Functions of Money According to Islamic Economics and Capitalism

Big mistake conventional economics is to make money as a commodity, so the existence of the money now more widely traded than be used as a medium of exchange in trade. Conventional banking institutions and other financial institutions also make money as a commodity in the lending process. The instrument used is the interest rate (interest). Instrument using the interest money that land speculation has become easy for many people on this earth. Misconception was fatal to the great crisis in the economy throughout history, especially since the early 20th century to the present. Economy countries in this hemisphere can never be separated from exposure to the crisis and the threat of the next crisis will happen again.Islam considers money only as a medium of exchange (medium of exchange), not as a commodity (commodities) are traded as embraced capitalism. This provision has been widely discussed are like Ibn Taymiyya cleric, Al-Ghazali, Al-Maqrizi, Ibn Khaldun and others. It is emphasized again Choudhury in his "Money in Islam: a Study in Islamic Political Economy", that the concept of money is not allowed to apply to the commodity, because it can damage a country's monetary stability.Hence the motive demand for money is to meet the needs of the transaction (money demand for transaction), not for speculation. Menghalalkanspekulasi capitalist economy currencies. Speculative activity is what has ruined the world economy in a severe financial crisis bentruk.Islam strongly recommends the use of money in exchange for the Prophet was aware of the weakness of one form of exchange in ancient times the barter (bai 'al muqayadhah), where the goods exchanged. According Afzalur Rahman, the Prophet realized the difficulties and weaknesses - weaknesses will this exchange system, and then he wanted to replace it with a system of exchange through money. Therefore, he stressed to his companions to use the money in their transactions.It can be found in the hadiths, among others, as reported by Ata ibn Yasar, Abu Said and Abu Hurayra, and Abu Said Al Khudri.Ra of Abu Said, said: "On one occasion, Bilal came to the Messenger of Allah brought Barni dates. Then the Prophet asked him, "which dates from this?" Answer Bilal, "Dates are low quality. Therefore, I traded two bushels to one bushel of food dates to the Prophet. "Then the Prophet said, This is called usury. You do not ever do it again. If you want to buy dates (good), kurmamu first sale (less good), then with that sale money to buy a better date. "(Bukhari Muslim).From the above hadith it is understood that the Prophet ordered that menjuall dates (less good) first, then money from the sale were used to buy good quality dates earlier. So the Prophet forbade direct trade 2 sha 'not good dates with a sha' dates of good quality.Prophet did not approve transactions with a barter system, so he advocated the use of money as a medium of exchange.Meanwhile, according to Dr. Rif at al-'Audi, in his book Min al-al-Iqtishad Turats li al-Muslim, that money is the concept of flow (flow concept) that can not be a commodity, while the capital is the concept of inventory (stock concept). In conventional economics, there are several terms as expressed by Frederick Mishkin in his Economiss of Money, Banking and Financial Institutionas.Islam does not recognize the concept of time value of money (which is popular with the term-time is money), but Islam the concept of economic value of time which means that the value is time itself. Islam allows a tough price to pay income higher than pay cash. Even more interesting is the permissibility of tough pricing higher it was not due to time value of money, but due solely because of the arrest of the sale of goods act. For example, if the goods are sold in cash with profit Rp.500, - then the sale can be bought again and sold it in one day then that's the advantage Rp.1000, - whereas when a tough sell to pay the seller the right to be retained, so that he can not buy anymore and sold again, due to further it, the rights of families and children for dinner Sellers stuck to the buyer. This is the reason, the seller has retained the right to meet obligations (of delivery) then Islam permits a tough price higher than the price in cash. The motive for the demand for money-in-Islam is to meet the needs of the transaction (money demand for transaction).In the Islamic concept, money demand is not known for Speculation, speculation is not allowed. As with the conventional system which would open up wide opportunities with the ability to provide interest on the property. Islam actually makes money (assets) as an object of charity, the money belongs to the people so that hoarding money under the pillow or left unproductive banned, because it reduces the amount of money circulating in the community.From the above it can be concluded is a medium of exchange money (medium of exchange) that ease the burden on humans in the implementation of the exchange, because the money is useful for the public and can be used by the public. With the other editors of that money is everything that is accepted widely accepted as a means of exchange. In the conventional money economy 'as if' made man as a "god", where people view money is everything, as an important tool and is placed as number one. Growing human race in search of money. Wealth is measured by the extent of the money. Even pleasure as if painted with having money. This was a spur of conventional economics to move quickly in the financial sector. because looking at money as a medium of exchange as well as a store of value / wealth. Another case the economic dimension of Islam that money is everything that is commonly accepted and valued only as a means of exchange (medium of exchange) rather than as a hoarder of wealth (store of wealth / value).Many more differences of principle between the two economic concepts, among others: that according to Islam is a public good money, whereas in the conventional economy are private goods. Money as a public good, meaning that money is basically functionally is public property, therefore the money should circulate in the economy. Money should not be hoarded (iktinaz); money should not be idle (unemployed), he must diproduktifkan in real business, such as through investment mudaraba or Musharaka. Hoarded money will make the anemic economy. Imam Ghazali therefore prohibits making the dinar and dirham into jewelry, because jewelry making as a means to withdraw money from circulation and imprison money. When a prisoner money, it's bad for the economy. Thus, according to Islamic economics, money is a flow concept, not a stock concept as in conventional economics.In Islam, money flowing like water. The water flow will not cause disease. For that money must always continue to operate naturally in the economy, the faster the spin the money in the economy, the higher the income, the better the economy. For those who tidap can turn his property, 'again' Islam strongly recommends to invest in perinsip mudaraba or Musharaka. In this regard the Prophet said, Know, Those of you who keep orphans, orphans while it has the money (dinar-dirham), then bisniskanlah, do not be left idle, so that later the money was consumed sedeqah / charityRiel and the balance of the monetary sectorFundamental differences in the Islamic economic system and capitalism is the real principle of Islamic economics have based economy, while embracing capitalism Monetary System based economy. Islamic economics is based on the real sector, requires that each activity must be related to monetary and real sectors in balance with the real sector. While the monetary-based economy of capitalism, menkonsepsikan always separate the real sector with the real sector.Therefore, in an Islamic economy the money supply, not a variable that can be determined simply by the government as an exogenous variable. In Islamic economics, the amount of money circulating in the economy as specified in the endogenous variables, ie determined by the number of requests for money in the real sector. Or in other words, the money supply as much as the value of goods and services in the economy. Ibn Taymiyya in 1250an, has been advanced to explain with this theory. According to him, the authorities should print money (currency other than gold-silver) in accordance with the fair value (proportional) on the transaction, without causing injustice against them. Ibn Taymiyya here explain the relationship of the money supply and the volume of transactions, in order to guarantee a fair price. Jurisprudence in macro-economic Siwak mentioned Ta'alluq qitha'i al-al-bi maliyah qitha'il wa'qiiyyah (affiliated moneyer sector / financial sector in real terms).So, in an Islamic economy, the financial sector following the growth of real sector. This is where the difference with the conventional economic separation between the financial sector and real sector. As a result of that separation, then the flow of money (monetary) grew by leaps and bounds, while the flow of goods in the real sector falling further behind. Monetary sector and real sector becomes very uneven.Manajamen experts rate the world, Peter Drucker, said symptoms of the imbalance between monetary flows and flows of goods / services as a decopling, namely the phenomenon of rupture between the rise of the flow of money (monetary) to the flow of goods and services.Imbalance phenomenon was triggered by the rise of speculation on the second business in the financial markets, namely in the capital markets and foreign exchange markets (money market) so that the world economy contracted a disease called bubble economy (bubble economy). Called economic bubble, because it is born it looks great, but it does not contain nothing but air. When prodded, he was empty. So, bublle economy is an economy in which large quantities of monetary calculation, but not offset by the real sector, even the real sector is very far behind its development.Just to illustrate, of the decoupling phenomenon, for example, before the Asian financial crisis, in one day, wandering in the funds in capital markets transactions and virtual world financial markets, it is estimated the average circulation of about 2-3 trillion dollars in one year, or about 700 trillion U.S. dollars. Though the flow of goods in international trade in one year is only about 7 trillion dollars. Thus, the flow of money 100 times faster than the flow of goods. (Reuters, 18-8-2000). This phenomenon occurred before 2000, yet we see more horrific facts in 2010an.In a seminar on STAN Jakarta, where I and Dr. Aviliani when it is as a speaker, he said, that the ratio of transactions of real sector and financial sector has swelled in spectacular fashion, that is 1 to 3000. This means that if the real business transactions only 1 trillion U.S. dollars a year, then the derivative transactions in the financial sector 3000 times as much, which is as much as 3000 trillion U.S. dollars a year. This acceleration occurred in 6 years.In the paper at a seminar of the National Agustianto 2007 at Sharif Hidayatullah State Islamic University Jakarta, noted that the volume of transactions taking place in the money market (currency Speculation and derivative market) of the world amounted to U.S. $ 1.5 trillion in just one day, while the volume of transactions on world trade in the real sector was only U.S. $ 6 trillion per year (ratio 500: 6), so it's about 1%. Unfortunately again, only 45 percent of transactions in the market, the spot, the rest is forward, futures, and options. Meanwhile, according to Reuters September 2007, money supply in the forex ransaksi had reached 1.3 trillion a year. These data suggest that the rapid development of the financial sector soared to leave the real sector. Thus the balloon getting bigger and more vulnerable to explosion. When the balloon burst, then there was a crisis as we often see on this earth.Symptoms of decoupling, as described above, caused, as a function of money is no longer just a medium of exchange and store of wealth, but have a commodity to be traded and highly profitable for those who get gain. Although it could force a loss of billions of dollars.Based on that reality, then the Annual Conference of the Association of Muslim Scientist in Chicago, October 1998 to discuss the Asian economic crisis in the perspective of Islamic economics, agreed that the root problem is the development of financial sector crisis that runs itself, regardless of the real sector.Business activity that separates monetary and real sectors, none other than the practice of usury. Contemporary term called derivatives. In the current derivative transactions, had actually fused triumvirate of riba, and gharar maysir. Derivatives business system in the view of Islam, is a big crime, so that the perpetrators in eternal hell (2:275), because the unforgivable sin. Menghangcurkan economic impact could be as many countries where we feel and see today. If a country plunged into crisis cliff, then hundreds of millions could suffer Imagine if 10, 20 or 30 countries hit by the crisis, how many billion human beings who become miserable and getting poorer due to the wrong system, which justifies the system of usury, maysir and gharar. Therefore evil derivative transactions, the George Soros called hydrogen bombs, while Warren Buffett called him the financial weapons of mass destructionDerivative transaction has been transformed into a time bomb that could explode at any moment and create a mega-Catastrophic to devastated global financial system. This is due to the expansion of derivatives has created a huge bubble in the world economy.Economists and financial experts have identified and berkonklusi that derivative transactions be stem and the main cause of all major economic disaster which occurred in 1929 in the United States. System of usury, maysir and gharar (derivative), too, who was behind the Wall Street stock market crash of 2001 known as Black Monday, as well as financial and banking crisis in 1987Derivatives business are also likely to be the cause of the Asian financial crisis of 1997/1998; the cause of the collapse of giant hedge fund Long Term Capital Management (LTCM) in 1998; the collapse of Britain's oldest merchant bank, Bank Barrings; collapse of Enron; trigger of Argentina's economic crisis; as well as being lighter crisis financial and economic crisis today. This happens because, according to Kavaljit Singh (2000), which was originally used derivative transactions to reduce risk (hedging) due to price movements are no longer being, even become an instrument of speculation.Current efforts are much discussed to reduce the adverse impact of derivatives is to create a sophisticated regulation and supervision (Business, March 20). However, Aziz said Setiawan, an expert on Islamic economics Paramadina, when regulatory restrictions do not touch the ability to mutate and metamorphosis of derivatives, the threat of a systemic crisis will always be there. Metamorphosis and mutation derivatives to develop when there is a separation of risk of real economic activity, so the risk of transformation into "commodities" and make it can be traded separately.Commoditization of risk makes the risk of becoming more and more breeding. When the risk is separate from the real sector, there is no limit the types of risks that could be transacted, ranging from stocks, bonds, commodities, index, currency, rating companies, the completion of a takeover, weather and other risks. Even further, derivatives can be derived from other derivatives, options on futures that was born, futures on options, options on options, and others.This is, make a separate volume and growth of the derivatives of the real sector. Because the real sector is much more complex and are faced with various constraints, the growth of derivatives markets is much faster than goods and real services. So no wonder that the volume of derivatives have been breeding more than ten times the gross domestic product (GDP) worldwide are only U.S. $ 60 trillion.Based on data from Bank for International Settlements (BIS), the volume of derivative transactions in the last 6 years has swelled to more than six-fold, from about U.S. $ 100 billion to U.S. $ 683 billion in 2008. Finally, without touching aspects of the regulation limiting the ability to mutate and metamorphosed derivatives, do not be too helpful to reduce this time-explosive bombs.As a result of the separation under the hegemony of the world economy is very vulnerable kafitalisme crisis, in particular developing countries. The amount of money in circulation is not balanced by the number of items in the real sector. Currently, the circulation of money for the real sector in a year, equal to the circulation of money in virtual transactions (derivatives) in a single day. Thus, the striking comparison between the real sector and financial sector.