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<nettime> In Gold We Trust, part 2
Julian Dibbell on Sat, 19 Jan 2002 21:08:01 +0100 (CET)


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<nettime> In Gold We Trust, part 2


In Gold We Trust, by Julian Dibbell
Wired, 10.01, January 2002

[part 2]

It's a hot high noon in Dubai, United Arab Emirates. Faint, muggy breezes
are blowing in off the Persian Gulf; and in the shopping malls, Mercedes
dealerships, and air-conditioned Starbucks of this deliriously prosperous
city-state, loudspeakers are discreetly broadcasting the muezzins' call to
prayer.

The call can also be heard, if you listen hard enough, inside a
12-foot-square, steel-and-concrete-walled storage vault located in Dubai
International Airport's heavily guarded cargo-holding facilities. But if
you're inside the vault, your mind is probably on other things. Like, for
instance, the $7.5 million worth of precious metal piled up around you: five
flat bars of chrome-bright palladium; two large plastic jars full of powdery
platinum sponge; 160 fat, tarnished loaves of silver; and - on a single
shelf, laid out one next to the other like babies in a maternity ward - 58
slender, radiant bricks of 99.9 percent pure gold, about 400 troy ounces
each and altogether worth more than $6.5 million.

These assets represent nearly half of the e-gold system's physical reserves,
and there are, arguably, sound business reasons for storing them in this
part of the world. Dubai, sometimes called the Switzerland of the Middle
East, offers the financial sophistication of a major commercial hub, the low
overhead of a mostly immigrant labor pool, and the high security of a
politely authoritarian mini-monarchy.

But the truth is, the gold is here because Allah commanded it. Or at any
rate, because the passionate believers behind e-dinar - the network's
Muslim-friendly frontend - believe He did. When Douglas Jackson and the
e-dinar principals began the negotiations that culminated in e-dinar's
September 2000 launch, Jackson was told up front that a proper Islamic
currency requires a proper Islamic country as its base. Obligingly, he moved
some of the company's existing assets from ScotiaBank in Canada to Dubai's
Transguard repository (the rest remains with J. P. Morgan Chase in London)
and even rewrote his governance contract to give e-dinar a limited veto over
bullion transfers out of the vault. In return, e-dinar agreed, in effect, to
help market the e-gold system to the world's 1.1 billion Muslims.

The pitch? Late one night in the lobby of one of Dubai's five-star hotels, a
46-year-old Muslim named Abdalhasib Castiñeira lays it out, sipping
chamomile tea as he outlines a brief theology of money and calmly prophesies
the downfall of the worldwide capitalist imperium.

A gaunt, neatly bearded Spaniard, Castiñeira is marketing director of the
Islamic Mint, a private institution dedicated to reviving as international
currency the coinage described in the Koran - the gold dinar and silver
dirham. He has placed on the table before him two small gold coins inscribed
with Arabic scripture. The Islamic Mint makes them and they represent, says
Castiñeira, the Islamic virtues of fair trade and honest value. Give someone
a piece of gold, the argument goes, and you give him a real asset whose
worth has endured throughout millennia. "Whereas this," he says, pulling a
crisp US hundred-dollar bill out of his wallet, "is just a promise." Put
your faith in it, and you submit to a system ultimately controlled by
governments and corporations, a system that when it collapses - "all empires
fall sooner or later," he says - will take the dollar down with it.

"But if you hold this," he says, picking up one of the gold coins and
weighing it thoughtfully in his palm, "you are free."

The coin in Castiñeira's hand contains 4.25 grams of gold, just as the dinar
did in the time of the Prophet. Likewise, and by no coincidence, the
e-dinar's primary unit of account is also 4.25 grams of gold. Officially,
the Islamic Mint and e-dinar are separate organizations, but they're
actually the off- and online divisions of a single project, joined by
ideological and personal ties.

E-dinar's British COO, Yahya Cattanach, and his family share a communal
condo with Castiñeira in the comfortable Jumeirah district of Dubai. The
company's Spanish president, Umar Ibrahim Vadillo, is also the president of
the Islamic Mint. And finally, uniting all three men - as well as e-dinar's
Swiss CEO, Malaysian CFO, and German CTO - is one crucial biographical
datum: All are high-placed members of the Murabitun movement, a modern,
Western offshoot of Sufi Islam and possibly the only religious sect in
history whose defining article of faith is a financial theory.

***

There aren't too many Murabitun in the world; they number probably in the
thousands. But they are avid proselytizers, supported in part by Dubai's
royal Maktoum family, and they've established significant communities in
Germany, England, South Africa, Indonesia, and Spain (though none is quite
so impressive, perhaps, as the Murabitun outpost in Chiapas, Mexico, a
community of 600 local Indians converted in the midst of the Zapatista
uprising). Scattered though they are, community leaders see one another
often, convening regularly in the small Scottish town of Achnagairn, home to
the movement's founder and patriarch, the 71-year-old Sheikh Abdalqadir
As-Sufi.

For most of his life, the sheikh went by the proper Scots name Ian Dallas.
In the 1960s, he worked as an actor and promoter, making the scene in London
and Paris and hanging with Allen Ginsberg, the Beatles, and other hippie
icons. Increasingly disillusioned with the counterculture, Dallas wound up
in Morocco, where he met the Sufi spiritual leader Sheikh Muhammad ibn
al-Habib and became a Muslim. Sheikh Muhammad had a vision: The modern
revival of Islam, he believed, would come from, as he put it, "the people
who pee standing" - from Westerners. Ian Dallas, now Abdalqadir, was
anointed to take the lead. "Go to your land and see what will happen,"
Sheikh Muhammad told him, and he went.

Back in London, Sheikh Abdalqadir slowly gathered acolytes from among the
drifting spiritual seekers of the day. Murabitun legend has it that pop star
Cat Stevens (later Yusuf Islam) got his first exposure to Islam from Sheikh
Abdalqadir, when both of them used to hang out at T. Rex singer Marc Bolan's
house. Others became hardcore followers, donning djellabas and turbans and
helping the sheikh shape Murabitun belief into a curiously worldly
mysticism - a radical Islam tinged with elements of classic European
anarchism, moderate feminism, refined anti-Semitism, and dense Heideggerian
phenomenology.

It wasn't until the mid-1980s, however, that the members of the Murabitun
truly began to set themselves apart from the run of post-hippie spiritual
movements. Sheikh Abdalqadir came to believe that if there was anything a
group of Western Muslims was best positioned to contribute to the world, it
was an Islamic cleansing of the global financial system. And so he set his
closest followers - in particular Umar Vadillo - the task of studying
classic Islamic texts on money, with a view to drawing out their modern
implications. The result, published in 1991, was the "Fatwa Concerning the
Islamic Prohibition of Using Paper-Money as a Medium of Exchange."

In the wake of fatwas sentencing Salman Rushdie to death and launching Osama
bin Laden's terrorist jihad, Vadillo's sounds almost comically wonky. But
make no mistake: This is an extreme document. The Bible condemns the
financial practice of usury, certainly, and Islam does so even more firmly,
prohibiting as haram, or unlawful, not only excessive but any interest
charges on debt - a stricture that generally requires orthodox Muslims to
leap through awkward theological hoops just to keep their money in a bank.
But what Vadillo objects to, and in no uncertain terms, is modern money
itself. "After examining all the aspects of paper money," he writes, "in the
Light of the Qur'an and the Sunna, we declare that the use of paper money in
any form of exchange is usury and therefore haram."

Naturally, you can't comply with the fatwa merely by paying with plastic
instead of paper. Paper money is a usurious cheat, Vadillo argues, largely
because it has become "nothing but a pure symbol with no reality attached
except the imposition of law." And since that same unreality undergirds the
entire monetary system, the only honest way to escape its taint is to strive
for the entire system's destruction. The fatwa, in short, is a call to
financial jihad, and the struggle, Vadillo predicts, will be an
unconventional one. Muslim information warriors will hack into banking
networks and "transfer money at random." They will create dummy companies
and "absorb debt that will never be paid back." They will "raid" the diamond
and gold markets, which, according to Sheikh Abdalqadir's way of thinking,
represent the hoarded wealth of the world's great usurers, the Jews.

But these are tactics for a war that has yet to come, and may not ever. For
now, and before all else, there's one thing Muslims everywhere need to do to
hasten the end of the paper-currency regime and with it the demise of
capitalism, the liberation of Islam, and the restoration (insh'allah) of the
caliphate: They must work together to create a righteous alternative. They
must bring back gold and silver as a standard medium of exchange.

***

What was Douglas Jackson thinking when he hooked up with these guys? If he
could have looked into the future, would he have guessed that, at the start
of 2002, the world's attention would be riveted on pan-Islamic radicalism
and its links to, among other things, obscure international money networks?
And if so, would he still have steered his own obscure international money
network into so close a partnership with the Murabitun?

Probably. So far, Jackson's only second thoughts about the e-dinar deal have
been to wonder just how much appeal the Murabitun's financial extremism
really holds for the average Muslim. "The jury's still out," he says
somewhat ruefully, noting that in a year of operations the funds held in
e-dinar accounts have barely added up to a single bar of gold. For this and
similarly mundane reasons, Jackson was already looking to loosen e-dinar's
connection to the e-gold system months before the World Trade Center
collapsed, and he insists the political mood since then hasn't added any
urgency to the task.

And why should it? In the weeks since September 11, investigators have
painted a pretty clear picture of the kind of networks they think al Qaeda &
Co. are moving their money around in, and it doesn't include anything as
Net-savvy as online payment systems.

And even if it did turn out that al Qaeda funds have passed through e-dinar,
one thing's for sure: The Murabitun wouldn't be thrilled to hear it. For
years they have publicly proclaimed their contempt for terrorists of every
stripe, and in the wake of the September attacks, their stance has only
hardened. Shortly after 9-11, Sheikh Abdalqadir issued a declaration
excoriating Osama bin Laden and the Taliban. The attacks themselves he
condemned as horrific and, more to the point, futile. "Bombing a building
which houses a magical wealth system, which has no physical reality but
remains simply electronic impulses in the digital archives of computers, far
from attacking or weakening the system, strengthens it," wrote the sheikh.
"A true study of the Qur'an and the Sunna shows us that capitalism will not
be abolished on the battlefield but in the marketplace where it is
practiced."

"Look, we are against terrorism more than Bush is," Vadillo explains via
email. "You want to be radical? You don't need to blow up the bank, just
burn your bank account. And for that you are going to need an alternative.
What is the alternative? E-dinar."

That's not to say Jackson shouldn't be worried about tainted money coursing
through the e-gold system - or that he isn't. But what troubles him most are
the Ponzi schemes: Hundreds of online pyramid scams have made e-gold
(because of its convenience and because it offers bilked users no way to
cancel charges) their payment system of choice.

It gives some sense of how much these operations have contributed to
e-gold's bottom line to know that, to this day, the single largest holding
in the e-gold system - $1.1 million in gold, 8 percent of total reserves -
sits unclaimed in an account belonging to an alleged Ponzi that shut down a
year ago. As for more recent activity, Eric Gaither of Gaithman's, one of
the leading independent gold-currency exchanges, guesses that "at least 50
to 60 percent of e-gold" transactions are headed into or out of what he and
others sometimes euphemistically call HYIPs (high-yield investment programs)
or simply games. Other reputable exchange providers put the figure between
30 and 90 percent. "Frankly," says Steve Foerster, former CTO of G&SR and
currently COO of Dominica-based gold currency 3PGold, "without online games
right now there would be no gold economy."

For his part, Jackson vigorously denies HYIPs account for anything
approaching a substantial portion of e-gold traffic. "These are piddly-ass
little things," he says. "When you actually run one of these things down,
they're pathetic." Still, he concedes, they're a PR liability, and he and
his staff have been working hard to squeeze them out of the system. They've
instituted "know your customer" rules to identify suspected swindlers, and
they've cooperated amicably with law enforcement. When SEC staffers came to
G&SR's offices last May to review the accounts of one of the biggest e-gold
schemes ever - the self-styled "Christian-based humanitarian organization,"
E-Biz Ventures, shut down after allegedly inflicting losses of $8.5 million
on investors - they were welcomed with coffee, bagels, and a conference room
of their own. J. Chris Condren, the attorney charged with recovering E-Biz
investors' money, has only good things to say about e-gold. "They've
answered every question we've asked them, they've responded to every
subpoena, every request for information."


Still, Jackson sometimes seems almost baffled that anyone could care who
uses e-gold and why. It's all the same for him, for instance, that most
users haven't a clue about the profound macroeconomic consequences he sees
in e-gold. "They could be doing this for the dumbest reasons, we don't
care," he says. "All we need is a growing circulation." For Jackson, the
only thing that really seems to matter is what happens when the circulation
gets big enough for e-gold to matter. Will he be proved right or not? Will
e-gold bring about an epochal change in human destiny or won't it? And if it
does, will anybody still care that once upon a time e-gold was a currency
beloved of gun freaks, Sufi anarchists, and Ponzi schemers?

"You're going to have to make a personal judgment," says Jackson. "Am I some
sort of dipshit visionary, you know, that's got some idea, but what I'm
really doing is just sort of facilitating all kinds of sleazy stuff? Or in
fact is this vision one that is achievable?"

***

So which is it? Take your time. And if you really want to get a handle on
the question, try the following experiment. Go out and find a 400-troy-ounce
gold bar, like the ones stored in the e-gold vault in Dubai, and pick it up.
You'll learn something interesting about gold: It's heavy.

Maybe you think you knew this already. Maybe you know gold has a specific
gravity of 19.3, and that this means it's 19.3 times heavier than water.
Maybe you also know gold is heavier than any element known to humans prior
to the 18th-century discovery of platinum, and almost twice as heavy as
lead. But until you've held 400 ounces of it in your hand, you've probably
never grasped just what sort of heavy this stuff really is. Relative to its
modest size, the 27.5 pounds in a standard gold bar is so much weight it's
nearly impossible to accept that gravity alone accounts for the force you
feel as you lift it. You're tempted to attribute some additional, almost
metaphysical, power to the metal - as if the gold brick in your hand weren't
just undeniably real but a gleaming avatar of reality itself.

And whether or not Douglas Jackson actually thinks of gold that way, he sure
tends to act like he does. Beneath the scaffolding of what he calls his
"unassailable economic logic" lies the true foundation of his vision: the
self-assurance of a man convinced he's discovered something as genuine as it
gets in a world ruled by fiction and cheats.

This is why, despite Jackson's efforts to position his system as a serious
financial player - a rival to the major currencies of the world - little
e-dinar remains Jackson's closest corporate partner. Maybe Jackson wants to
fix capitalism and maybe the Murabitun want to finish it, but both, at
bottom, pursue a truth that isn't so much economic as it is spiritual. Both
see in gold a purity that transcends the machinations of the merely mortal.

Which at least answers part of Jackson's question: Is he some sort of
dipshit visionary? Well, no more or less, really, than Sheikh Abdalqadir
As-Sufi, the Scottish redeemer of the Muslim world. As for whether Jackson's
vision is in fact achievable - let's just say the odds of e-gold effecting
an epochal change in human destiny are probably not much better than
e-dinar's odds of bringing back the caliphate.

But both may be better than you think. Last June, Mahathir Mohammed, the
irascible, authoritarian prime minister of financially beleaguered, mostly
Muslim Malaysia, called for the formation of an "Islamic trading bloc." Like
the Euro Zone, the bloc would have its own currency, yet with a twist: The
"Islamic dinar," as Mahathir proposes calling it, would be backed not by
anybody's faith and credit but by gold. As it happens, Mahathir seems to
have gotten the idea for the gold dinar from none other than Jackson's
associates among the Murabitun. If the proposal flies then there is a more
than negligible chance that e-gold could become the base-money system for an
economic community stretching from Indonesia to Morocco.

"I want to jump on that," Jackson says of the opportunity. Already Vadillo
and the sheikh have met with Mahathir to make the pitch, and Jackson hopes
to fly to Malaysia soon to drive it home.

Of course, convincing a major world leader to put the monetary fate of a
billion people in the hands of a retired oncologist from Melbourne, Florida,
is not going to be easy work. But Jackson doesn't seem to mind the
challenge. "That's going to be an especially fun project over the next few
months," he says. "I'm gonna have a lot of frequent-flier miles."

[end]


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