Thursday, October 30, 2008
Spiderman Don't Cry
Spiderman Don’t Cry
Assalamu ‘Alaikum,
After a thoroughly packed and fun Eid vacation in Malaysia we came back to an uncertain future in Riyadh. As if to underline personal worries the world economy too seems tottering on the brink of collapse. Phrases like Subprime and liquidity crunch are on the lips of many people on the same popularity level as melamine from China. Everybody and everything seems to be at a crossroads of sorts.
Even Malaysia the country we left is at one big crossroads in terms of country leadership, the genial but much maligned Premier is, to many people, embarrassingly forced to abdicate in favour of a highly controversial and in many views questionable Deputy. There seems to be a dearth of charismatic and natural leaders from the ruling party to take over from the embattled Premier. The charismatic and natural leaders are all on the other side of the fence struggling to find an acceptable racial and religious formula that will win the support of the kingmakers, the Malay Muslim ummah. We await further developments from this intriguing soap opera.
Reading the news media it is heartening to note that at long last Islamic financing and Islamic banking is given due recognition as saviours from a world economy and conventional banking system ravaged by mindless selfishness and greed. How do you compare an economic system that believes world good can be achieved through selfish pursuits of individual aims unregulated by ethics and morals, compared to one that says the world’s wealth belongs to Allah, humans temporarily own them on trust for Allah, and are to be administered for the good of the world’s ummah as commanded by Allah? Conventional banks create subprime papers which essentially sells ownership to poor housing loans to other banks and investors. Under Islamic financing you cannot either buy debt or under Shafie Mazhab you can buy debt only if they are dayn mustaqir i.e. a good and collectible debt. Under either interpretation, subprime papers will not see the light of day in Islamic financing and banking. So such potential gates of disaster will not exist in an Islamic system. To this open wound, they add another self inflicted wound in the form of the conventional banks obsession with mark to market procedures. Mark to market means at all times you must revalue your investments based on prevailing market price and take decisions based on the worse current value. Now anyone familiar with investments in equity will find this approach of valuing investments faulty to say the least. If you have just invested in the development of a petrochemical plant, everyone knows it take some years to be ready and even more years to breakeven. In the gestation years where your plant is operating at a loss, do you mark to market your investment and say you have made a bad choice? Obviously not. But riba financiers do not believe in equity. In the same way there have no equitable tolerance for non repayment from their borrowers; they display no interest in the future value of their investments only the current value matters. And so in mimic of the proud Japanese tradition they hara-kiri themselves to the point of economic collapse, hence the demise of Lehman Brothers Investment Bank and the current death throes of AIG Insurance. In the next page of their Operating Manual premised on pure selfish interest which says it is okay to kill the system in the pursuit of self survival, they refuse to participate in interbank lending. This leads to the next phase of this new conventional disease, the liquidity crunch. The question they ask themselves is, is the other bank suffering the same fate as me? I think they are, so I will not lend to them in case they are not able to repay. So interbank lending stops. In the conventional economy this is like the gear box of the car not functioning. What happened was, acting on mere suspicions they created the situation they fear. Banks which would have been ok had interbank lending continued now is heading to ICU. Governments, instead of realizing the folly of the riba system and use the opportunity to debunk it in favour of a better system, choose to shore it up by committing funds at mind boggling trillions. To the kid in Darfur who daily struggles to deny the vulture an opportunity to dine on his frail corpse, and millions of similar souls in thousands of Darfurs the world over, what price an economic system that values riba financiers over their plight? Sometimes we’d wish we do not understand too clearly; tis such a sad and lonely feeling.
A new landlord bought our mini compound and doubled the rentals for everyone. It seems he wanted to create a Dubai out of Riyadh overnight. We provided for some increase in rental this year but we were not prepared to pay the amount the new landlord wanted. Mohamed the Yemeni Lawyer and Ahmed the Jordanian IT guy left before Eid. The Headmistress left a few weeks ago. We will follow middle of this month. Only the Lebanese dentist left but he will not stay either. Many times the new landlord bring potential tenants to view the villas but as Amir our friendly caretaker confided in us, “kalam fulus kullu roh” i.e. mentioned the rental they all left. We will not be moving to another mini compound, we’ve found a nice apartment that meets our principal criteria i.e. near the kids’ school. Anyway things have changed for us in Riyadh. New management at the helm of Papa’s bank means new directions. Papa have placed himself on the job market, we could be moving anywhere, anytime soon. Walked with 3 year old Zahir round the compound taking last looks at the place. The kids are sad to leave, they will miss the pool and Uncle Amir. Zahir tugged my shirt and said, “Papa, Spiderman don’t cry, right?” “No son, Spiderman don’t cry,” I said bravely.
Assalamu ‘Alaikum,
After a thoroughly packed and fun Eid vacation in Malaysia we came back to an uncertain future in Riyadh. As if to underline personal worries the world economy too seems tottering on the brink of collapse. Phrases like Subprime and liquidity crunch are on the lips of many people on the same popularity level as melamine from China. Everybody and everything seems to be at a crossroads of sorts.
Even Malaysia the country we left is at one big crossroads in terms of country leadership, the genial but much maligned Premier is, to many people, embarrassingly forced to abdicate in favour of a highly controversial and in many views questionable Deputy. There seems to be a dearth of charismatic and natural leaders from the ruling party to take over from the embattled Premier. The charismatic and natural leaders are all on the other side of the fence struggling to find an acceptable racial and religious formula that will win the support of the kingmakers, the Malay Muslim ummah. We await further developments from this intriguing soap opera.
Reading the news media it is heartening to note that at long last Islamic financing and Islamic banking is given due recognition as saviours from a world economy and conventional banking system ravaged by mindless selfishness and greed. How do you compare an economic system that believes world good can be achieved through selfish pursuits of individual aims unregulated by ethics and morals, compared to one that says the world’s wealth belongs to Allah, humans temporarily own them on trust for Allah, and are to be administered for the good of the world’s ummah as commanded by Allah? Conventional banks create subprime papers which essentially sells ownership to poor housing loans to other banks and investors. Under Islamic financing you cannot either buy debt or under Shafie Mazhab you can buy debt only if they are dayn mustaqir i.e. a good and collectible debt. Under either interpretation, subprime papers will not see the light of day in Islamic financing and banking. So such potential gates of disaster will not exist in an Islamic system. To this open wound, they add another self inflicted wound in the form of the conventional banks obsession with mark to market procedures. Mark to market means at all times you must revalue your investments based on prevailing market price and take decisions based on the worse current value. Now anyone familiar with investments in equity will find this approach of valuing investments faulty to say the least. If you have just invested in the development of a petrochemical plant, everyone knows it take some years to be ready and even more years to breakeven. In the gestation years where your plant is operating at a loss, do you mark to market your investment and say you have made a bad choice? Obviously not. But riba financiers do not believe in equity. In the same way there have no equitable tolerance for non repayment from their borrowers; they display no interest in the future value of their investments only the current value matters. And so in mimic of the proud Japanese tradition they hara-kiri themselves to the point of economic collapse, hence the demise of Lehman Brothers Investment Bank and the current death throes of AIG Insurance. In the next page of their Operating Manual premised on pure selfish interest which says it is okay to kill the system in the pursuit of self survival, they refuse to participate in interbank lending. This leads to the next phase of this new conventional disease, the liquidity crunch. The question they ask themselves is, is the other bank suffering the same fate as me? I think they are, so I will not lend to them in case they are not able to repay. So interbank lending stops. In the conventional economy this is like the gear box of the car not functioning. What happened was, acting on mere suspicions they created the situation they fear. Banks which would have been ok had interbank lending continued now is heading to ICU. Governments, instead of realizing the folly of the riba system and use the opportunity to debunk it in favour of a better system, choose to shore it up by committing funds at mind boggling trillions. To the kid in Darfur who daily struggles to deny the vulture an opportunity to dine on his frail corpse, and millions of similar souls in thousands of Darfurs the world over, what price an economic system that values riba financiers over their plight? Sometimes we’d wish we do not understand too clearly; tis such a sad and lonely feeling.
A new landlord bought our mini compound and doubled the rentals for everyone. It seems he wanted to create a Dubai out of Riyadh overnight. We provided for some increase in rental this year but we were not prepared to pay the amount the new landlord wanted. Mohamed the Yemeni Lawyer and Ahmed the Jordanian IT guy left before Eid. The Headmistress left a few weeks ago. We will follow middle of this month. Only the Lebanese dentist left but he will not stay either. Many times the new landlord bring potential tenants to view the villas but as Amir our friendly caretaker confided in us, “kalam fulus kullu roh” i.e. mentioned the rental they all left. We will not be moving to another mini compound, we’ve found a nice apartment that meets our principal criteria i.e. near the kids’ school. Anyway things have changed for us in Riyadh. New management at the helm of Papa’s bank means new directions. Papa have placed himself on the job market, we could be moving anywhere, anytime soon. Walked with 3 year old Zahir round the compound taking last looks at the place. The kids are sad to leave, they will miss the pool and Uncle Amir. Zahir tugged my shirt and said, “Papa, Spiderman don’t cry, right?” “No son, Spiderman don’t cry,” I said bravely.
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