Sam’s Exchange: The Religion of Money

Religion and money, as we know, are closely linked and religion dictates many business rules. The Muslims, the Jews and Christians in fact, have their very own monetary systems, based on their religious practices.

I have never been inside a Mosque, until last Saturday that is. I drove from Dubai to Abu Dhabi, at warp speed, which seems to be the practice on this stretch of road, to visit the biggest mosque in the UAE, and one of the biggest in the world.  Sheikh Zayed Mosque, which is named after Sheikh Zayed bin Sultan Al Nahyan, the founder and the first President of the United Arab Emirates, is brand new. It is open to the public, and on Saturday’s they give free tours. Ahmed, our local tour guide, certainly fulfilled the wishes of the late Sheik Zayed, which was to give non-Muslims a cultural tour of the mosque, and a greater understanding of modern Islam. We could ask any questions we liked, and there were no restrictions on where we could go inside the mosque. It was fascinating.

I would not describe myself as religious in the traditional sense in that I am a God-fearing weekly parishioner of a church. I am not. Nor have I ever been. In Australia, where I grew up, Christianity was taught in my school. As a small child, I was christened under the Church of England. I have some Jewish connection going back a couple of generations on my father’s side, which gives me an appreciation of the Jewish faith at the very least. At best I try to educate myself about different religions in order to understand them and appreciate them.

Religions are in fact, the first truly global companies, and have been for centuries. They have many similarities. They aim to attract new followers, like companies attracting new clients, they have the grandest structures in the world, and they all take one day out each week as their preferred day of worship, or their day off from work. The Muslims have Friday off, the Jews have Saturday, and the Christians take off Sunday. These days off generally dictate the weekly working cycle of us.

And the working week generally goes from Monday to Friday. Here in the UAE however, it goes from Sunday to Thursday. In reality however, the world is going global, and that means 24/7. You can buy and sell something, somewhere in the world on any given day. That is the religion of money.

Religion and money, as we know, are closely linked and religion dictates many business rules. The Muslims, the Jews and Christians in fact, have their very own monetary systems, based on their religious practices. We know them as Usury, and Shari’ah.

Usury is also known as fractional banking where the bank takes deposits and lends out against them. The trick here, or the practice, is to lend more than you have in deposit, and charge interest on the loan, thus creating income for the bank. For example, you have 10 dollars in deposit, but you lend 100 in loans. The fraction here is 1/10, or 10 percent. This has evolved into the creation of fiat money, which is based on the future obligation to pay. Today, this is expressed in terms of bank’s capital adequacy, or minimal capital requirements, and 8 percent is what a good solid bank should have in its capital on its balance sheet. Most do not, thanks to its accountants’ creative abilities, or fraud, the latter two being a major part of today’s financial crisis. The Jews and Christians practice Usury banking. They control it.

The Muslims practice Shari’ah banking.  In terms of banking, Shari’ah products must be asset backed. So strictly speaking, fiat money is a non-starter.  Rent replaces interest, and short selling, the practice of selling something you do not own, is forbidden. Usury and Shari’ah banking products have striking similarities. The products as they are known are stocks and bonds. When it comes to bonds, we are talking debt. So instead of having bonds, Shari’ah has Sukuks. They have convertible Sukuks, just like convertible bonds (bonds which can be converted into equity of the underlying company at the holder’s discretion).

Islam, Judaism and Christianity are all religions; different, but similar. Their connector is money. Usury and Shari’ah monetary systems are integrating. Ninety percent of Middle Eastern capital is based out of the UAE and Bahrain. Twenty years ago it was not. Large Usury banks have Shari’ah Sovereign Wealth funds as key investors, or anchor investors. As investors in their own right, Islamic Sovereign Wealth Funds are hugely diversified investors into the Usury system. And the Usury system is fully invested in many Islamic countries, the UAE being a case in point.

It is clear a new monetary system is evolving, a multi-currency, asset-backed system. We need to recognize the common ground between Usury and Shari’ah, to have a single, integrated global banking system.

Have some faith in the religion of money.

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Global Markets are anything but integrated. What if we had a paradigm shift in the way we think, the way we actually do business with each other, between nations. Balanced global trade can only occur if we have transparent, accessible, efficient markets, with standardized contracts and on a standardized platform of global exchange. We are on the cusp of achieving this, although most people cannot see it. Sam’s Exchange aims to give its readers a clearer view and a platform for discussion. Markets, trade and economics are in fact nothing more than the result of our thoughts and actions expressed in numbers, not the reverse.

Sam Barden is CEO of SBI Markets General Trading LLC, a Dubai-registered trading and advisory company. Barden, 39, has worked in the global financial markets for more than 17 years in Europe, Russia and the Middle East. He has advised and executed strategic transactions for both the government and private sector, in particular in energy and commodity markets, advising various energy producing nations on their strategic market developments and interaction. He holds a degree in economics and finance from Victoria University, Melbourne, Australia.

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