Fiat Money Essay

The Fiat Money

The Fiat money are always the biggest issues to the Muslims scholars since 12th century due to the questionable intrinsic value. In the past, such issues have not being arise because the practice of such monetary system were not exists up until the 19th century, where the gold and silver were started to be replace by Fiat money currencies (paper money).

In the early 9th to 17th centuries, Muslim scholars such as Al-Ghazzali, Ibn Taimiyyah and Ibn Khaldun had discussed the media for exchange of gold and silver with conventional value, to which the counting of the outdated weighing became as a legally valid method and money become numérarie; that is a basic standard by which values are measured as gold in monetary system). However,

Suftaja is a letter of credit made out by a money changer which a co-operating money changer at the destination of the journey, would convert into coins. In the medieval Islamic period, the suftaja became the wide used medium of exchange in everyday life in a few countries such as Sudan, Egypt, Baghdad, Isfahan and Delhi; thus the form the currency can be seen as the example for the fiat money today. However, the different to the fiat currencies, suftajas were considered as an exchangeable money; the placement for the physical gold and silver, in which the paper money itself held the representative of the precious

Firstly, it is viewed as bond on the deposit of gold silver which held by several ulama, as historically the connection between the gold and silver with paper money through the relation of debt between Central Bank and the money holders is convincing. The Central Bank is required for the exchange of debts and the full back up of the currency issued.

Secondly, it is view as suftaja, the substitution for the gold and silver values, to which the paper money itself have the characteristics representative of the physical precious metal as the Islamic Development Bank viewed that the currency is seen as the metal it is based on. However, the equality of the paper money with gold and silver can only be acceptable if it entirely backed up by the precious metals, to which the Central Bank have to holds a fully reserve of it in order for the money justification to be