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Very good question, I guess we can start by saying that with inflation, stocks and property goes up a significant amount, and as a result, the banks make more money when they do their investing, and stocks like every other bank do, the only advantage they have is that they only invest in halal stocks.
Maybe we can discuss, how normal banks address inflation and see if Islamic banks can also do the same. Why do we have to do anything differently? (Besides the haram stuff obv)
I have heard that Islamic banking is growing rapidly and people are saying islamic banking is the antidote to inflation with their methods such as sukuk and not going for high risk deals and such. I wonder how true this is ?
What’s the inflation problem? Is inflation Islamically problematic?
As I understand of the current financial system, inflation isn’t a problem in and of itself. High inflation is a problem. No inflation would also be a problem.
A little bit of inflation is beneficial to the economy because it encourages spending
I can expand further on this if need be
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This is kind of why ideally central banks try to keep inflation at a 1-3% range and never 0
I don’t even know, I think its a general problem lol
I can see why spending more is encouraged, but surely, inflation isn’t good? The struggle is real!!
Any bank that keeps it’s customers wealth in currency does nothing to resolve the issue of inflation.
When gold is the store of value inflation can’t really happen. If you use a fiat currency, then with a gold-backed economy, your problem will be deflation. Inflation is correctly linked to a debt-based economy. If we had an asset-based store of value and a non-debt based economy, then unless assets increase we wouldn’t experience inflation.
Oh wow I didn’t know that. So does that mean that as Muslims we’re anti inflation?
Also how would this work with Waheds upcoming bank account? Given it’s backed by gold which is deflationary and we live in an inflationary system would Muslims using this offering not be getting the short end of the stick then?
High prices is clearly problematic on a macro Level
Essentially with high prices often you’ll see the less wealthy suffer because common goods see price rises
However those who own businesses see a rise in their revenues
Agreed, especially for those who are really struggling, like us!
Sukuk , often compared to bonds, are used to secure financing for large projects. While a bond in the Western sense is levied for the funds required, a sukuk is guaranteed by ownership of actual goods, such as the equipment,
Turkey and Jordan may be worth looking into as practical examples of trying to implement Islamic finance
We’re not anti-inflation; it just means our system is better protected against it. If you look at Musa Mensa, due to his immense wealth he collapsed economies due to his charitable efforts by handing out gold. Due to the surplus of gold, there was inflation