Islam and Communism?
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aamirsaab
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Which would make it the same as every other form of law system tbh.
lol probably true.
Again I'm not pointing out Nazi Economics and law is identical to Islam, just that they have alot more in common then Communism and Islam from what I see so far.
Of course in the end it is how Islam is Unique that matters, not how it is similar to something else.
4- Only because of the Jew Reference or the whole thing?
5- You agree with the second half though do you not? Foreigners must be subject to Islamic Law on Muslim soil?
7- understood
8- Understood
11- When is making money by a means that doesn't require you to earn it acceptable?
22- It means they demand they get rid of a secular army and create an Army that only wages war using the guidelines of God.
23- Understandable, but one does not have to stretch his imagination to see it happening
24- The threatening the existence part I assume?
Again bear in mind I did the best I could to alter the document as little as possible, to illustrate where I was coming from.
Chuck
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I'll explain specifically why Islamic financial institutions are relatively better in current financial crises.
First I'll explain what was happening with housing financing in the US. Normally, when you own an equity in stock market, most financial institutions allow you to buy on margin. Margin is when you don't have to pay full amount for the stock but you pay portion of the stock to own all the stock, for example, pay just 20% of the stock value but they will give you full owner. They do this because brokers can sell more stock since buyer has to pay less amount and that increases the buying power.
say you want to purchase a stock for US$ 1 million and each share costs US$ 20, which will buy you 50,000 shares. So if you are buying on margin, you don't have to pay full amount (margin differs from one financial institution to another), so lets say you only have to pay $4 per share, so for 50,000 you only pay $ 200,000. Now you become greedy, so you say i can afford 50,000 more now on margin why not I buy 50,000 more. so you buy 100,000 shares on margin for $400,000 with total cost of 2 million. Broker is happy because without margin his commission would be (if commission is 0.25%) $1mio multiply .25% = $2,500, but with margin since you bought double, his commission is $5,000.
If you are really greedy with your $1million you can buy 250,000 shares with total cost of $5,000,000
advantage of that is if share value rises you make more profit, but if share prices goes down then you make more loss too. This is called financial leverage.
ex1 without margin:
a) 50,000 shares bought at $20, value increase to $25 new total value = 1,250,000; profit = $250,000 if you sell at that price.
b) value goes down to 15$ then new total value = $750,000; loss = $250,000.
ex2 (with margin):
a) 250,000 shares bought at $20, new price goes to $25 so new total value = $6,250,000; profit = $1,250,000
b) new share value $15, new total value = $3,750,000; loss = $1,250,000 (but you will get margin call at $1,000,000)
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Now I'll explain what a margin call is. In this example, you have margin of $4 per share so for 250,000 shares you need to keep a balance of $1million ($4 x 250,000) in your account. If price goes down to $19 thats loss of $1 per share, so you have lost $250,000 in your account. Now your account is $750,000 and you can keep 187,500 max # shares. Financial institution will take away 62,500 shares from you and sell it another person.
If you had bought 100,000 shares only then you will not have lost your shares on margin call if price went down to $19. since you need to keep only $400,000 as balance in your account. But you would loss shares if share devalues enough to affect your $400,000 balance. For example, if price went down to $13 per share. Then total value of your shares would come down to $1,300,000; loss of $700,000 so your balance would come down to $300,000. So now you can only keep 75,000 shares and FI will take away 25,000 shares.
Without margin FI can't take away the shares from you even if price comes down to $0, so will not get margin call and lose shares. So if price goes up next time, you can sell shares and get something.
Under Islamic Finance this type of leveraging is discouraged, so financial institutions limit buying/selling on margin as much as possible.
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Regarding US housing crises, some people on wall street came up with brilliant idea that why don't they do this with housing stock. So they came with derivatives that allowed people to buy houses on margin and they also gave sub-prime loans which turned into this housing financial crises. Housing stock is of different nature and it is running in trillions of dollars, and price per house is big so bad effects of leveraging are quite visible.
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The thing I don't like about this financial system and which is plus point for Islamic financial system is that:
(1) as it is obvious average person suffer losses while financial institutions suck their money. For example, with margins average stock trader gets greedy and forgets what would happen if price goes against expectations, then FI takes away his stock and sell it to another buyer and makes a profit when average trader has lost money. So financial institution is earning double income (a) from commissions (b) selling margined out stock or foreclosures.
(2) This type of leveraging directs the money unnecessarily to wrong people as this encourages trading on price of shares, so too much money goes into commissions and reselling on margin calls. If this type leverage was not their then investor would focus on companies that are bringing value to them through innovations in technologies. For example, in recent years investors did not put their money in promising technology companies like solar energy, vertical farming, etc... but most were buying houses and hoping for the prices to go up and sell house for a profit. Which were inflationary profits rather then profits coming for goods and services that would be useful for US economy and created jobs and industries.
First I'll explain what was happening with housing financing in the US. Normally, when you own an equity in stock market, most financial institutions allow you to buy on margin. Margin is when you don't have to pay full amount for the stock but you pay portion of the stock to own all the stock, for example, pay just 20% of the stock value but they will give you full owner. They do this because brokers can sell more stock since buyer has to pay less amount and that increases the buying power.
say you want to purchase a stock for US$ 1 million and each share costs US$ 20, which will buy you 50,000 shares. So if you are buying on margin, you don't have to pay full amount (margin differs from one financial institution to another), so lets say you only have to pay $4 per share, so for 50,000 you only pay $ 200,000. Now you become greedy, so you say i can afford 50,000 more now on margin why not I buy 50,000 more. so you buy 100,000 shares on margin for $400,000 with total cost of 2 million. Broker is happy because without margin his commission would be (if commission is 0.25%) $1mio multiply .25% = $2,500, but with margin since you bought double, his commission is $5,000.
If you are really greedy with your $1million you can buy 250,000 shares with total cost of $5,000,000
advantage of that is if share value rises you make more profit, but if share prices goes down then you make more loss too. This is called financial leverage.
ex1 without margin:
a) 50,000 shares bought at $20, value increase to $25 new total value = 1,250,000; profit = $250,000 if you sell at that price.
b) value goes down to 15$ then new total value = $750,000; loss = $250,000.
ex2 (with margin):
a) 250,000 shares bought at $20, new price goes to $25 so new total value = $6,250,000; profit = $1,250,000
b) new share value $15, new total value = $3,750,000; loss = $1,250,000 (but you will get margin call at $1,000,000)
-------
Now I'll explain what a margin call is. In this example, you have margin of $4 per share so for 250,000 shares you need to keep a balance of $1million ($4 x 250,000) in your account. If price goes down to $19 thats loss of $1 per share, so you have lost $250,000 in your account. Now your account is $750,000 and you can keep 187,500 max # shares. Financial institution will take away 62,500 shares from you and sell it another person.
If you had bought 100,000 shares only then you will not have lost your shares on margin call if price went down to $19. since you need to keep only $400,000 as balance in your account. But you would loss shares if share devalues enough to affect your $400,000 balance. For example, if price went down to $13 per share. Then total value of your shares would come down to $1,300,000; loss of $700,000 so your balance would come down to $300,000. So now you can only keep 75,000 shares and FI will take away 25,000 shares.
Without margin FI can't take away the shares from you even if price comes down to $0, so will not get margin call and lose shares. So if price goes up next time, you can sell shares and get something.
Under Islamic Finance this type of leveraging is discouraged, so financial institutions limit buying/selling on margin as much as possible.
------
Regarding US housing crises, some people on wall street came up with brilliant idea that why don't they do this with housing stock. So they came with derivatives that allowed people to buy houses on margin and they also gave sub-prime loans which turned into this housing financial crises. Housing stock is of different nature and it is running in trillions of dollars, and price per house is big so bad effects of leveraging are quite visible.
--------
The thing I don't like about this financial system and which is plus point for Islamic financial system is that:
(1) as it is obvious average person suffer losses while financial institutions suck their money. For example, with margins average stock trader gets greedy and forgets what would happen if price goes against expectations, then FI takes away his stock and sell it to another buyer and makes a profit when average trader has lost money. So financial institution is earning double income (a) from commissions (b) selling margined out stock or foreclosures.
(2) This type of leveraging directs the money unnecessarily to wrong people as this encourages trading on price of shares, so too much money goes into commissions and reselling on margin calls. If this type leverage was not their then investor would focus on companies that are bringing value to them through innovations in technologies. For example, in recent years investors did not put their money in promising technology companies like solar energy, vertical farming, etc... but most were buying houses and hoping for the prices to go up and sell house for a profit. Which were inflationary profits rather then profits coming for goods and services that would be useful for US economy and created jobs and industries.
Well I had much more fundemental concerns, but first we must define our terms.
What do you believe should be forbidden in an Islamic system? As far as finances goes. What exactly is Usury? As it appears at first sight that different Muslims have different opinions in reguards to this term.
Also thanks for responding, I'm quite impressed by the level of patience people here have.
capitalism seeks to exploit mans base instincts to make the system work, communism some how believes they can be elimated and then everything will be ok.
ok islam seeks the middle path, that of managing mans desires into halal ways.
as to the nazi debate, it is silly. nazism contained some good things, so did communism, what is good or bad is in accordance with what Allah says is good or bad, not a man.
24.yeah, only the jewish reference.
5.everyone generally should be treated equally, thus all are to be under the same laws.
11. Inheritance.
23.too restrictive, not Islamic in any way.
24.yes the threatening part.
22.funny way of saying it..
Chuck
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That is highly open ended question and would require very lengthy discussions. For a general introduction to Islamic finance here is a good article http://www.ruf.rice.edu/~elgamal/files/primer.pdf
Btw, the example of mine you quoted is not simply usury, but related to issues of financial leverage in Islamic finance. It is a very complicated topic and you need to have at least basic understanding of financial models. But anyway leverage is one of the issue where Islamic finance is different than conventional banking. The following article is good for showing where they differ in financial structure but difficult to understand for layman: http://www.newhorizon-islamicbanking.com/index.cfm?section=features&action=view&id=10731
But I'll quote key point in the light of current financial crises:
Woah, the rice.edu link... very different, potentially thread resolving approach.
Bear in mind my concerns were 'fundemental'. I wasn't arguing that Islamic finance was unstable, but rather it could not replace our present institutions and continue to privately operate.
That article contradicts this inasmuch as it presents a whole new spin on the concept of Islamic Finance and Riba. I was told it was questionable for a Muslim to even keep the interest the bank pays him given given how and why it is there. I saw no way that Islamic finance could take the place of our present, for lack of a better word, 'banking magic tricks', that hold up modern capitalism. This article helps explain this, while making the case that it's more stable to boot.
Now the only question is, Does every Muslim agree with it?
Chuck
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You talk about fundamentals but you don't know fundamentals. Neither you understand fundamentals of finance and you come with preconceived notions that without interest banking won't work and interest is holding modern capitalism. Current capitalistic meltdown was brought down by this interest too. FYI, Islamic finance is booming. As far as agreement is concerned, any system you won't find agreement many issues, but there would be agreement on most of the basic principles which is true for Islamic finance too. And you don't expect every Muslim to use Islamic savings account, neither all muslims stay away from alcohol.
I don't mean to be rude, but I recommend before you discuss on a subject get educated about it first. You are making some loaded statements and you don't understand the mechanics.
Here is an investors forum, interesting discussion there: https://www.kitcomm.com/showthread.php?t=31877
This is wasting my time, I'm done here.
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Chuck
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kitcomm forum I didn't post for positive comments, but interesting discussion though. few people were emotionally charged, few didn't know how it works but at least they were asking questions, and few had misconceptions about Islam but nonetheless they appreciate Islamic principles of finance.
If anybody has specific questions about Islamic banking they can ask me.
If anybody has specific questions about Islamic banking they can ask me.
Chuck
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It is stable thats why it is performing better in times of crises and it is growing. In other words, it is operating as alternative financial system already. As far as continuation is concerned I don't have a crystal ball to predict the future but it is booming and already a trillion $ industry so it is here to stay for a long time.
angry angry. Fear not, I'm used to it coming from capitalists.
I will gladly explain my position in more detail in my next post.
And yes, you did mean to be rude, which is fine. You want me to be more detailed and demonstrate I know what I'm talking about or gtfo, I can understand that.
Chuck
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Oh yea Islamic finance is not much different then finance in US with few fundamental differences.hmm, much 'Islamic' commerce is actually the same old western models with a beard, thnx for sharing tho brother chuck
But I like to hear about old western models. Might be interesting.