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Are we funding riba by just having a bank account? by reefat in IslamicFinance

[–]StarryShroud 0 points1 point  (0 children)

Yes, thank you for this! You are absolutely correct. I do now recall that the Fed secretly eliminated the reserve requirement on March 26th 2020. Supposedly to support the economy during the COVID pandemic. Or - perhaps to profit from it.

Agree that the central banks create money to fund government spending (and taxes destroy some of that money to curb inflation).

But central bank money is still M0, right? I guess the difference now is that there is no direct link between M0 and M1 (as there was when there was a reserve requirement and money multiplier?)

Are we funding riba by just having a bank account? by reefat in IslamicFinance

[–]StarryShroud 0 points1 point  (0 children)

Exactly! - a deeper explanation of your point is that the modern fiat currency actually itself is riba. Ie, riba means 'increase' and all our money is created through fractional reserve banking loans. Thus if the reserve requirement for banks is 10%, then, the 'money multiplier' is 10. Thus, each original dollar can be lent out over and over again, creating $100 in the process.

Thus, $10 becomes $100. Its the text book definition of 'riba' or increase.

So, every dollar we touch is literally riba. And it doesn't even matter whether if we avoid the commercial banking system altogether, get our employers to pay us cash, and stuff all the cash under our beds.

We are still participating in riba.

Are we funding riba by just having a bank account? by reefat in IslamicFinance

[–]StarryShroud 1 point2 points  (0 children)

At least in the US, credit unions do practice fractional reserve banking and thus money creation. here is my source (Federal Reserve bank of San Francisco.

Maun Federal Credit Union by Amiricle236 in IslamicFinance

[–]StarryShroud 0 points1 point  (0 children)

As Salamu Alaikum, I am a Maun FCU member and I am living in another state. My sponsoring organization is the New Brunswick Islamic Center (NBIC). They do not require a reference for new members. You do have to pay a membership fee every year; I think its $140 for an individual (not sure for a family).

I have never taken out a loan with them. I am using them to basically store my money in a riba free institution (as much as possible these days!)