Series of Answers by the Eminent Scholar Ata Bin Khalil Abu Al-Rashtah, Amir of Hizb ut-Tahrir
To the questions of the visitors to his Facebook page (Political)
To Ahmed Saeed
Question:
Peace be upon you, and the mercy of Allah and His blessings...
As we know, America has a budget deficit reaching approximately 20 trillion dollars. My question has two parts:
Is it in debt? And to whom?
If so, what prevents it—given that it issues the Dollar and imposes it on the world even though it is not backed by gold and silver—from printing enough dollars to cover its deficit? May Allah reward you with goodness.
Answer:
Peace be upon you too, and the mercy of Allah and His blessings,
We have been asked a similar question before and answered it on 22 Jumada al-Ula 1430 AH - 16/05/2009 CE.
I repeat the question and answer for you:
(Question: The economic crisis continues to consume the entire world. America has massive debts to several countries, especially China. Can America not print dollars to pay off its debts to China, or do the International Monetary Fund (IMF) regulations prevent that?
Answer: America can print banknotes, with the approval of the IMF or secretly—and even openly—without its approval. It holds the actual influence in the Fund and can present false reasons and hide the truth, and the Fund will support it in that! However, printing banknotes in this manner leads to a decrease in the dollar's value, and consequently to inflation—meaning a rise in prices. Therefore, America does not resort to this unless it has a prevailing interest.
For instance, reports indicated that America printed between 2 trillion and 4 trillion during the oil speculation that caused prices to rise to nearly $150 per barrel (and America was not far from that speculation). America printed those bills to be able to buy the largest quantity of oil directly or indirectly to add to its reserves. It saw an interest in that which outweighed the rise in prices and the fall of the dollar. However, it stopped doing so at the beginning of the worsening global economic crisis, because the American markets could no longer bear further inflation due to the bankruptcy of many companies, rising debt, and the decrease in production and consumption...
America cannot now print banknotes without a corresponding increase in economic output, and this may continue for the foreseeable future.
But at any time America finds an interest in printing money without backing, it will do so. It is the only country whose currency controls a large percentage of other countries' reserves, in addition to its actual influence in the IMF.
Accordingly, if it were to print bills now to pay off its due debts, it would not be effective for two reasons:
First: Because its value would decrease. The more bills are offered, the lower their price becomes. Thus, an economic problem would occur between the creditor and the debtor. If the creditor is a major country like China, for example, this would affect the economic relations between the two countries and increase America's economic crisis beyond what it already is, especially since America and Europe want China to contribute to solving the crisis, not to abandon it.
Second: Increasing the supply of paper currency without economic backing will lead to an increase in the prices of goods within America, which is something the economic markets in America cannot bear...
For all this, it is not expected that America will print new banknotes without a corresponding increase in economic output, at least in the foreseeable future.
However, as we said, the possibility remains; if America finds a prevailing interest, whether political or economic, it will do so, driven by the spread of its dollar in the reserves of many countries and its actual influence in the IMF.
22 Jumada al-Ula 1430 AH - 16/05/2009 CE) End.
I hope this is sufficient.
Your brother, Ata Bin Khalil Abu Al-Rashtah
04 Rabi' al-Awwal 1440 AH 12/11/2018 CE
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