During a recent Islamic financial conference, the Prime Minister of Malaysia once again suggested that participating countries should use gold in their international trade as a means of payment. Doing so would help circumvent the economic sanctions imposed by the West.
In the past few decades, many countries either became victims of such sanctions or suffered serious economic crises due to speculative market activities. Examples include Venezuela, Iran, Turkey, and Russia. Economic history has many cases of countries finding their national currencies under pressure upon becoming too dependent on imports or exports. If the exchange rate of a currency starts to fall, inflation begins to grow. This often destabilizes the economic and social situation in the respective nations.
As reported by Business Standard, four Islamic countries are now discussing the possibility of using gold as an alternative method of payment to protect their economies from outside attacks. Last weekend, Malaysian Prime Minister Mahathir bin Mohamad, suggested that Iran, Turkey, and Qatar should begin using gold when trading goods. During a serious crisis, these countries could exchange goods for gold – or create a new gold-backed currency. By the way, this is not the first time that Malaysia has proposed such an initiative.
Mahathir bin Mohamad's proposal is directed mostly against the US actions. He declared that the US has the tendency of unilaterally deciding which countries it wants to slap with sanctions. Thus, Islamic countries should have an instrument to withstand such pressure. Bin Mohamad's suggestion entails using a gold-backed dinar; discussions on how to bring this policy to life are already ongoing. Until then, all trade deals between the four countries will still be settled via their national currencies.
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