Malaysian Province Moves To Gold And Silver-Based Currency In "Main Islamic Event Of The Last 100 Years"

Tyler Durden's picture

More world governments are "just saying no" to the ponzi. Last week, the Malaysian government of Kelantan "said it was introducing a new monetary system featuring standardised
gold and silver coins
based on the traditional dinar and dirham coins
once used by the Ottoman Empire." And as everyone who has taken game theory 101 knows, the first defector wins the most, while the last one is left with nothing. A small province in Malaysia just made the critical first defection. The question now is who will be next... and next...and next.

The FT reports:

Nik Abdul Aziz, the state’s chief minister, spoke in visionary terms of an economy in which state civil servants would be paid in the new sharia currency, and the poor would be protected against inflation by the intrinsic value of the precious metals used to produce it.

About 1,000 shops and restaurants in the state have said they will accept the new currency, which follows an earlier issue of gold dinars in 2006. The coins comply with traditional Islamic teaching on the use of coins with intrinsic value as a medium of exchange, rather than paper money.

While having prior experience with Sharia-compliant debt issuance, Zero Hedge staff was unaware that it is against Islamic beliefs to endlessly dilute linen "money" in the way every central bank is doing now. One learns something new every day.

The coins, minted to a specified weight and purity, are available in a range of denominations from half a dinar to eight dinars, and from one dirham to 20. At the current price of gold, one dinar is worth M$581($183) and one dirham is valued at M$13 ($5).

The launch was lauded by the Muamalah Council, a campaigning organisation that seeks the peaceful introduction of an Islamist social and economic system. The council said it was “the main Islamic event of the last 100 years”.

This whole Sharia situation is troublesome: if the Islamic world, in retaliation for a possible Iran invasion or otherwise, decides to issue a fatwa against the usage of non-Sharia compliant forms of monetary exchange, watch what happens as the developed world wilts overnight. With the bulk of world commodity extraction arising from the Muslim crescent, and wholesale ban on using USD and EUR, a move already underway in Iran, would make for the second coming of von Havenstein very, very difficult.

Yet the Kelantan move may have some stumbling blocks prior to full implementation:

The chief minister also admitted that there were “many technicalities” to be overcome before the scheme could be significantly extended. He did not explain why a switch to gold and silver coins would protect against fluctuations in the value of money, given that the US dollar price of gold has risen more than five fold in a decade.

In spite of its small scale, the scheme may pay political dividends for the state government, which is run by PAS, an Islamist party that is in opposition in the national parliament. PAS is locked in a ceaseless struggle for control of Kelantan with the United Malays National Organisation, the main party in the federal government coalition, which also claims to represent Malay Muslims, the largest population group in Malaysia.

Burnishing its Islamic credentials is unlikely to do PAS any harm. The only certain winner, though, is the gold market. Although small, the scheme will help to increase demand, pushing up prices even further.

And for those who think that the move is a regional hoax that is not being taken seriously by anyone, the Malaysian National News Agency Bernama notes that the repercussions of the "move to gold-standard" decision has reached the very top:

Only Bank Negara Malaysia (BNM) can issue currency that is legal tender, said Prime Minister Datuk Seri Najib Tun Razak.

Unlike the US, where the Coinage Act of 1965 gives citizens the right to use refuse the usage of cash in transactions (and thus opt in for a different form of currency), Malaysia is not quite as liberal:

Commenting on the Kelantan government's introduction of gold dinar and
silver dirham as an alternative currency in the state, Najib said BNM
would be looking into the matter to see if any laws had been broken.

"Follow the laws of the country, only Bank Negara is authorised to
issue currency that is legal tender," he told reporters after handing
over Ramadan aid to mosque and surau from the Pekan parliamentary
constituency here Saturday.

On Thursday, when launching the Syariah currency, Kelantan Menteri
Besar Datuk Nik Abdul Aziz Nik Mat had said the state would strive to
expand the use of the gold dinar and silver dirham in all transactions,
including paying civil servants' remuneration.

However, he said there were still many technicalities that had to be
addressed by the state government over the use of the currency.

The New Straits Times in its front page today said BNM had stated that
only it had the right under the law to issue currency in Malaysia.

If there is one thing we are sure about, is that any time the government steps in before a decision that has been taken by a clear majority, with the purpose of making life easier, the outcome is usually lethal, especially in volatile Islamic countries. Whether the transition from paper to a hard-backed currency will be the first spark in social upheavals as government slowly realize all their printer-induced leverage is slipping away, is still unknown. What is, however, is that many more will soon follow Kelantan's lead to abolish an endlessly dilutable thought experiment, which has no intrinsic value, and whose purchasing power is decimated by the minute, as hundreds of billions in new money are printed every month by the world's central banks. Yet perhaps, this is precisely the example that is needed for the world to realize that someone is actually willing to do more than just talk pointlessly about the transition to a gold standard, and actually is willing to risk enough by following through with it. What happens next is Ben Bernanke's worst nightmare.

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snowball777's picture

One dirham, one dirham foot-looonngggg (at least until gold is $50k/troy and the shitty sandwich costs $208).

<hurts himself attempt to self-pat for previously predicting an islamic gold currency this year>


greyghost's picture

sharia this...sharia that! now i know why all the talking heads on t.v. have been using the "sharia" word non stop. it ain't about stoning someone...they don't give a rats ass about someone stoned to death. BUT bring up sharia money, no debt, no interest and lots of gold.....well i can hear them now...

anything sharia will be tainted by the media as "you will be stoned to death by gold coins". the media is becoming easy to see thru.

MarketTruth's picture

Maybe not stoned to death by coins, though the USA is hell bent on keeping the petro-dollar. When Saddam went off the petro-dollar, not long thereafter.... and the USA is still covering their assets on Iraq with all those (unfound) WMDs.

Iran has now also gone off the petro-dollar...

Gold and silver may be a great first step that might not draw too much attention, yet when you sell oil and decide to avoid the Federal Reserve debit note (US dollar)... wars break out due to those darn 'terrorists'.



SWRichmond's picture

Yes.  It's almost easy to predict that the West will, in short order, trace Al-Qaeda activity to this small province and start drone flyovers, airstrikes, and then dispatch a few hundred thousand mercs to pacify the area.

still kicking's picture

Our men and women are not mercs you fucking jackass.  They have been duped the same way the rest of the world has, they think they are fighting for something only to realize too late that they are pawns in a political game.  You owe them an apology.'s picture

But the "contractors" are mercenaries. Lots of them over there.

still kicking's picture

when he says "a few hundred thousand" I am pretty sure we aren't talking contractors.  I wouldn't deny or defend any of those Blackwater or KBR fucks.

SWRichmond's picture

Few seem to understand the scope of the "contractor" effort.

Reducing the number of contractors excludes the several hundred thousand in Iraq and Afghanistan. And the Pentagon admits it is not sure how many contractors it actually has.

I want the troops brought home immediately, and the contractors to have their passports revoked, be declared "stateless persons" and left there.

angela5503's picture

 Okay pawn, please accept my fucking apology.

still kicking's picture

Don't apologize to me fuckwad, I have never served, but I have watched many friends and family go off to war, and feel I have to right to defend them.

SWRichmond's picture

I want to be clear, and I apologize if I wasn't: I mean the merc contractors.  In contrast, our men and women in uniform who have sworn an oath to die for us are our most precious national resource, one that must only be risked and expended when there is absolutely no other choice and when the clock has run out.  Neither of those prerequisites was met in Iraq.  We have no business there; I want them brought home and out of harm's way now, today.  Afghanistan has been dragged out into an endless occupation; I want out of there, too.

still kicking's picture

Then you have my wholehearted apology.  I overreacted, but I get so very tired of the people that blame our brothers, sisters, children, and neighbors of war mongering, as you so aptly stated those people are doing a job to defend us.  The powers that be have abused that resource to no end and it sickens me that they skate away clean while our loved ones come back in a box or maimed.

midtowng's picture

That's what I was thinking. When do we start bombing Malaysia?

zevulon's picture

gold shmold. i've seen buckets of gold melted into bars, i've been around gold my whole life. 

the defining attribute of advanced monetary societies as that they learn to incorporate metals and other non-wasting assets (land) as only a piece of the basic wealth reserve. not all of it. 


yes gold may go to the moon. and yes, the dollar may default , as has the currency of many countries. but guess what. you don't see too many gold backed curriencies these days, default or none. and that's because we are not zimbabwe, default or not. 

there is a value, immeasurable as it may seem, that can be attributed to our culture, our beauracracy, our (ostensibly corrupted) legal/political system that actually expresses itself beyond any possible transition towards a stable monetary base. and that value, those values, will preclude the existance of a fully prescious metal backed currency. that is to say , the golden rule no longer holds the force it once did. because whoever holds the gold, only makes some of the rules. not all of them. 

faustian bargain's picture

sez you.

We don't see too many gold backed currencies these days because they are bad for the expansionary ambitions of central governments, and they limit the profits of big banks who like to influence and control governments. Perhaps that is the immeasurable value to which you refer.

Bringin It's picture

I'm with the monkey on this one.  End the Fed.  BoooYaaah for Kelantan!

ColonelCooper's picture


I think that this move to metal coins is more importantin what they're SAYING than actually doing.

1. It's additional Sharia sabre rattling.  Unlike the poster a couple of comments above me, I'm a little more concerned about people getting stoned to death because some 4th century Mullah deemed it "judicious".  I think it's hard to blame the media for sensationalizing the issue. (for once) They bury you to the waist and fucking pelt you with rocks til you die.  Cool.  Cause some poor bitch looked sideways at a dude who wasn't one of her child molesting relatives?  Cool.

2.  They just told the ponzi to get fucked in the name of Islam.  If the rest of the islamic world did the same....That really would be cool. 

Stormdancer's picture

Amazing!  Around gold all your life and still didn't learn anything? I can see why some need to believe in reincarnation :)

Hephasteus's picture

I met a person that claimed to be 4 billion years old and a very old soul. I told her that it was very nice of them to have such a slow growth plan for her severe retardation and that it hardly shows in all the stupid things she claimed to understand.

Uncle Remus's picture

She didn't also claim to be a librarian too did she?

Sean7k's picture

All you have to know is this: you don't have to force someone to accept good money (legal tender laws). John Adams knew it. We know it. Want to know why the FED produces paper money? The Treasury is not allowed to  by law. Coins (silver and gold), but not paper.

Values and bureaucracy have no intrinsic value- otherwise you could sell them. Government is debt and debt is a violent act against the people. An inefficient act at that.

Go Malaysia, go sharia money law. End the FED. End tyranny once and for always.

knukles's picture

Gresham's Law'll put paid to this experiment rather quickly.  Note that use of the new precious metals based currency is volitional, existing along side fiat.

Everybody'll attempt to take the precious in payment and remit change in fiat, thereby hoarding the quality item.  Reality of the moment, human nature.

Now, if no fiat existed alongside the precious, then it's a different story, albeit debasement occurs.  Still, better than Ponzi Promissory (IOU's) issued at behest of the Power Elite for Basic Bread and Circus Maintenance.

Mercury's picture

The precious....we wants it!

tmosley's picture

Gresham's Law only applies when the price of the commodity in question is fixed.  That does not seem to be the case here.  This is a separate, floating currency, and is no more likely to leave circulation than Swiss Francs.

Snidley Whipsnae's picture

Think of the Numismats around the world that will pay a premium to add these new gold and silver coins to their collections.

This small Malaysian provence will probably be unable to keep up with orders from abroad, much less stamp enough coins for the local economy...assuming they will accept foreign orders.

tmosley's picture

If enough capital flows in, they can produce any amount, until the whole world runs out of gold.

Again, if the premiums attached to these coins get to be too large, gold will flow there in search of higher returns in terms of paper.  That's all there is to it.  This is nothing but positive.

virgule's picture

Before you spend 20 minutes reading all the posts below, as of Wednesday evening, the kelantan government office selling coins...has run out of gold coins!

They apparently sold a miserable USD-equivalent 50K and then "faced technical difficulties....No one is using the coins for payment, buyers are keeping them as investment".

tpberg7's picture

Gold Currency Bitchez!

Cognitive Dissonance's picture

Gold and other hard assets would act like the regulator looking over their shoulder. They'd have a destabilizing effect upon the outright theft of our countries wealth.

Regarding the headline of this article.

Malaysian Province Moves To Gold And Silver-Based Currency In "Main Islamic Event Of The Last 100 Years"

$20 says that the USA will be threatening this Malaysian Province with military and economic consequences within 12 months. Who wants a piece?

Bringin It's picture

I can not take your money.  I agree. 

The issues over the border are ripe for exploitation, unfortunately.

On the other hand, maybe NetanYahoo will bomb Iran by Monday and this will be all moot.

Cognitive Dissonance's picture

I can not take your money.  I agree. 

Thanks because I wouldn't know how to actually "settle" the bet on an completely anonymous blog while still keeping my ID hidden. You saved my ass. :>)

cossack55's picture

Can I get my winnings in Dinars?

Cognitive Dissonance's picture

Sure, just as long as we wait until the dollar has been so completely debased that it's worth much less than it is now. Then we shall see how many Dinars the Wiemar dollar buys.

Rotwang's picture

Check into something called the "Loom" payment systems.

Actual implementations might exist.

Dismal Scientist's picture

I was last in Malaysia some 20 years ago. I seem to remember it was basically the Chinese ethnic minority who did most of the work, and currently represent some 25% or so of the total population. Wonder what Beijing would think of a direct threat...

Snidley Whipsnae's picture

Perhaps this small experimental move to a gold currency was instigated by Bejing? Sun Tsu would approve.


Max Hunter's picture

'$20 says that the USA will be threatening this Malaysian Province with military and economic consequences within 12 months. Who wants a piece?'

I was thinking the same thing.. This is bad for business..

I'm curious as to how they will incrementally demonize them until they are full blown savages that can only be saved by our bombs.. LOL

flacon's picture

HONEST MONEY FOR HUMANITY! If the United Nations cares about mankind this ought to be their slogan. But of course we all know that the U.N. is all about CONTROL and OPPRESSION of mankind. 

Hephasteus's picture

Ya but they are doing it from the moral high ground of the biggest lying stealing, opressing, cheating bastards on the planet so of course it will work.

They are way better tranformation symbols than lady gaga. Which is why it's so fucking odd you can't hear nothing but stupid crap about her on MSM. They need to roll out mother teresa but I guess the xanadu treatement didn't stick.

NoVolumeMeltup's picture

Where did you see Britain being referenced in the article?

ZeroPower's picture

Non-event. Barely a country state, and the wiki entry for it didnt even look one bit interesting.

snowball777's picture

A child, however, who had no important job and could only see things as his eyes showed them to him, went up to the carriage.

"The Emperor is naked," he said.

Hephasteus's picture

Oops. Everybody done and went and put all their manufacturing plants in the wrong place.

Fish Gone Bad's picture

Perhaps a new money game is afoot?  Now to really fuck things up, someone has to introduce some wild cards, like drugs and weapons.  Hmmmmm who has those all around the place (hint: )?

FEDbuster's picture

What started as a pinhole leak in the giant dam ......

digalert's picture

I know I read in that article "feral" government.

Hephasteus's picture

They mostly come out at night. Mostly.