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3- Breaking away from the Gold Standard
The virtual economy would have not become a genuine trend, if the main currency (i.e. Dollar) remained linked to the gold standard as per the Bretton Woods Agreement in 1944. The agreement established a clear base of exchange into gold within a fluctuation rate of not more than (1%); it also set the bases on how to convert currencies into gold. The existence of such a law can not permit any State economy to appear much larger than its real size. That would cost its stockpile of gold to deplete. There will not be sufficient gold to match the fictitious numbers of the virtual economy. But when the US turned against the Bretton Woods Agreement (in the early 1970’s) and broke the link between the dollar and the gold standard, it freed its economy from the rein of the market prices without any restrictions. The US was not satisfied with breaking the linkage between the dollar and the gold, but it also broke the link between the value of its currency and the economy. It made it possible for money to grow more rapidly and at much higher rates than the growth of the economy. It was this separation between money and gold on one hand, and between money and economic growth on the other that enabled the existence of the virtual economy and its tendency to grow at an alarming rate. (Recently the Prime Minister of Britain Gordon Brown called for the reconstruction of the Bretton Woods agreement – Report on Business.com Oct. 14-2008)”
4- Conclusions
Is the presence of a virtual economy a matter of strength or weakness for the State? There is no doubt that the presence of a virtual economy leads to the emergence of the state as a powerful state with an ability to maneuver, threaten and impact other countries. A virtual economy and strength may allow one country to destroy the economies of other countries especially if those countries rely on a real economy or have less ability than the attacking state. America is still using the virtual economy to influence Europe, Japan, China and others. However, the virtual economy is like an Achilles’ heel for these States. While it appears as a point of strength, it also could be a potential point of destruction for the state. When a state is exposed to real crisis, whether caused by disasters or wars, the crisis would drain up what is equivalent of the real economy of that State which in turn may lead to the bankruptcy of the State economy.
Today, the major capitalist countries in Europe and the US have built their enormous economies on the basis of the virtual economy. Most importantly, these countries cannot go back to rebuilding a more realistic economy. The financial politics are based on usury and exorbitant wealth, and the steady increase of the money has become the only goal of their economic and financial policies. And from here we cannot imagine rebuilding the economy in the capitalist countries to become closer to reality, and therefore they will remain vulnerable to destruction and collapse. And Allah SWT says: “Those who devour usury will not stand except as stands one whom the Evil One by his touch hath driven to madness. That is because they say: “Trade is like usury,” but Allah hath permitted trade and forbidden usury. Those who after receiving direction from their Lord, desist, shall be pardoned for the past; their case is for Allah (to judge); but those who repeat (the offence) are Companions of the Fire; they will abide therein (forever). “(Quran Chapter 2; verse 275)
1. Bernanke Defends Bear Stearns Rescue, http://newsok.com/bernanke-defends-bear-stearns-rescue/article/3224837
2. http://virtual-economy
3. Daniel Gross, NEWSWEEK; Oct 11, 2008
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