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Islamic Finance and the New Financial System: An Ethical Approach to Preventing Future Financial Crises

Book Description

Can Islamic finance save the global system?

Islamic Finance and the New Financial System describes how the adoption of Islamic finance principles in future regulatory decisions could help prevent future shocks in the global financial system. Using illustrations and examples to highlight key points in recent history, this book discusses the causes of financial crises, why they are becoming more frequent and increasingly severe, and how the new financial system will incorporate elements of Islamic finance - whether deliberately or not. With an introspective look at the system and an examination of the misconceptions and deficiencies in theory vs. practice, readers will learn why Islamic finance has not been as influential as it should be on the larger global system. Solutions to these crises are thoroughly detailed, and the author puts forth a compelling argument about what can be expected in the future.

Despite international intervention and global policy changes, the financial system remains in a fragile state. There is an argument to be made about integrating Islamic finance into the new system to facilitate stronger resilience, and this book explains the nuts and bolts of the idea while providing the reader with a general understanding of Islamic finance.

  • Understand the key principles of Islamic finance

  • Examine the history of the current financial system

  • Discover how Islamic finance can help build a new debt-free economy

  • Learn how Islamic finance theory doesn't always dictate practice

  • Although Islamic finance is a growing market, it is still a foreign concept to many. Those within the Islamic finance circles wonder why the system has yet to gain broader appeal despite its ability to create a strong and well-balanced economy. Islamic Finance and the New Financial System provides clever analysis and historical background to put the issues into perspective.

    Table of Contents

    1. Series Page
    2. Title Page
    3. Copyright
    4. Dedication
    5. About the Author
    6. Acknowledgments
      1. Introduction
    7. Part One: Financial Crises and the Current Financial System
      1. Chapter 1: A Brief History of Financial Systems and the Birth of Money
        1. Early Financial Systems and Currencies
        2. Gold and Silver
        3. Paper Money, Promissory Notes (<i xmlns="http://www.w3.org/1999/xhtml" xmlns:epub="http://www.idpf.org/2007/ops" xmlns:m="http://www.w3.org/1998/Math/MathML" xmlns:svg="http://www.w3.org/2000/svg" xmlns:ibooks="http://vocabulary.itunes.apple.com/rdf/ibooks/vocabulary-extensions-1.0">Sukuk</i>), and Bills of Exchange), and Bills of Exchange
        4. Goldsmith Deposits and the Establishment of Banks
        5. Financial Globalization and the Gold Standard (1821−1913)
        6. The Two World Wars and the Great Depression (1914−1945)
        7. The Bretton Woods Agreement (1945−1971)
        8. Post–Bretton Woods−−Fiat Currencies (1971−Today)
        9. Other Relevant Events in Our Current Monetary System
        10. Summary
        11. Notes
      2. Chapter 2: Past Financial Crises and Their Causes
        1. The Wall Street Crash of 1929 and the Great Depression
        2. The Oil Crisis (1973)
        3. Latin American Debt Crisis (1980s)
        4. Black Monday (1987)
        5. U.S. Savings and Loan Crisis (1989−1991)
        6. Japanese Asset Bubble Collapse (1990s)
        7. Mexican Peso Crisis (1994)
        8. Asian Financial Crisis (1997)
        9. Russian Ruble Crisis (1998)
        10. The Dot-Com Bubble of 2000
        11. Some Observations on Past Financial Crises
        12. Summary
        13. Notes
      3. Chapter 3: The Global Financial Crisis of 2008
        1. The Buildup to the Crisis
        2. Anatomy of a Bubble
        3. Fraud
        4. Aftermath
        5. Contagion
        6. Summary
        7. Notes
      4. Chapter 4: Solutions Create More Problems
        1. Governments' Response to the Crisis
        2. Central Banks' Response to the Crisis
        3. Unintended Consequences
        4. Summary
        5. Notes
      5. Chapter 5: The Next Financial Crisis and the New Financial System
        1. Easy Credit and Subprime Borrowers
        2. Too-Big-to-Fail Banks Taking on Too Much Risk
        3. Too Much Debt in the System
        4. Complex Derivatives That Grew Out of Hand
        5. The Trigger for a New Financial System
        6. Summary
        7. Notes
    8. Part Two: The Islamic Financial System
      1. Chapter 6: Overview and History of Islamic Finance
        1. Islamic Finance Defined
        2. A Closer Look at <i xmlns="http://www.w3.org/1999/xhtml" xmlns:epub="http://www.idpf.org/2007/ops" xmlns:m="http://www.w3.org/1998/Math/MathML" xmlns:svg="http://www.w3.org/2000/svg" xmlns:ibooks="http://vocabulary.itunes.apple.com/rdf/ibooks/vocabulary-extensions-1.0">Riba</i>
        3. Modern History of Islamic Banking and Finance
        4. Islamic Banking and Finance Around the World
        5. Summary
        6. Notes
      2. Chapter 7: The Key Principles of Islamic Finance
        1. Definition of Money According to Shariah
        2. Does Time Value of Money Exist in Islamic Finance?
        3. Islamic Financial Instruments
        4. Summary
        5. Notes
      3. Chapter 8: Islamic Financial Instruments as Alternatives
        1. Consumer Banking
        2. Corporate Finance
        3. Government Finance
        4. Summary
        5. Notes
      4. Chapter 9: Criticisms, Shortcomings, and Misconceptions of Islamic Finance
        1. Misconception #1: Islamic Finance Is Linked to and Supports Terrorism
        2. Misconception #2: Islamic Finance Is for the Benefit of Muslims and Is Part of Shariah's Agenda for World Domination
        3. Misconception #3: Islamic Banks Are Not Safe
        4. Misconception #4: Islamic Finance Is a Marketing Gimmick
        5. Misconception #5: Islamic Finance Cannot Be a Stand-Alone Financial System Since It Is Too Dependent on the Conventional One
        6. Summary
        7. Notes
    9. Part Three: The New Financial System
      1. Chapter 10: Preventing Future Crises—Real-World Solutions from Islamic Finance
        1. Debt
        2. Derivatives
        3. Too Big to Fail
        4. Money
        5. Lack of Ethics
        6. Summary
        7. Notes
      2. Chapter 11: Evaluating Alternative Solutions
        1. The Gold Standard
        2. The Chicago Plan
        3. Special Drawing Right (SDR)
        4. Summary
        5. Notes
    10. Conclusion
      1. Index
    11. End User License Agreement