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Islamic Dinar : 4.25 grams 22 K Gold

Dirham Islam : 2.975 grams Pure Silver
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Wednesday, March 19, 2008

The Therapy is Effective for Time Being...

This year the US Federal Reserve already tried to save the economy and its currency (US$) several times, take a look at my article, amongst others dated 12/1/06, 26/2/08 and 12/3/08.

The continuous rescue attempt can be viewed from two sides, first we can see how serious is the problem that the Dollar is facing so it needs to be rescued. Second, we can see that the US government is very serious to save its currency.

The first view was seen by the market in previous rescue attempts so the Fed’s efforts were not effective; while last night was different, the second view was seen by the market players therefore the Fed rate cut of 0.75 basis points succeeded in increasing the US Dollar and stock market at once.

In the money market, the US$ strengthens agains 15 european nation currencies, the Euro, from 1 Euro equals US$1.5831 the day before, to recover to US$ 1.5640 in yesterdays closing. In the stock market, the Fed’s latest rescue attempt succeeded in driving the stocks upward significantly. Dow Jones Industrial Average was up 3.51% from previous day, while the NYSE Composite Index was up by 3.97% from the day before.

What does this means for the price of gold and Dinar? The attractive stock market yesterday became the temporary competitor for the gold market. For the some of the players, the gold price is overpriced and was the time to take profit and used their fund to purchase stocks. Thus, the gold price declined to US$985.0/troy oz this morning.

The impact of this decline in global gold price is of course the Dinar in GeraiDinar also declined significantly, 2.25% from yesterday afternoon price of Rp 1,289,200 to Rp 1,260, 200.- this morning.

For every decline in price of stocks or gold, the market players can always have two views. For the decline of gold for instance, the market players can see that this decline will continue or just temporary and will go up again.

Those who view that this decline will continue is based on the reality that the gold price is too high according to them, because even this mornings gold price in US$ is still 51% higher than the gold price last year. Their opinion is that the gold price is too high and tend to decline.

On the other hand, I see that the price is still too low. The basis of my calculation is the real purchasing power of Dinar towards commodities like oil, etc. History has proven that the purchasing power of Dinar is the same in every era; so if it is used to purchase crude oil for example – the purchasing power of gold should be the same.

The steps taken by the Fed last night can only affect the money market and stock market, but the US$ purchasing power towards the majority of commodities like crude oil, nickel, or agriculture products, did not improve. The crude oil price for instance still lays at US$ 108.57/barrel this morning.

In my opinion, sooner or later the gold price will increase again and so will Dinar. But again, this is only my opinion; it can be wrong and don’t have to take my opinion. Only Allah the Most Knowledgeable.

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Sunday, March 16, 2008

It Can Be That The Fitrah Solution Makes The Stomach To Ache in The Beginning…

I took the title of this article from Rasool S.A.W Hadits, narrated by Abu Sa’id Al- Kudri: A man comes to Rasool S.A.W and said “My brother is having a stomach ache” then Rasool S.A.W said to that man. “Tell him to drink honey”, the man cam back to Rasool S.A.W and the Prophet said again “Tell him to drink honey”, then the man came back again for the third time and Rasool still says “Tell him to drink honey”, then the man came back and said “Rasool S.A.W, I’ve already did it” then Rasool S.A.W says “Allah has conveyed the truth, but your brother’s stomach is lying, tell him to drink honey”. Then the man asks his brother to drink honey again and he was well.
That Hadits is about honey and medication, but we can learn from a lesson embedded in that Hadits, which is… Allah has conveyed the truth, but the situation that we are facing is fooling us….

Last week was a miserable week for the World economy. A week where the US government applied a high dose therapy to save the Dollar (refer to my article dated 12/3/08 ), but it was proven to fail in the next two days (refer to my article dated 14/3/08). This failure is seen again today, when I am writing this article, the Sydney gold market has run for two hours, and in the first two hours the gold price already increased so high.
This failure is admitted by the President of United State himself, George W Bush, quoted from The New York Times dated 14/03/2008 titled, Bush Acknowledges Economic Troubles. In his speech in the Economic Club of New York, Bush said that “the economy is having a though time….If you ever get stuck in a situation like that, you know it’s important not to overcorrect, If you overcorrect, you end up in a ditch.”

If I’m writing and commenting a lot on the US economy and its Dollar, it’s not because I like to or vice versa with US, it is just the reality on the world we live in right now.

The ups and down of the Rupiah, the ups and downs of the Indonesian Stock Exchange is affected more by what is happening in the US$ than the decisions made by the Indonesian monetary authorities.
If the US is in a ditch… so are we; and we were reminded by Rasool S.A.W 1400 years ago with his hadits, “Step by step you followed previous people actions. Until if, they fall in to an Iguana hole, then you follow them into it”. One then asked, “Oh Rasool, are you referring to the Christians and Jews?” Rasool replied “Who else?”
So now we are in a ditch or Iguana’s hole (because Iguanas does live in a ditch!)…because we followed their currency and monetary system..
Then what is the solution? Lets return the Fitrah Islamic solution, the fair Dinar monetary system, usury free capital, and get rid of speculative economic practices, full of Gharar and Maisir…

But we may experience a stomach ache first like the Hadits above…its fine as long as we will heal.
This solution is not just for Islam people; other people that truly seeks for solutions will find the same solution. Look at the GATA proposal to change the US$ with gold and silver that I’ve quoted in my article dated 12 December 2007 in my old blog. Wallahu A’lam.

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