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The Gold Dinar System

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My Opinion on the Gold Dinar System in International Trade Nowadays, all the countries in the world are using floating fiat currency. The drawback of using fiat currency is the value of currency will change associated with the changes of money market because it is pegged to the U.S. dollar. Therefore, the currency system is very unstable. The gold standard began due to the instability of fiat currency. The problem of instability in currency had caused many global economic crises in the world. Therefore, the economist suggests that we should adopt a new proposal to return back the gold dinar as the money. This is because the gold dinar is stable in value. (Salmy Edawati Yaacob 2012, p.1014).
During the Romans and Persians era, gold dinar was …show more content…

It does not eliminate all those activities because the price of gold will also fluctuate. Thus, the changes of the gold price may lead to speculation and arbitrage. Nevertheless, those activities can be minimized by using the gold dinar system. This is because gold has an intrinsic value while the currency has no intrinsic value. The gold with intrinsic value will only be exposed to some of speculation risk compared to the currency. Hence, it is safer to use gold dinar as it can reduce the speculative and arbitrage activities.
In our opinion, the gold dinar system is an effective monetary system. Gold acts as a basis for a stable monetary system through international transactions as the price is always in a stable situation. According to Dr. Abu Bakar bin Mod Yusuf, Norhayati Mat Husin and Nuradli Ridzwan Shah bin Mohd Dali (2002, p.78), the price of gold is stable at $ 20.67 per ounce from year 1833 to 1923. Therefore, gold dinar has brought a measurement of stability to international trade and investment …show more content…

This is due to the fact that the stability in value of gold can bring to the stability of exchange rate. Additionally, gold also can minimize the exchange rate transactions cost as there is only need to keep the accounting records of the transactions. All the transactions can be achieved and recorded electronically with lower cost.
In order to understand the limitations of using the gold dinar system, we point out several idea based on previous research. First of all, gold is not a convenient medium of exchange because the gold supply in the world is very limited. Gold is natural resources and cannot be created. Nowadays, there are expanding and increasing volumes of international trade. However, the high volumes of trade cannot be met due to the limited supply of

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