Dr Anas Alhajji writes: “Inflation is old, thousands of years old, when people used all kinds of things as money. Inflation existed even when gold and silver were used as money.”
Dr Alhajji is an energy markets expert, researcher, author, and speaker. He also advises governments, companies, financial institution and investors on various energy markets issues.
We have been listening to what experts have been saying about inflation and its impact on various parts of the economy in recent weeks. Many think inflation is a modern phenomenon, and somehow, the Federal Reserve of the US, fiat money, or capitalism created it.
The quantity theory of money was NOT introduced in Europe in the 17th century as European books claim. It was introduced in Egypt 300 years earlier, in a book written by a scholar called Al-Maqrzi.
Knowledge From 1,000s Of Years Ago
Here is the amazing part that Dr Alhajji wants you to know that Yaqub ibn Ibrahim al-Ansari (known as Abu Yusuf), a judge and jurist who lived in 8th century Baghdad, studied inflation and debt, to conclude that debt has to be paid in its “real value” and not the “nominal value”.
As many of you know, usury (interest on loans) is banned in Islam (the same in Christianity and Judaism too). Abu Yusuf concluded that the increase in the “nominal value” when paying the debt in “real value” under inflation is NOT usury. This is from the 8th century, folks!
“I borrowed money about 40 years ago from XYZ (the father of the businessman), please return the money to him or his children. Now, I am here to pay my father’s debt to you since your father died too!” the man said.
Both men realised that with massive inflation over the years, paying the debt in its nominal value doesn’t make sense. They decided to go to the highest religious authority in town (Sheikh), who was from the Hanafi school, one of the main schools of Islamic jurisprudence.
“Gold Is Just A Stone If You Don’t Believe In Its Value”
They explained the matter to him. He wrote on a piece of paper five items that are widely used on daily basis in the village, and told the two men to go ask the oldest people in town about the prices of these items when they were young and write them down next to each item.
They brought back the list after a few days with the prices written next to the items. The Shiekh asked his son to go to two stores nearby to get the current prices of these items. You know what he did next? With a simple calculation, he calculated the real value of the debt.
The debt was settled. Dr Alhajji’s point here is: inflation is old. Even when gold was used as a currency, societies dealt with inflation’s ramifications long ago. Even in a remote village, where most people were uneducated, they realised what inflation means and how to deal with it.
So, why do some “experts” and “traders” think inflation is something new? Why do some people think “fiat” money is the problem, when inflation existed even when gold and silver were used as currencies? Gold is just a stone if you do not believe in its value!
Inflation Has Been Around Forever
One of the most amazing things about the Arabic language is that it is the only language that is widely used today, that has not changed much in the last 2,000 years. Anyone who reads the language can still read books written 1,500 years ago. A wealth of macroeconomics knowledge is out there.
According to the majority of Islamic scholars, price controls are prohibited. Prices are set in free markets. In the 8th century (on the modern-day Syrian coast), people complained about the increase in meat prices. A scholar told them: make it cheaper, reduce your demand.
Even back then, they realised the difference between cost-push inflation, demand-pull inflation, and the role of the money supply. They also realised the solutions and that government intervention to lower or set prices is wrong.
The “moderns” are aware of the ancients; it’s just that short-term greed gets in the way of common sense… Especially, in societies disconnected from their past, and with no stake in their children’s future. So, today’s politicians are not just repeating mistakes from the 1970s, but from around the 570 AD, too.
“Inflation has been around forever, it will continue to be around forever…”
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Auqib Hassan is pursuing a master’s degree from the Aligrah Muslim University. Auqib can be reached at auqibhassan321@gmail.com