Paper Money

What is paper money? Today paper money is an unredeemable I.O U. For example, I have an English £5 note which records a ‘promise to pay the bearer on demand the sum of FIVE Pounds’ made by Andrew Bailey, ‘the Chief Cashier’. This promise refers to the time when people (they weren’t referred to as consumers in those days) used to deposit their gold sovereigns and silver florins with the bankers who would give them an I.O.U. in exchange which promised to repay the sum of gold or silver when asked. People soon realised that these I.O.U.s could be used as a means of exchange in any number of financial transactions before being turned back into gold or silver when needed. Then the bankers began printing I.O.U.s even though they were not backed by gold or silver and using them as money – although they did make sure that they still had enough gold and silver to honour any I.O.U. if anyone did ask for it to be redeemed. At this point, this paper money was a redeemable I.O.U. By this means the bankers were able to loan printed money on interest which in turn resulted in more money being created out of nothing – which meant that more I.O.U.s had to be printed.

When asked if he would become king of America, a banker replied, “Give me control of the issuing of money and credit and I care not who sits in the house of politics.”

In the end, there were so many I.O.U.s – there was so much paper money – that it became no longer possible to honour them. So the bankers changed the rules and informed every-one that they could still use the paper money as a means of exchange, but they could no longer exchange it for gold or silver. In the end gold and silver money was taken out of circulation altogether.

Everyone knows, myself included, that even if I manage to locate Andrew Bailey himself, he is not going to keep his promise. He is not a magician. My £5 note is not backed by gold or silver. It is only a piece of paper with a fancy design and a number printed on it. It is only worth what people think it is worth. Is this piece of paper a Shari'ah compliant means of exchange? Is it a worthy means of exchange for honourable Free Human Beings?  No, it is most definitely not.