As with the impact of Commodity Money

Beginning of the functions of money are as a medium of exchange (medium of exchange) and the unit value (unit of account). Then, in the 17-18 century, the capitalist adds another function of money as a store of value (store of value), which later evolved into the demand for money motive Speculation that alter the function of money as a commodity trading.

Much earlier, Imam al-Ghazali in the 11-12 century, has warned that "money is like imprisoning Trading functions of money, if the money being traded, undoubtedly stay little money that can serve as money." In the Islamic concept, money is not included in the utility function because of the benefits that we get the money instead of directly, but rather from its function as an intermediary to convert an item into another item. The impact of changes in the function of money as a medium of exchange and unit value of becoming a commodity we can feel now, which is known as the theory of "Economic Bubble Gum."

But actually, these impacts have been reminded by Ibn Tamiyah who was born in the reign of the Mamluk Bani year 1263. Ibn Tamiyah in his book "Majmu 'Fatwa of Shaykh al-Islam) delivered an important warning about the five items as commodity money, ie:
1. Trade money will trigger inflation;
2. The loss of confidence in the stability of the currency value will discourage people to do long-term contracts, and oppressing class income earners remain as an employee / employees;
3. Domestic trade will decline because of concerns the stability of the value of money;
4. International trade will decline;
5. Precious metals (gold & silver) which had previously been intrinstik value of the currency will flow out of the country.

In the 14th century, Ibn Khaldun in the book "Prolegomena" explains that the wealth of a country is not determined by the amount of money in the country, but is determined by the level of production and the country's balance of payments is positive. If a country prints money as much as possible, but it is not a reflection of the rapid growth in the production sector, hence the abundance of money has no value. The amount of money that is not in accordance with the value of the resulting production of a country known to cause inflation and bubble gum economics, which eventually led to a multi function crisis. Driver of a country's development is the production sector, not the monetary sector, because the production sector will provide employment, increase labor income, and generate demand (market) to other production.

For that, let us turn to the actual function of the money that has been executed in the Islamic concept, ie, as a means of exchange and unit of value, not as a commodity, and realized that the real money is just as intermediaries to make an item to another item.


Author: Merza GAMAL (Islamic Socio-Economic Observer)