3min snip

The Thinking Muslim cover image

Managing Your Money and the Halal Economy with Harris Irfan

The Thinking Muslim

NOTE

The Impact of Inflated Money Supply on Investment

Inflated money supply leads to a devaluation of cash in bank accounts and compels venture capital (VC) firms to rapidly invest in projects, often disregarding their long-term viability. This urgency arises from the need to protect capital from significant annual devaluation rates, which can exceed the officially stated inflation rates. Consequently, VC firms focus on short-term, high-return investments due to the instability of the current monetary system. Historical comparisons illustrate that a sound currency, such as under a gold standard, would preserve value over time, contrasting sharply with the dramatic loss of dollar value since the abandonment of the gold peg in 1971. The continuous expansion of the money supply allows governments to easily finance debts, particularly in wartime, through mechanisms that essentially amount to money printing. This results in a shift from risk sharing in investments to an asymmetrical financial relationship where banks exploit the devalued currency, placing individuals in a subordinate position.

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