Question:

1. In light of what was mentioned in the booklet, The Economic Crises, please comment on the policy of issuing currency by the state. If huge amounts of silver or gold were discovered in the mines under the state's control, is the state responsible for extracting the gold and silver and issuing it as currency? And can the state choose to not extract the gold and silver because it does not wish to destabilize the exchange rate?

2. How will the Khilafah "Caliphate" be able to practically regulate the standard of gold and silver? For example, if gold and silver are scarce in a land, how is the Khilafah "Caliphate" going to manage this issue? Is there going to be an issuance of a new currency backed by gold and silver in addition to the current paper currency? Or will the paper currency be backed with other assets with the aim of discovering enough gold and silver to cover the backing of the currency with gold and silver completely?

Answer:

1.    The extraction of gold and silver must be handled by the state, not just because

the legal currency is based on it, but also because the underground metal are public property.

And the state will extract gold according to its need for currency and its consumption, and the Sharia'a rules create a balance due to the following factors:

The currency is gold and silver...pricing-fixing is forbidden... if the price increased in a province of the state, then the state must return it to its normal state by bringing the commodity from other provinces and increasing its quantity in the markets as a matter of caring after the affairs of the Ummah... hoarding is forbidden... the state's need for manufacturing is a necessity... etc.

All these factors organize the process of extracting gold and silver automatically, so there is no inflation of prices, because the monetary system of gold and silver makes the margin of increase in prices so small that it is almost non-existent, and it is stated in the book The Economic Crises: "And this system achieved stability and steadied the unit value on both the internal level and external level, and the proof is that the record for pricing with gold in the year 1910 was almost the same level that it was in 1890." End.

2. But the postulation that the state will be established in a land scarce in gold and silver is an unrealistic assumption, for all the Islamic lands which the state is expected to be established in contain many gold and silver mines, and contain commodities that other countries need, such as oil and gas, and the state will not sell them to the world except in exchange for gold and silver or exchanged goods, and we have paper assets in the banks of those countries, and we will exchange them for goods... and also our lands are self sufficient pertaining to basic goods, so their sanctions will not effect us if they use them, instead the effect will be more severe and tougher against them.... And likewise in our banks we have tangible currencies...And it was revealed to us that Allah has blessed several Muslim lands with resources in ample quantities...

So do not despair and be reassured, and pray for Allah Almighty to hasten the Nusrah, and He is the Strong, the Aziz.