Friday, June 09, 2006

The Shock in the Kuwaiti Money Market its causes & how to deal with it

The following is a draft translation of a leaflet written in Arabic by brothers in Kuwait with some slight ammendments.

The crisis of the money market (stock market) in Kuwait is because of two main reasons, first of which is the corruption of the capitalist economy, and the second is the mal-sponsorship of the rulers of Kuwait and its government for the affairs of the people. As for the capitalist economy, it includes three systems which supported one another to divide the capitalist economy into two kinds of markets. The first is the actual economy in which the production, marketing and services of the goods take place, and the second is the financial economy, in which selling and buying different kinds of money take place, they are checks which represent rights liable of circulation, from this money economy the money markets initiated and advanced. The corruption of the money markets comes from the corruption of the three systems from which the money markets originated, the systems are, the system of stock companies, the usury banking system and the compulsory currency system.

As for the stock companies, it was first established to protect the wealth of the rich business men from the debtors and those who have rights, and to enable the rich business men from dominating the public money. The main characteristic of the stock company is that it has limited responsibility, so if it lost and declared its bankruptcy, then those who have rights on it and the debtors have no right to ask the shareholders for anything, they have nothing, except what was left of money in the company. Therefore the stock company has a totally independent personality from its contributors, it allows only the one who has right to sue it alone and not to sue the shareholders at all. From the system of the stock companies is that the owners of money need fifty percent from the rate of shares to have control on its work and the money of the contributors, which makes the other contributors only shareholders, which they circulate in the money market by selling and buying without the permit of any one. This resulted in the category of speculators, who consider stocks a merchandize which could be bought and sold, and from which they can get profit. The greater the capital money and the influence of the speculator are, the more capable will he be in gaining money, due to his effect in the directions of the market to raise or lower the prices of some stocks. Also the stock holders have the right to sell or buy it without a permit from any one, also the rich people have the right to sell the stocks without permit and without telling any one, hence they can sell the stocks and claim no responsibility what ever of the work of the company which they had control of and used to manage, it also enables the rich people and those who control the company from taking advantage of the circumstances of the company and the market when selling or buying, such as selling their stocks before declaring about losses or to buy stocks before declaring any profits.
As for the usury banking system, it is the head of disaster in the capitalist economy. Because it enables the banks to use the money of the depositors as if it is the money of the bank and not that of the depositors, it gives loans to those who circulate stocks in order to take a guaranteed usury on each loan. This loan has a very bad effect on the money market. Because of the influence of these banks and their knowledge of the secrets of the market, they could foretell the direction of the prices, so if the expectation is rising they give loans to the circulators, which leads to doubling the prices because of the abundance of money for buying, and this results in the inflation of the processes of circulation, and the price of the stocks becomes much more than its real value. As soon as the prices draw back, for any reason, the banks stop giving loans, and start to sell the stocks of those who took loans, which affects the prices and make them retreat more, so the banks hurry more to sell the stocks of those who got loans, and so on until the collapse takes place.

Thus the role of the usury banking system in the money market is transferring between inflation of circulation and prices and in minimizing them.

As for the compulsory paper currency (paper money), it gives the Central Bank the right to issue a currency to be circulated in the country, in the form of printed papers without any material value for it, but it is compulsory by law and in front of court to pay rights. This means that the Central bank can originate the amount it needs of paper currency in order to realize the policy of the state. So if there was a collapse in the market of paper money, the Central Bank issues money and circulates it in the banks, which gave loans to those who work in the stock market, so as not to be bankrupt, and thus it conceals the crisis of the usury banking system. Issuing money has a high price which the common people bear without being aware of its reason. Because issuing money increases the amount of circulating currency, which causes the decrease in the value of the currency, and this results in an increase in the prices, or inflation, inflation means the decrease of the value of currency, that is why the capitalist economy complains always from inflation and rise of prices. It is no wonder that the capitalist economy is corrupt because it was built on a corrupt ideology, which gave humans who are incomplete, limited and helpless the right to legislate instead of Allah, so he was misled and he misled others as well,

Allah (swt) said:

((وَلَوِ اتَّبَعَ الْحَقُّ أَهْوَاءهُمْ لَفَسَدَتِ السَّمَاوَاتُ وَالْأَرْضُ وَمَن فِيهِنَّ بَلْ أَتَيْنَاهُم بِذِكْرِهِمْ فَهُمْ عَن ذِكْرِهِم مُّعْرِضُونَ))

"If the Truth had been in accord with their desires, truly the heavens and the earth, and all beings therein would have been in ruin! Nay, we have sent them their admonition, but they turn away from their admonition." [Al-Mu'minun: 71]

As for the second principle reason for the crisis of the money market, which is the mal-sponsorship of the rulers and government of Kuwait for the affairs of people, here is the explanation:

First: The rulers of Kuwait insist on implementing the capitalist economic system, although it is corrupt, and contradicts the instincts of mankind, and is no good for dealing with economic problems of mankind. Bearing in mind that the uselessness of the capitalist economic system is being repeated by the capitalists before the Muslims, we hear from their economists about the effect of the negative usury banking system on the economic cycle, and we also hear about the effect of nullifying the basis of gold and the depending of the compulsory paper currency on inflation, we also hear from them describing the money market to be similar to the casinos in which all kinds of traps and swindling are being used to plunder the money of the circulators. If the reality of the paper currency market was other than this, the states would not have been obliged to issue laws and to establish inspection institutes and form committees to inspect the scandals.

Second: The corruption of the paper money market is being taken advantage of in a very bad manner, to plunder the money of the people, on the sight and hearing of the rulers and the government without moving a bit. So because of the corruption of the system of the stock companies, the powerful and rich people use their influence to establish unreal companies, which have no activities and which do not produce anything, and publicize them in the market, to sell their stocks to the people and thus plunder their money. The percentage of unreal companies in the market reached about 35% from the sum of the companies by the end of 2005, also the administrations of the companies manipulate the weakness of account inspection to falsify the accounts of their companies, so either they announce exaggerated profits, and this is what takes place generally, or announce losses according to the interests of the rich people who have control of the money of the circulators, in order to play in the value of the stocks and swindle people. This matter was disclosed by the end of the financial year of 2005, the companies which forged their accounts did not distribute any profits, and justified that by saying that they increased the capital money of the company. What is ridiculous is that the government is the main speculator in the paper money market, through the general assembly of investment which has big shares which reach the half, in most of the boxes of investment, and which owns many of the companies listed in the market, that is why the government is considered to be the principle speculator in the price of stocks and market.

Third: Another mal-sponsorship is that when money was abundant, because of the rise in the price of oil, and the return of capital money from outside because of the events of 11 September, the rulers and the government did not make use of this abundance, by providing actual investment opportunities. The opportunities of investment remained very limited, so the people turned to the money market, so the market steamed and then the prices collapsed. It was possible, and it still is, for a manufacturing basis to be established, and a high oil technology to be bought in order to advance the production and filtration and industry of oil, to build an oil and petro-chemical industry which will form a true economic basis, and a true tributary to increase the income and variation, it will also provide thousands of chances of work for the unemployed and needy. The money was not invested in this manner, and is still not, the rich people still had nothing other than the paper money market or the saturated real estate market to make grow their money.

Oh Muslims!

It is the grace of Allah on us, that He legislated for us an economic system which is void of the usury banking system because He prohibited usury, and from the paper money markets because the contract of the stock company is void by Shari'ah, and from the compulsory paper money system because he necessitated gold to be the basis of currency. It treated economy on the basis of being an issue of distributing wealth and not producing it, it fixed the reasons for ownership, and organized the manner of distributing the wealth and did not fix the amount, it legislated Ahkam for industry, and for commerce, and for rent, and for agriculture, it considered the issue of production a scientific issue and not an economic one, so it was empty from depression, recession, inflation and rise in prices, above all this, it is not in need of being related to the economy of other states in order to grow. (Refer to the book of Economic System In Islam, and the book of Funds in the Khilafah State issued by Sheikh Taqi ud-deen an-Nabhani and Sheikh Abdul Qadeem Zalloom)

Oh Muslims!

The oil-wealth of Kuwait is very abundant, and its income is imaginary, and the people have a lot of money in their hands. Yet this wealth needs protection, and the income needs to be invested and the money needs to be well looked after. What is going on actually is quite the opposite, our wealth is being guarded by the spears of the Kafer, and the income of oil in the banks of the West move the wheel of the economy of the West, the money of the people is exposed to be plundered and lost. So who will protect the wealth of the Muslims, other than the armies of the Khilafah Rashida, so we call you, oh Muslims, to work with the da'wa carriers to establish the Khilafah Rashida.

Allah Al-Mighty said:

((إِنَّمَا كَانَ قَوْلَ الْمُؤْمِنِينَ إِذَا دُعُوا إِلَى اللَّهِ وَرَسُولِهِ لِيَحْكُمَ بَيْنَهُمْ أَن يَقُولُوا سَمِعْنَا وَأَطَعْنَا وَأُوْلَئِكَ هُمُ الْمُفْلِحُونَ))

"The answer of the Believers, when summoned to Allah and His Messenger, in order that he may judge between them, is no other than this: they say, "We hear and we obey": it is such as these that will prosper." [An-Nur: 51]

12 Rabi'-ul Thani 1427 AH
10 May 2006 CE

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