Sunday, May 20, 2012

Q&A: Exchanging gold for gold?

The following is a translation from an Arabic Q&A. 


Question:

The following came in the Book of the Economic System, p. 268, the sixth line: "If a man bought a true dinar by two forged dinars it is not permissible"

It also came in p. 289, line 12 in the same book ‘and the exchange rate between the two States is then the ratio between the weight of the pure gold in the currency of the first State and the weight of the pure gold in the currency of the second State "

I understood from the text mentioned in the first place and the subsequent clarification that it is not allowed to exchange the forged two dinars by a true dinar though the pure gold contained in the two forged dinars might be equal to the weight of pure gold in the true dinar. Therefore, the understanding I got is that when you exchange the gold of 24 carats with gold of 21 carats, for example exchange will not be except by weight for weight despite the different proportion of pure gold in both carats. What was stated in the second place mentions explicitly that the exchange will be by the ratio of the weight of pure gold, and not a weight for weight as I understood from the first place? Which of the two understandings is correct, and how can we reconcile between the two statements. In other sense, what counts in the process of exchange? Is it the weight of each of the two gold slugs regardless of the weight of pure gold in each of them, or it is the weight of pure gold in both gold slugs?

My attention was drawn by that which came in p. 268, that the evidence of not allowing to sell the true dinar by two forged dinars is the objection of the Prophet, peace be upon him, to the exchange of the Berni (good) dates by the lousy dates, one saa' for two saa' (volume measure) despite the fact that the exchange of dates for dates is sale, while exchange of the true dinar by the forged dinar is an exchange process. Furthermore, the Berni (good) dates and the lousy dates are both pure dates which are not mixed with anything else, while the forged gold is not pure gold, but rather mixed with impurities. I see the two realities different from each other, and they are not replaced by each other.

In essence, when the gold of certain carat is exchanged by gold of different carat, will exchange be weight for weight, regardless of the carats of each of them, or what counts is the equal weight of pure gold in each of them, for difference of carat necessarily means variation of the ratio of pure gold in both gold slugs?

Answer:

The question is as follows:

1 - Exchange of gold for gold is the like for the like; and the word of "gold" is a genus name that applies to everything that is called gold, whether it was of 18, 21 or 24 carats...

If you want to exchange it you do that by weight for weight. Once offer and acceptance were concluding then it is not allowed to repeal/revoke the exchange, on condition that there is no cheating in the exchange. In other words, if you had gold of 24 carats and the other side had gold of 18 carats; thus no one of you should hide from the other side the type of gold he had.

If however, he said he had gold of 24 carats, and after the exchange as the like for the like was completed the other side discovered that the gold is of 21 carats then there is fraud in this case, which allows revoking of the exchange. The side that was deceived has the choice of either accepting or completing the exchange, or to revoke it, and each of the two sides takes back his own gold. However, the one side that had gold of 24 is not allowed to take from the owner of the gold of 21 the difference (of weight or value) between them, because both types are gold, and thus it is not allowed to differentiate between them.

This is the interpretation that was mentioned in the Economic System, page 267: (If somebody bought gold of 24 carats for gold of 24 carats, and then one of the two dealers found the gold he took was of 18 carats, then this is considered cheating, and he has the choice between either revoking or accepting the exchange. However, if he wanted by exchanging the gold for gold to accept the money with its flaw, on condition of taking from the other side the shortage of its price due to its flaw, this would not be allowed because of the increase in one of the two types of exchanged gold, and because the obliged similarity in the same genus is missing).

2 - As regarding that mentioned in page 268: (and if a person bought from somebody else one true dinar for two forged dinars this is not permissible. But, if he bought a true dinar by dirhams of silver and he then bought by the dirhams two forged dinars, this would be allowed, whether he bought them from the same trader or from any body else. This is due to what is narrated from Abu Said who said: "Bilal brought to the Prophet, peace be upon him, Berni (good) dates, the Messenger of Allah, peace be upon him said: From where is this?, Bilal said: We used to have lousy dates, and I then sold two saa's of it for one Berni saa' as food for the Prophet peace be upon him. The Messenger of Allah, peace be upon him said then: "Oh, this is riba itself, so you do not do that; rather if you wanted to buy dates, then you sell it for something else, by which you buy the dates ‘you want'" narrated by Muslim.)

The sense of reasoning the impermissibility of trading two pounds of lousy dates for a pound of good dates and its application to objection of exchanging two forged dinars for one true dinar is a sound inference. However, your rejection of the inference by saying: "The reality of the substitution of lousy dates for good dates is sale, while the substitution of the true dinar for the forged dinars is exchange". This statement is not correct, for the exchange is sale; but selling gold for gold is called exchange.

Look at the beginning of the subject page 266: (exchange transactions: No matter how much numerous and various are the exchange transactions, they do not depart from being a sale of one currency for another currency of the same genus, and a sale of one currency for another currency of two different genus's).

3 - As regards that which you mentioned in page 289:

(The exchange rate between the two countries would then be the ratio between the weight of the pure gold in the currency of the first country and the weight of the pure gold in the currency of the second country).

This is a different issue, for this is not the issue of "true and forged", but rather an Islamic dinars and English pound, for example. When they are exchanged the same process has to be followed which is "the like for the like." If the Islamic dinar represents "4.25" gram of gold of 24 carats, while the English pound represents  ""2.125 " gram of gold of 21 carats, then the exchange must be the like for the like.

So, the Islamic dinar is equivalent to "4.25" grams of gold, which is equal to 2 English pounds of (ie, 2 × 2.125 grams = 4.25 grams) regardless of the type of gold. This means it is not permissible to say that the gold of 21 is less than the gold of 24 , so I want double and an increase as well ... This is not permissible, because what is called gold, whether it was 24, 21,18, it would be exchanged by the same weight. And once the offer and acceptance were concluded, then the sale would not be invalidated, on condition that there is no cheating, which means each one of the two dealers should inform the other of the type of the gold he had.

If there were fraud, i.e. if the English was malignant, which is the case, and the Muslim was naive, and sometimes he is so, and the English said to the Muslim that when you exchange my banknote in the English bank they will give you for it 2.125 grams of gold of 24 carat, so the Muslim took two of them, and gave him the Islamic dinar, whose value is 4.25 grams, where the naive Muslim believed the words of the malignant English. When the Muslim went to the bank and gave it the two pounds banknotes he took in replace of them 4.25 grams of gold 21. In this case, it is permissible for the Muslim to return to the English choosing one of two options, either he accepts the sale, or he revokes it, where each one of them would take his gold; but it is not allowed to take the difference (between the two currencies), because gold is exchanged for gold, and the like for the like as long as they are called gold.

Of course, the English would be subject to punishment of fraud if the transaction took place in Dar al-Islam, unless if the English was an ambassador, where it will be enough to expel him as punishment for the fraud!

10 Rabee' II of 1432
03/15/2011

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