Re-examining money, debt and Islamic banking in the USA

Purpose - The purpose of this paper is to challenge the view that there is nothing wrong with fiat money, debt and interest or Islamic banking, by re-examining the monetary performance of the USD, analyzing US economic projections of debt at interest and evaluating the contribution of Islamic banking within a financial system that does not recognize the Shari’ah. Design/methodology/approach - This paper constructs gold and commodity price indices from 1792 to 2023 to re-examining the performance of the USD over the long-term; through library, document and content research, analyzes the impact of debt and interest on the US economy and re-examines whether US institutions are offering genuine Islamic financial alternatives. Findings - US$1.00 in 1792 is now worth less than US$0.01 in 2023. The monetary balance sheet of the USD is now 97% backed by debt. Within the next 10 years, the USA will be unable to service its debt. There has been no progress in Islamic banking in the USA, with all products involving risk-free debt transactions priced at interest. Research limitations/implications - By adopting a monetary theory of value, the devaluation of the USD resulted in increased prices due to the debt-based fiat standard and an exponential increase in public debt and interest. Practical implications - The USD and the US economy are unsustainable in the long term, and US Islamic banks should transform into Islamic investment managers. Social implications - Muslims should create and preserve wealth through genuine Islamic intermediation based on Islamic partnerships and Islamic social finance. Originality/value - The US fiat standard is debt organized into currency, which is exponentially increasing and confiscating wealth through inflation and transferring it via interest to the banking system. US Islamic banking products replicate the practices of conventional banks.