A robbery which is not in Lebanon

The incident ended when the man reportedly left the bank and turned himself in. Reports also say the bank gave him enough money to pay for his father's hospital expenses.

Interestingly, many Lebanese sympathised with the man even though he had threatened bank staff and other customers. What is more interesting is that the police have decided not to prosecute him.

The Lebanese police will have a hard time prosecuting the man because his motive was not to rob the bank but only to withdraw his savings of US$210,000 to pay for his bedridden father's hospital treatment. He had tried several times to do it peacefully but was not allowed by the bank. Finally, in desperation, he decided to act drastically.

This incident is one outcome of the severe economic crisis that has been going on in Lebanon since 2019. In that year, the value of the Lebanese currency plummeted, which in turn caused the inflation rate to soar and the country's economy to collapse. About three-quarters of Lebanon's population is now poor.

In the wake of this crisis, Lebanese banking authorities have imposed unofficial capital controls beginning in early 2019 by limiting currency withdrawals from banks and stopping the withdrawal of deposits in US dollars. Instead, depositors of dollars are only allowed to withdraw their savings after converting them into Lebanese pounds at a pitiful exchange rate - about 74 per cent lower than the market rate. This makes many Lebanese people so angry with the banking industry.

Some may ask if this situation can occur in other countries, including ours. The answer is yes. After all, since the beginning of the interest-based banking industry in Europe in the 18th century and the use of paper currency to replace gold and silver, banks were unable to allow all depositors to withdraw all their deposits at the same time.

The banking industry's primary business model is to lend money and profit from it, which is not allowed by Islam. In Islam, one is allowed to gain profit from actual trade or equity investments with risk elements and not from lending money.

Moreover, in pursuit of more profit, banks later gave loans in paper currency, which they could easily print and produce. The banks initially stated that paper currency was gold-backed. This system is called the `Gold Standard. But in reality, only a small proportion of the paper currency was backed by gold. If all the depositors wanted to convert all the paper money into gold simultaneously or withdraw all their deposits, the banks would be unable to accommodate the depositors' demand since the amount of gold in their possession was much smaller than the paper money. That is why there have been frequent banking crises in Europe since 1634. The most famous crisis at that time was the "Tulip Mania Financial Crisis".

But the greed of bank owners ensured that this system is maintained till today. Moreover, banks could give more loans and earn more profit when the 'Gold Standard' was officially dissolved in 1971 when the American authorities announced that they would no longer honour the promise to convert US dollars into gold.

The system has evolved further such that now, more than 95 per cent of the currency does not even exist physically but is merely electronic records created from thin air when commercial banks issue loans to their customers. So if a company or an individual takes out an RM1 million loan from a bank, then RM1 million of new Ringgit currency has been created electronically from nothing and does not even exist physically. As a result, all currencies worldwide, including our country, are no longer backed by any precious metal.

The central bank creates the physical paper and metal currency that some of us use to buy nasi lemak at roadside stalls. But the amount is tiny, less than five per cent of the total money supply in our financial system.

We all need to be aware of some adverse effects of this system. The first is that it is easy for banks to give loans since they do not need to have gold and silver or even cash to issue loans. All that is required is a banking license from the central bank. Because of that, our country's debt increases by more than RM 7 billion every month.

Another outcome is the high level of indebtedness in society. For example, in Malaysia, the total debts of the government, corporate, and household sectors are more than RM3 trillion. Worldwide, the total debt is more than USD 300 trillion. Imagine the amount of profit for the bank owner due to this debt.

Another outcome is inflation, which is the fall in the purchasing power of the currency over time over time. If the banks are allowed to give loans without any control, the problem of hyperinflation can occur, where prices will rise every few hours.

When employers are burdened with debt, salaries and wages tend to stagnate. A cost of living problem will occur when the inflation rate is higher than the increase in wages and salaries.

When a country is in a state of high indebtedness, any shock to the economy can produce an economic and financial crisis when households and business companies cannot pay their debts, which is happening in Lebanon right now. But this situation has also happened in other countries, including Greece and Argentina. Even the United States is not immune. The best example is the subprime crisis that occurred there in 2008.

Another outcome is a widening income gap between the poor and the rich. Those with low incomes are plagued with the problem of static wages and salaries because their employers want to reduce operating costs. However, the rich, especially the financial elites, will become more prosperous due to increased interest income.

Finally, if there is a crisis and many depositors want to withdraw their money in cash, a bank run will occur, where banks will not be able to fulfil their requests, as is happening in Lebanon now.

In conclusion, the financial system practised worldwide, including in Malaysia, will not be able to help create a fair and compassionate situation for the people. If this system is allowed to grow, more people will suffer. Intra and interracial conflicts will intensify. Political leaders may come and go, but the people's misery will continue unabated.