Rocky Vega

Malaysia, well, at least its northern state of Kelantan, is putting the Islamic gold dinar and silver dirham into circulation as legal tender and it could be implemented as early as mid-August. It won’t be the first nation using gold coins — Indonesia has already minted about 25,000 pieces for use in Australia, Malaysia, and Singapore — but, they are going to be useable in a rather comprehensive fashion.

According to The Guardian:

“If information on its website is to be believed, the council has the blessing of the state’s Islamist government, Parti Islam SeMalaysia (Pas), to kickstart the dinar in three moves. First, the state will pay a quarter of its public servants’ salaries using the dinar. Second, all state companies will accept dinar payments. Lastly, some 600 commercial enterprises will also embrace this currency.

“Inspired by selective religious sources and backed by historical precedents within the annals of Islamic history, the gold dinar system is touted by certain fiercely proud Muslims as the Islamic answer to thwart capitalism’s woes.

“The idea was first mooted by Malaysia’s former prime minister, Mahathir Mohamad, in the aftermath of the 1997 Asian financial crisis. He argued that the coins would never hang their possessor out to dry in the same way that paper money had. As precious metals with intrinsic value, gold and silver are more resistant to market fluctuations and devaluation compared to the US dollar – an argument he took to the Organisation of the Islamic Conference as a tool to battle western hegemony.”

In and of itself, choosing a gold-backed currency as a tool “to thwart capitalism’s woes” seems a bit wrongheaded. Its use could raise the ire of capitalist public accustomed to paper money, but there are many true-blue capitalists that would sing the praises of a gold-backed US dollar, for instance, given the opportunity. The concept of a gold-backed currency other than the dollar, in this case the dinar, could conceptually offer a threat to the dollar’s reserve currency resilience, but not without a global endorsement of its usefulness in international trade. Anything’s possible, but it seems unlikely even China, with its particular reserves quandary, is going to rush to support a Malaysian reserve currency anytime soon.

You can read more details about the gold dinar and silver dirham in The Guardian’s coverage of whether or not Malaysia’s Islamic currency will be able to thwart capitalism.

Best,

Rocky Vega,
The Daily Reckoning

Rocky Vega

Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.

Recent Articles

Peter Thiel Explains What Backs the U.S. Dollar

Chris Mayer

In a recent interview, Peter Thiel gave a simple and clear explanation of what gives the U.S. dollar its power. “It surprised me,” writes Chris Mayer, “because I had not heard anyone but fringe economists give it. And yet it is the key to understanding modern money.” Chris revisits the idea… including some radical ideas “that will change the way you think of money and the economy forever.”


Could Steak Really Cause Arthritis?

Stephen Petranek

Can you really eat more salt? Is arthritis caused by steak? Are artificial sweeteners really Satan’s sugar? Stephen Petranek comes clean about 2014’s wackiest health recommendations in his new series on “The Truth About MD Warnings.”


Now’s the Time to Buy Housing Stocks – While They’re Cheap

Greg Guenthner

So let me point out one of the new clues for you: construction hiring is actually on the mend after years of decline. Contractors added 48,000 jobs in December, according to the latest numbers. Full-year numbers were also better than expected, clocking in at 9-year highs. Why is no one talking about that?


The Currency Wars’ “Pearl Harbor”

James Rickards

The most dramatic battle yet in the currency wars took place last Thursday. It was the financial equivalent of a Pearl Harbor sneak attack. Jim Rickards has the full story... what it means moving forward... and a lesson for all gold investors...


Why Oil Can’t Stay Cheap

Byron King

As consumers, you want to see low prices at the pump. But for investors who've been riding the American fracking boom, are these low prices a death knell? Byron’s advice to you, as an investor with exposure to energy stocks, is to not panic in the face of short-term market turmoil. And Byron’s got two picks primed to rebound…