The history of money – why we need cryptocurrencies part VII

We have recently left you at a crucial moment in history. First banks were emerging in Europe. However, before we take a closer look at this issue, it is worth to bring the subject of the Arab economy into the Middle Ages.

The religion created by Mohammed was based on quite well thought-out economic foundations. Under the heavens, it praised the support of the poor, but also to pay taxes, taxes and all other charges (my mobile operator would be delighted!). Islam has developed its own banking model, and put emphasis on saving and money functions.

Practical advice from God

In Sura II, we even get practical advice on how to borrow money: “You who believe. If you incur debt for a certain period of time, write it down! “- it was a very wise advice, who did not apply to her, could be sure that he would soon be punished by divine punishment. Then it gets interesting, because we learn that the medieval Arabs would be fans of Blockchain: “Let the writer save you, according to justice. (…) And let him write and let the debtor dictate! (…) Demand the testimony of two witnesses from among your men! And if there are not two men, then one man and two women may be witnesses on whom you agree: if one of them goes astray, the other will be able to admonish her. “

As you can see from the above, the block network would be an ideal solution for both parties of the transaction. The habit of always looking for two male witnesses, or alternatively for one man of two women, had to be troublesome, almost like looking for people today.

Interestingly, in the context of our previous considerations regarding usury, Sura XXX forbade borrowing at interest, though it was handled cunningly. You could borrow money at zero percent, but you could also ask for interest if the contractor was late in returning the money on time.

Perhaps by such councils, the Arabs made an impressive economic expansion. As traders, they visited the areas of the Arabian Peninsula, the Middle East, Persia, North Africa and the Iberian Peninsula. Trade exchange was supported by money in the form of various coins, but also often exchange goods for goods.

Inflation too much temptation for the Arabs

It was only Abd al-Malik who introduced the monetary reform in 696. He introduced a unified system of money. Interestingly, there were Arabic signs on the coins, but there was no image of the ruler. On the one hand, one could find a fragment of the CXII sura on them, and on the other a challenge of faith. On the sides the date and name of the town. It was not until the time of the Abbasid dynasty that the name of the Caliph was added.

Abd al-Malik introduced three types of coins to circulation:

– gold dinars weighing 4.25 g (initially a bit heavier),

– silver dirhams weighing 2.95 g (previously 4.15 g),

– copper fals (their weight fluctuated between 1.5 and even 5 g).

1 dinar equaled 10 dirhams, but only at first, because in the tenth century this value was 14 dirhams. As you can see, the Arab rulers also could not resist the temptation to spoil money. The Ghaznawid dynasty (the years of its rule in the period 977-1186) was particularly to blame, which reduced the content of precious ores in both main coins, adding more and more to them. The extremism in this practice reached the Bujid family ruling in the 10th and 11th centuries, which beat dinars consisting only of copper!

Gold vs. silver

The market was dominated by gold, but not for long. It also caused a deflation effect. How did they fight with this phenomenon? Again by spoiling the coins. It even came to the fact that in 1036 in Baghdad it was forbidden to use dinars at all.

After a period of enormous economic collapse in the second half In the twelfth century, gold was turned to silver in order to stimulate the circulation of coins in the markets. However, the domination of silver was also proof of a decline in the Arab economic power. The last dinars were minted in Baghdad in 1262, and in Egypt in 1346.

Silver coins also began to be falsified. And not in an easy way. People did not resort to “cutting” the sides of coins. Mercury or antimony was added to their composition. Counterfeiting has become so widespread and carried out on such a scale that in Mecca has been introduced even to the official quotations of “fake dirhema” with a rate of 1/24 to the real. It can be said that the Arabs made the first fork in history. And it has become fashionable before it!

Ransom wisely!

Military conquests themselves were also organized in a wise and somewhat reminiscent manner of the ideas that had guided the Roman Empire before. Arab leaders instead of exterminating conquered peoples, respected the existing administration, customs and regime.

The caliphs were also pursuing a customs policy, they had a monopoly on trade in grain, wood, iron, tar and all the raw materials that made it possible to build ships.

Also in the tenth century, the Arabic banking system was born.

To be continued…

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