What Is Money

I thought about gold as money after reading a king buys something with 10,000 gold coins in an ancient tale. So, is that what money was? If so, since no gold metal = no gold coins - the money must have been limited to the amount of gold metal. The amount of money that can be made is limited.


 1  Free Flow Of Money

Since the money is limited, the way for the financial system to work is to have the money free flow around in society. E.g.: when you get money, you either pay, buy or donate.  So the money goes to someone else, but you get services, goods or charities in return. These services, goods or charities - are what fulfills your needs - NOT the money.

You may save a bit. But as long as people do not hoard the money, the free flow may reach everyone. والذين إذا أنفقوا لم يسرفوا ولم يقتروا وكان بين ذلك قواما [Q25:67 | QA Finance] وإيتاء الزكاة [Q24:37 | QA Zakat] الحمد لله


 2  Fair Lending

Say you lend 1 gold coin. You cannot account 2 gold coins in your book (1 debt, 1 usury) - as that adds an extra gold coin that does not exist. Simply put - imagine, if the nation has 100,000 gold coins owned by just one person, & he lent it all to you to be returned 200,000 - where are you going to get another 100,000 coins?

That extra coins DOES NOT EXIST.

So no usury. لا تأكلوا الربا [Q3:130] فلا يربو [Q30:39] بحرب من الله [Q2:278-279 | QA Debt]


 3  Price By Demand

In the modern system, prices are set by demand. Say, less wheat harvest causes higher demand for it. So the ones who can pay more money gets the bread. The ones who can't, have nothing. But is this fair? The rich will have bread, and the poor will be hungry. ثم لتسألن يومئذ عن النعيم [Q102:8]

So remain the price & share the bread. وفي أموالهم حق للسائل والمحروم [Q51:19] أو إطعام في يوم ذي مسغبة [Q90:14] This way, burdens will be held collectively, and it is not grieving a section of society.

Maybe Allah SWT will open other ways - more corn, potato, rice harvest? ماشاء الله

& traders can't reduce supplies to increase demand & price as well.
لا يحتكر إلا خاطئ [AD23.3440] النهي عن النجش [AN44.57]


 4  Price Inflation By Time

In the modern system, prices increase by time. Say:
Then: 1 loaf of bread = $0.10
Now: 1 loaf of bread = $1.00

Why is that? See how with $1, you can buy 10 loaves back then, but now you can only buy 1. Even if you have $9 now, you still buy less bread than before. So even with more money, YOU ARE POORER. If this goes on, one day you may need $100 to buy a loaf of bread. The money devalues so much, $1 can't buy anything it is worthless. | Currency Value

Increasing prices may seem to increase wealth. But the reality is, it devalues money. The less money you need to buy goods, the more powerful the money. ما أحد أكثر من الربا إلا كان عاقبة أمره إلى قلة [IM3.12.2279]


 5  Investment & Share Price

OK now you wanna invest in business. The nature is - it can profit, it can lose - there is simply no guarantee, so a rate of return cannot be promised. Just work & pray the business prospers. الحمد لله If you expect a full return (no more no less), that money is a loan. If you expect a rate of return like a loan interest - that could be usury.

OK now lets invest. I'm a beginner... The way I think of it is - when a company offers 1,000 unit of shares at $1 each - they get $1,000 capital & investors get shares in the company.

Only when the company profits, say $200, can it reinvest in growth & give dividends:
• $10 to Mr A who owns 100 units (10% shares)
• $30 to Ms B who owns 300 units (30% shares)
• $60 to you who owns 600 units (60% shares)

Then, the great mystery to me is, why does share prices go up & down in the stock market?

Say a company initial offering is 800 unit of shares at $1 each real capital = $800	With demand the company offers another 800 unit of shares at $2 each real capital = $800 + $1,600 = $2,400
With higher share price of $2 an investor sold his $100 shares • he gets $200 (profits $100) * real capital = $2,400 - $200 = $2,200 ** if everyone sells, real capital = — $800 * do other investor take these units ** IF real capital refunds these units	When share price falls back to $1 an investor sold his $200 shares • he gets $100 (loses $100) * real capital = $2,200 - $100 = $2,100 ** if everyone sells, real capital = $700 there is still capital at lower share price

So imagine if the share price skyrocket from $1 to $10,000 per unit - if you sell 100 units which you paid for only $100, you are a millionaire. So, what drives that - is it the share trading between investors? But who sets the numbers & pay so exorbitantly? Do I even get this right?

Since money is not a commodity - we cannot trade money, we trade goods using money. Money is a tool.
So if share units represent money (capital), should trading it be forbidden? ✘


I'm still learning! Wishing for the best monetary system.

I seek refuge in Allah SWT from errors
Only Allah SWT Knows Best والله أعلم

بسم الله الرحمن الرحيم
وكأين من دابة لا تحمل رزقها الله يرزقها وإياكم وهو السميع العليم
And how many a creature carries not its (own) provision.
Allah provides for it and for you. And He is the Hearing, the Knowing.
[Holy Quran 29:60]
The water is from the rain, fruits are from trees, milk are from lambs, bricks from the earth - all given free. الحمد لله It's only how we cultivate it. وابتغوا من فضل الله [Q62:10]

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