Inflation Solution Islamic Economic Perspective

Islamic banking finance economy

by islamicbankingfinanceeconomy.blogspot.com

Inflation Solution Islamic Economic Perspective


In theory, inflation can not be removed and stopped, but the inflation rate could be reduced in such a way. Islam is actually also a solution to curb inflation as it has been raised by leaders of classical Islamic economics. For example, al-Ghazali (1058-1111), said the government has the obligation to create stability in the value of money. In this al-Ghazali allow the use of money that is not from precious metals such as dinar and dirham, but on condition that the government must maintain the stability of the exchange rate and the government to make sure there was no speculation in the form of money trading.

Ibn Taymiyyah (1263-1328) also has a solution to this inflation. He was very opposed to the decrease in the value of currency and excessive money printing. He believes the government should print money must be in accordance with the fair value of transactions of society, not create injustice against them. This means that Ibn Taymiyyah emphasized that printing money should be balanced with trasnsaksi the real sector. Money should be printed only at the minimum level needed to transact and the fractions which have a smaller nominal value.

In addition, he also stated that the intrinsic value of the currency must be in accordance with people's purchasing power. The creation of a currency with a face value greater than the intrinsic value will cause a decline in currency values ​​and will bring inflation. This means that as a result of the low intrinsic value of money to be one of inflation. Likewise counterfeiting of currency and currency trading in value ibn Taymiyyah as forms of injustice against society and against the public interest.