The Real cause of Inflation and its Solution

The stormy tide of inflation that has gripped Pakistan for the past few years is now crossing all limits of tolerance. Oil, sugar, flour, pulses, vegetables, eggs, meat, electricity, and gas bills, School fees have become unbearable for a large segment of the population Pinoy Tambayan.

When we look at how the current economic system works, we see a deep and essential relationship between inflation and this capitalist system.

The Real cause of Inflation and its Solution

In the past, like the dollar, pound and franc, the rupee was issued on the basis of a precious metal. In the case of the dollar, the precious metal was gold, while in the case of the rupee, it was silver. This monetary-financial system provided stability not only in the region but also in international trade.

That is why the Indian subcontinent under the shadow of Islam used to be an engine for the global economy.

But interest-bearing loans issued under the capitalist system and the stock market created such a demand for the currency that the supply of gold and silver could not meet it. Lead to a huge increase. So the states abandoned the currency system based on precious metals and started printing more and more notes which did not have gold and silver reserves behind them and thus each printed note was more valuable than the previous one.

This is the reason why the prices of commodities are higher than before. Thus, the constant increase in the prices of commodities is the distinguishing feature of this capitalist system. Value is rising fast. Inflation as a result of the artificial paper currency is one of the four main causes of inflation.

Another reason for inflation is the inability of the government to take care of the demand-supply mechanism and the support of corrupt government officials to the big investors in overseeing this process, which has led to low prices of essential commodities in the market.

I increase. The democratic rulers of the capitalist system do not interfere in the efforts to hijack the supply chain by becoming frontmen of the world powers and local capitalists, but instead bow down to them by blackmailing them.

These capitalists create a shortage of supply by hoarding and forming cartels so that they can double the day and quadruple the profit by increasing the price of goods. On the other hand, the government does not import or delay imports of essential commodities, whether it is oil, LNG, wheat, sugar, and other commodities, in order to save the dollar.

Deficits can be reduced and the installments of international usurers can be met even if the people run out of two meals a day. Thus the shortage of supply leads to an increase in prices and causes inflation.

The third major reason for the rise in inflation is the sharp rise in the price of energy, which in turn increases the cost of doing business and commercial activities. The privatization of power plants has taken the energy infrastructure out of public and national control and into the hands of a few multinational investors who have a major impact on energy supply and prices.

And the fourth biggest and main reason for the rise in inflation is the tax system in the capitalist economy which consists of direct and indirect taxes. Most of these taxes are levied exclusively on indirect taxes, generally on all goods and services, causing the prices of goods and services to be much higher than their actual prices. An example of this is the general sales tax and petroleum levy applied to the actual prices of petroleum products.

If we talk about the alternative to this capitalist system, then the Islamic economic system emerges as a unique system with all its features. Islam has required the state to issue currency notes on the basis of precious metals and thus Islam has eliminated the root cause of inflation. Islam has made gold and silver the basis of the state’s currency, so the Prophet (peace and blessings of Allah be upon him) allowed only gold and silver to be the basis of the currency, and commanded Muslims to use gold dinars and silver dirhams. Weighs 4.25 grams and 2.975 grams respectively.

This is why the Khilafah State has been able to keep prices stable for more than a thousand years. ۔ An Islamic state, therefore, provides a strong base of gold and silver for the currency, and accumulates gold and silver reserves through a systematic system, in order to keep the gold and silver reserves stable, wherever possible, barter.

It also embraces sex trade and insists on international trade in gold and silver, ending the current oppressive dominance of the dollar, which is closely monitored by the IMF. Being based on gold and silver, the problem of inflation is eradicated as the government can no longer print notes or rates to cover the fiscal deficit.

The amount of money in society can be increased or decreased by increasing or decreasing the interest rate.

As far as the second major cause of inflation is concerned, in the Islamic system the head of the Islamic state, ie the caliph, is responsible and he is responsible for the welfare of his subjects and meeting their needs which he will have in the hereafter.

There will be strict accountability. So the caliph takes stern action against the hoarders and imposes penalties. It discourages the formation of monopolies and cartels and eliminates them from the system of state resources and penalties, and abolishes all taxes on imports for domestic traders so as not to establish a monopoly of a few investors on market supply.

As far as the third basic reason is concerned, Islam forbids private ownership of energy resources and declares them to be a public property that is guarded by the state and the benefits derived from them are passed on directly to the people. In an Islamic state, it is not permissible for the caliph to privatize oil and gas reserves or power plants, so Islam keeps energy prices balanced and accessible to the people.

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