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GLOBAL FINANCIAL
CRISIS - LOSING THE WAR AGAINST ALLAH Oct
20, 2008 In
a very short period of time, the world trade markets and the "economic
boom" took a toll for the worse and plummeted to its all-time low.Those
who are unaware of the workings of Western Capitalistic Economy continue to
turn a blind eye and regard this crisis as a mere short term recoverable mini
recession. At the same time, those who have spent their lives in the field are
much more critical. In fact, the Global Crisis is neither a trifling matter
restricted to a number of days nor is it recoverable. For
a brief analysis of this crisis, it will suffice to merely highlight its
origins. In crude words, this crisis is analogous to a terminally ill patient,
that is beginning to show fatal symptoms. More than half a century ago in 1938,
the Federal National Mortgage Association (Fannie Mae) was formed. This
Association lent out loans for the clients looking for home financing. This was
the initial infiltration of the reproductive virus, which would one day grow
like cancer to bring about the major crisis causing a staggering 2000 point
drop in the Market indexes. The
next step was to consolidate the first phase through the formation of The
Federal Home Loan Mortgage Company (Freddie Mac) by Richard Nixon in 1970.
Freddie Mac began offering a federal guarantee in lieu of the mortgages given
by the local lenders. In order for the newly developing market of home
mortgages to flourish Freddie Mac laid the foundation of extending financing to
those less stable clients who were more likely to default, since the guarantee
from the Freddie Mac would secure that risk. In
1994 Bill Clinton ratified the "Racial Discrimination Treaty" which
made low income individuals eligible for taking home loans. Similarly, it
encouraged maximizing loans with these financing mortgages to its brink; thus
giving a boom to the The
hardest blow in such time was to the investment-only banks. The Sub-prime
market sells these loans to other banks throughout the globe. The plummeting of
the Sub-Prime caused a major ripple on the other banks. The smaller banks
became incapable of delivering funds to its investors, throwing them into an
abyss of liquidation. In order to recover, these smaller banks looked for help
from other banks trying to take loans. However in the midst of
"evaporation" of liquidity, banks chose to refrain from inter-bank
lending. This is referred to as the "credit-crunch" i.e. when the
banks choose not to lend in between themselves to secure their own positions. This
caused a recession for those smaller banks, causing some of them to either be
nationalized or seek help from governments. At this point, governments decided
to intervene once more and inject more money into the system to recover the
markets and to assure the people of their savings. One
thing which we understand from the above snippet into the history of the Financial
Market is that while we tend to yearn for ownership of any commodity in the
world, in the forms of housing, conveyance or earning from securities and
futures, we tend to overlook the harms of our greed and the consequences
thereof. The banks kept lending and lending in hope to grow the market
clientele while reaping the interest of those loans.. However, there was simply
no cash to cover for those loans. On the other hand, the banks didn't have cash
to give off to the investors. يَا أَيُّهَا الَّذِينَ آمَنُواْ لاَ تَأْكُلُواْ الرِّبَا أَضْعَافًا مُّضَاعَفَةً وَاتَّقُواْ اللّهَ لَعَلَّكُمْ تُفْلِحُونَ O
ye who believe! Devour not usury, doubling and quadrupling (the sum lent). In
reaction to the prohibition, people sought to defend their stance by claiming
that Riba is nothing but a form of trade, just as Western Capitalism believes.
There is hardly any sector that does not deal in interest-based products.
Capitalism has even made the learned ones believe that such trade in securities
and interest markets is nothing but a means of earning and
living. Whereas, Allah Ta'ala declared for us,
Those
who swallow usury cannot rise up save as he ariseth whom the devil hath
prostrated by (his) touch.That is because they say: Trade is just like usury;
whereas Allah permitteth trading and forbiddeth usury… (Qur'an 2:275)
On
the authority of Abdullah Ibn Mas'ood radiyallahu anhu it is reported that the
Rasulullah salallahu alayhi wasallam said, "Usury has seventy three
categories. The least category of them is like a man marrying his mother."
(Al-Hakim, Bayhaqi)
On
the authority of Jabir bin Abdillah radiyallahu anhuma it is reported that he
said: "The Messenger of Allah sallallahu alaihe wasallm cursed the
devourer of usury, its giver, its scribe and one who (stands) witness to
it". And he said "they are all same".(Sahih Muslim)
O
ye who believe! Observe your duty to Allah, and give up what remaineth (due to
you) from usury, if ye are (in truth) believers. And if ye do not, then be
warned of war (against you) from Allah and His messenger. And if ye repent,
then ye have your principle (without interest). Wrong not, and ye shall not be
wronged.(Qur' an 2:278-9) We
must shed this element of "interest" from all facets of our life and
look towards Islamic Principles to combat the current Global Crisis and dawn
into an era of a morally sound Economy. Abuhajira
bin Abdul Hamid Checked
and Approved by, |
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