The inviolability of Gold and Silver
Islamic law can be divided into two parts: Ibadaat and Mua'malat. Ibadah is the science of the relationship between us and Allah, while Mua'malat is the science of the relationships between humankind. Religion today has been reduced to 'personal morality', leaving out the social, political and economic aspects which has ultimately brought us to the condition of Islamic practice nowadays; People focused on a narrow, individualistic set of rules while ignoring the larger social issues.
Mua'malat can therefore be understood as firstly, the interaction in Economics: trading, commerce, lending, borrowing, and secondly in 'Personal interactions' such as marriage, divorce, inheritance, etc. Back to the part of Mua'malat that has been completely distorted in the framework of Islamic economics today: Trading, financial institutions and contracts.
Gold, silver and storable, measurable foodstuffs are all commodities subject to riba. As such they are currencies against which other things not subject to riba are valued. These commodities admit of no exchange which entails an increase. When gold is exchanged for gold or silver then it must be like for like and immediate, from hand to hand. If there is any delay it is riba, usury. In other words riba is not merely ‘interest’ but a far more radical interdiction.
Again, Marwan ibn al-Hakam, the fourth Umayyad Khalif forbade the buying and selling of chits of paper [used to distribute foodstuffs to specific persons] denouncing it as riba.
[Malik’s Muwatta K. al-Buyu’, bab al-‘Ina]
This too clearly demonstrates that riba is not merely ‘interest’. It was not the chits of paper as such that were forbidden as riba but the buying and selling of them as if they were a commodity. Another of the meanings of riba is that you exchange one thing for something of less value: Ibn Rushd declares in his Bidaya that one would not sell a horse for a shirt for there would be an unjust excess of profit for one partner. Likewise the exchange of a piece of paper [as ‘paper currency’] for something of worth is an example of riba. Gold and silver ensure the abolition of these aspect of riba. Ibn Rushd says in the Bidaya al-Mujtahid: "It is obvious from the law that the purpose of the prohibition of usury is prevention of the fraud that usury entails, and ensuring equity in transactions consisting in close approximation and equivalence between the goods exchanged."