Question:
1- In light of what was mentioned in the booklet "Economic Crises," please comment on the policy of issuing currency by the State. If huge quantities of silver or gold are discovered in mines under State control, is the State responsible for extracting and issuing them as currency? And can the State choose not to extract gold and silver because it does not want to destabilize the exchange rate?
2- How will the Khilafah practically be able to control the gold and silver standard? For example, in a country where gold and silver are scarce, how will the Khilafah manage this issue? Will a new currency backed by gold and silver be issued alongside the current paper currency? Or will the paper currency be backed by other assets until enough gold and silver are discovered to fully cover the currency with gold and silver?
Answer:
1- The extraction of gold and silver must be undertaken by the State, not only because the Shari’ah currency is based on it, but because they are among the minerals found underground which constitute public property (milkiyah ‘ammah).
The State extracts gold according to its monetary and consumption needs, and the Shari’ah rulings (ahkam shar'iyyah) create balance through the following factors:
The currency is gold and silver... price-fixing (tas’eer) is prohibited... if the price rises in one of the provinces (wilayat) of the State, the State must return it to its normal level by bringing the commodity from other provinces and increasing its availability in the markets as a matter of caring for the affairs (ri’ayat ash-shu’un)... hoarding (ihtikar) is prohibited... the State’s need for manufacturing as a matter of necessity... etc.
All these factors automatically regulate the process of extracting gold and silver; thus, there will be no inflation in prices, because the "gold and silver" monetary system makes the margin of price increase almost non-existent due to its scarcity. It was stated in the "Economic Crises" booklet: "This system achieved stability and fixed the value of the monetary unit on both the domestic and international levels alike. The proof of this is that the price index in gold in 1910 was at approximately the same level as it was in 1890." End quote.
2- As for the assumption that the State will be established in a country where gold and silver are scarce, this is an unrealistic assumption. The Muslim lands, which are the likely locations for the establishment of the State, contain many gold and silver mines. They also contain commodities that other countries need, such as oil and gas, which the State will not sell to the world except for gold and silver or through bartered goods. Furthermore, we have paper balances in the banks of those countries, which we can retrieve in exchange for goods... Moreover, our lands possess self-sufficiency in terms of basic commodities, so their boycotts—should they occur—will not affect us; rather, the impact on them would be harder and stronger... Likewise, our banks contain hard currencies (Euro, Dollar, Sterling), and we use these for bartering for goods and the like.
You may be aware that the Hizb has requested from the regions a statistical study of the country's reserves of gold, silver, and other minerals, as well as the gold and silver present in central banks and hard currencies... It has become clear to us that some Muslim lands have been endowed by Allah with these riches in abundant quantities...
So do not worry, be reassured, and pray to Allah (swt) to hasten the victory, and He, the Mighty and Sublime, is Powerful and Exalted in Might.