New Gold-Backed Currency Could be in Use Next Month
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.