The Market Oracle reports that New Gulf currency 'Khaleeji' poised to be Gold backed to remove 'Riba'.
(emphasis mine) [my comment]
New Gulf currency 'Khaleeji' poised to be Gold backed to remove 'Riba'
Feb 17, 2009 - 07:35 PM
Again, bad news about this week and even those of us who made all the right moves early on can not help but feel anxious about what seems to come next: act two of the global financial and thus economic meltdown. This is indeed not the time for a little 'I-told-you-so' victory dance. Yes, gold as well as silver are storming to new heights.
Yes, global trade collapses. Yes, Asian economies are in free fall as a result. Yes, Japan's economy is crashing into an economic depression. And yes again, global stock markets seem to inevitably march forward and over the edge of a precipice, while eastern European countries, the UK as well as Switzerland are following the nosedive of the Icelandic dodo falcon. Once the dust has settled we may have very well witnessed the worst recession in 100 years. On the background of this picture, news of GM considering to file for chapter 11 and China continuing to prep the world for a departure from US bonds comes almost as an afterthought. Everything points to something big happening real soon now and it smells like panic is taking over. Nothing new in the west nor the east - however watch the middle. The middle east to be specific.
There is something that is not only new, but something that for the most part has been overlooked by the majority of the news outlets that at least I use to frequent [He must not frequent my blog]. When GCC leaders concluded their 29th annual summit meeting in Muscat, Oman at the 31st of Dec 2008 with a final approval for the creation of a single currency for the six-nation economic bloc, I certainly did not hear about it. Meet the Khaleeji. It is the upcoming common currency of the Gulf Cooperation Council (GCC) scheduled to go live in 2010. In light of the worsening financial crisis earlier worries of a delay until 2015 have apparently been dispelled.
That I have not heard about the Khaleeji until about a week ago is surprising to me for two reasons. Firstly, the common currency for the GCC has apparently been mulled since at least 2002 by the IMF giving more than enough time for the word to spread. Secondly - and here is when it becomes interesting: speculation is about for the GCC currency to be backed by gold. And why shouldn't it? Not only has the introduction of a then still called ' Islamic Gold Dinar' as a global currency been suggested since early 2001. No, in addition a group of Saudi businessmen has purchased gold to the tune of $3.5 Billion in an off market transaction in November 2008. Add to that impressions of the world renowned Dubai Gold Souk and I would be very surprised if gold does not at least become a major component in the basket of goods lending punch to the new currency.
But there is more. The Arabic word 'khaleeji' (????? ) stands for 'of the gulf' which would explain the 'G' symbol with the by now customary central bar. I however favor another explanation: just as the '$' symbol once so aptly stood for 'unit of silver' why can't the Khaleeji be understood as a 'unit of gold'? The most convincing argument for such an interpretation is that having a gold/silver backed currency is considered the final leg to remove Riba (??? 'interest' or 'usury') from the financial system, which is forbidden arcording to Islamic economic jurisprudence.
My reaction: Although I already reported about the Khaleeji on January 2 in my entry *****Gulf Arab Nations Break Their Dollar Pegs*****, I felt it was worth mentioning again for those who might have missed the story. Here is a quick recap of the important points about the GCC's proposed common currency:
1) On December 31st 2008, GCC (Gulf Cooperation Council) leaders concluded their 29th annual summit meeting in Muscat, Oman with a final approval for the creation of a single currency for the six-nation economic bloc, still targeted for 2010.
2) The currency, named the Khaleeji (Arabic: ?????), will be sole legal tender in Saudi Arabia, Kuwait, Bahrain, Qatar, and the United Arab Emirates.
3) The term 'Khaleeji' is Arabic for "of the gulf".
4) The Khaleeji project is gathering pace, with Saudi Arabia's King Abdullah directing the GCC economic integration committees to speed up their work and complete the whole exercise by September 2009.
6) Speculation is that the Khaleeji will be backed by gold.
7) In November 2008, a group of Saudi businessmen allegedly bought $3.5 billion worth of gold, believed to be the largest ever single transaction for the precious metal.
8) Gulf countries are keen to break away from the link with the US dollar because it ties them to inappropriate monetary policies that exaggerate the boom-to-bust cycle in their economies.
Conclusion: I feel the same way about the Khaleeji today as I did back in January:
My reaction: Wow, Arab countries have announced that in 2010 they will stop selling oil for U
S dollars. Even more interesting is the possibility of the Khaleeji being backed by gold. Could this foreshadow a move a move back to the gold standard?
In any case, this development, together with China making the Yuan an international currency, effectively end the dollar's role as the world's reserve currency. Soon, the US will be buying its oil in gold/Khaleeji and its consumer goods in yuan. The US dollar is now living on borrowed time.
Think about it: If you can't buy consumer goods or oil with the dollar, what good is it as a reserve currency?