paper currency the US could make more dollars sufficient to buy the whole of Africa. This capacity has to be done away with. Such expansion of the money does not benefit the poor and he had a problem with this.

Dr Conroy thanked Mr Vadillo. While he thought that the presentation was good he was not convinced of the need to change the currency system into the one suggested.

The meeting was adjourned.

Appendix:
World Islamic Trade Organisation (WITO)
The African Union and the Gold Dinar

Umar Ibrahim Vadillo
Founding President of WITO

WITO IN AFRICA
Cantray House Southern Cross Drive. Constantia 7800. Cape Town (South Africa)
Tels +27-21-7948853

A Gold and Silver Currency for the African Union
A paper currency will not help the Africa Union. Real currency will. Real currency, that is, based on real commodities, like gold and silver, will restore order to a world that has lost its sense of reality in favour of an small elite who enormously benefits from the present monetary chaos.

The African Union and the Islamic Trade Bloc, both based on a return to real currency will challenge the present dominance of US dollar which has become the facto the "gold of the world".

We defend the use of the Gold Dinar and the Silver Dirham. The gold Dinar consist of 4.25 grammes of 22 carats gold. The Dinar is approximately 1/8th of the weight of the South African Krugerrand, that is, 34 grams (33.93 grams exactly or 1.0909 troy oz) of 22 carats gold (that is a gold content of 1 troy oz).

In South Africa the Krugerrand is legal tender with a value equivalent to the value of gold. Since its first mass production in 1970, more than 46.3 million ounces (1440 tonnes) or 54.5 million coins of all four sizes have been sold world-wide, making the most successful in the history of gold bullion coins.

Our proposal is that the African Union establishes the Islamic Gold Dinar/Krugerrand as the common currency of the Union with real premium value of the coin. This means that all the different size coins will have an identical market premium, and therefore they will be inter-exchangeable in the market-place. Thus, 1 ounce should exchange with 4 double dinars or 8 dinars. Only then it will become currency. We must notice that this is not the practice today and the premiums change from 3% up to 50% for the smaller denominations.

The Gold Dinar exchangeable with the Krugerrand on the basis of 1/8 will be the basis of the new African Currency.

Silver is also necessary and completes the traditional bimetallic system. Silver had been and will most probably be the most popular currency because of its value and therefore it will become the dominant currency in local trading. The standard of the Dirham is perfect because it is small in size and has been already the most successful silver currency of the history of Africa.

A non-Banking Electronic Payment System
Gold and silver electronically circulated will satisfy all the needs of modern trading without resorting to the use of banking. The system of e-dinar and e-dirham using state of the art internet technology is already in operation and can easily be used in the African continent.

The combination of the physical currency with the electronic one 100% backed by the physical gold will create a strong fully practical currency.

E-Dinar is the first Islamic alternative to the banking system in 500 years of banking history. The establishment of e-dinar presents a challenge to the present dominance of the banking system and represents a path to the ultimate abandonment of this unjust model.

Essentially e-dinar is based on a central repository of Gold dinars in several locations across the world united with a single world-wide data base which is accessible to members via the internet. The same applies to the e-dirham system. At present, the electronic payment system of the Islamic Gold Dinar is registered in Malaysia and has its bullion repository in Dubai (UAE).

Real Economy versus Speculative Economy
The real economy is the economy without usury. The real economy is the economy of the people who produce and trade honestly with effort, contributing wealth to their society. The real economy represents wealth generated by real people trading and producing real merchandise and services, sold in real market-places using (one day) real money.

The real economy has, in relation to the accounting methods of today, a formal and an informal reality. The informal real economy is that part of the economy where transactions are based on street trading, smallholder farmer production, and the labour of women to sustain households. The dynamism of informal economies sustains significant percentages of national populations, especially in developing countries. Nevertheless, their contribution is 'invisible' insofar as it is not counted in GNP or GDP growth. The formal real economy in which goods and services are produced and traded (and registered as part of the GNP), constitutes the visible part of the real economy. Usually 'the real economy' is defined as the 'visible' part of the real economy, and is seen as the one that 'counts'.

The other part of the GNP is the powerful "money" or speculative economy, which arises from trading money in rapidly expanding pooled funds (e.g. pension and mutual funds). The volume of flows in the speculative money economy is approximately one hundred times greater than the volume of flows in the visible "real" economy.

The difference between the real and the speculative economy has also been defined in terms of productiveness as the "productive" and "non-productive" economies respectively. This definition is a reflection of the fact that the speculative economy, which makes money out of money, such as the money created by speculative bubbles, is not a true productive force, and therefore it does not add real wealth.

The growing size and power differentials between these economies fuels social injustice and environmental destruction. According to the United Nations Development Program:

· The gap in per capita income (GNP) between the countries with the richest fifth of the world's people and those with the poorest fifth widened from 30 to 1 in 1960, to 60 to 1 in 1990, to 74 to 1 in 1995;

· the fifth of the world's people living in the highest income countries had 86 percent of world GDP, whereas the bottom fifth received only 1 percent; and half of the world's population lives on less than $2 a day.

Through the use of computers, managers of the money economy rove the world and prey on national economies. In the series of crises in Asia, Russia and Brazil, we saw tidal waves of capital outflows devastate enterprises and livelihoods throughout entire nations.

With the rise of the speculative money economy, or "casino capitalism", governments are weakened and marginalised. Through deregulation, governments transfer power to the so-called "market". Some governments become more accountable to external investors and creditors than to their own citizens. Financier George Soros arrogantly observed how, these days, Presidents and Prime Ministers now court financiers and industrialists, not the other way around. Unelected financiers and industrialists are orchestrating the globalisation process.

Capitalism favours speculative or money economy which is placed in the hands of few and this means that capitalism is bad for people. Gold and pure trading, on the other hand, will stimulate the real economy of the people.

The Effects of the Growth of the speculative Economy
The most clear effect of the extraordinary growth of this speculation is the effect on poverty. The following is World Bank's Report on Development Effectiveness.

The World Bank's Annual Review of Development Effectiveness 1999 (p.17) finds increases in world poverty, inequality and instability. Some specific findings follow:
-In 40 percent of the countries, per capita income either failed to grow or shrank;
-In 25 percent, the share of the population in absolute poverty increased;
-In 23 percent, life expectancy declined;
-In 54 percent, the people experienced stagnating per capita income, rising poverty, declining life expectancy, or a combination of these events;
-In 85 percent, per capita income grew 1% a year or less in the 1990s; and
-In 59 percent, gross savings as a percentage of GDP were low (less than 10 percent) or declining.

Far from advancing growth and development of the world economy, so-called "globalisation" has in reality showed itself to be a form of unbridled predator capitalism, which has opened wide the divergence between financial titles and real economy on the one hand, and rich and poor, on the other, in an intolerable manner, both on the national and the international plain.

Capitalism has been bad for Africa. After centuries of abuse and exploitation, the establishment of the African Union represents a historical opportunity to challenge the modern universal religion called capitalism.

Capitalism does not want gold, because gold does not allow banking. Capitalism does not like open markets they prefer monopolistic supermarkets, where capital can be accumulated in the hands of few. Capitalism prefers capitalist corporations rather than guilds, the traditional cooperative model of production, for the same reason they prefer supermarkets. The defense of trade is in itself the end of capitalism, in the same way as health is the end of illness. The promotion of health is the promotion of trade.

A Trade Strategy for the African Union
The return of a gold currency must be accompanied by the return of real trade. A trade strategy for the African Union will imply the re-established of the traditional trade routes, markets and Africa's real currency:

1. A Network of Markets (The 25 Markets of Africa)
2. Caravan Routes (linking East with West and North with South)
3. Guild System and Welfare (Guild Manufacturing Parks and Awqaf)
4. A New Model of Trading and Manufacturing Finance (No banking)
5. A Gold and Silver currency for Africa (Dinar/ounce Standard)