Teori Keuangan

dan Investasi ‫مرحبا‬

‫مرحبا‬
Syariah
Dr. Vita Sarasi, S.E., M.T
Joval Ifghaniyafi Farras, S.M., M.M
04.
Inflation in ‫اثنان‬
Islamic
Perpesctives
Inflation in the Conventional Economy
Inflation is an economic condition in which prices
generally increase and it happens in the long term.
● Inflation in general occurs because the money
supply is more than necessary.
Types of Inflation in the Conventional
Economy
By Severity;
● Mild Inflation
Inflation has not so much disrupted the state of
the economy. Light inflation is below 10% per
annum.
● Moderate Inflation
This inflation has not endangered economic
activity but reduced the welfare of people on
fixed incomes. Moderate inflation ranges from
10% - 30% per annum.
Types of Inflation in the Conventional
Economy
By Severity;
● Heavy Inflation
This inflation has destabilized economic
conditions. People become reluctant to savings
because interest on savings becomes low, they
tend to choose to invest in kind. Heavy inflation
ranges from 30% - 100% per annum.
● Hyperinflation
This type of inflation is already destabilizing the
economy and is difficult to stop. Very heavy
inflation is above 100% per annum.
Causes of Inflation in the Conventional
Economy
Demand-pull inflation
● Increased demand sometimes cannot be met
by producers which ultimately causes prices
to tend to rise.
● The increase in aggregate demand that
occurred due to an increase in government
spending, an increase in demand for goods for
export and an increase in demand for goods
for private needs resulted in prices rising
because the supply was fixed.
Causes of Inflation in the Conventional
Economy
Cost-pull inflation
● The increase in production costs occurred due
to an increase in raw materials (such as an
increase in labor wages or an increase in fuel
oil). This increase in production costs then
causes prices to rise and inflation occurs.

Inflation as the amount of money in circulation increases

● This theory was put forward by the classicists
who said that there is a relationship between
the amount of money in circulation and the
prices. If the number of goods is fixed, while
the money in circulation increases 2 times,
the price will double.
Inflation Theory in Conventional
Economics
Quantity Theory
● The classicists argued that the price level is
determined by the amount of money in
circulation. The price will increase if there is
an increase in money in circulation while the
number of goods offered is fixed.
Keynes's theory
● Keynes saw that inflation occurred because of
the excessive appetite of a class of people
who wanted to take advantage of more goods
and services available.
Structural Theory
● According to this theory, the cause of
inflation is producers who are unable to
anticipate quickly the increase in demand
caused by population growth.
The Impact of Inflation on People's
Economic Activities
Impact of Inflation on Income
● Inflation can encourage entrepreneurs to expand their
production, thereby growing new job opportunities and
increasing one's income. However, for those with fixed
incomes inflation will be detrimental because their fixed
income will be less when compared to the price of goods
and services.
Impact of Inflation on Exports
● In a state of inflation, the competitiveness of export
goods decreases. The country will suffer losses due to the
amount of sales being reduced which means that the
foreign exchange earned is also getting smaller.
The Impact of Inflation on Saving Interest
● When inflationary, the real income of savers decreases
because the amount of interest received is in fact reduced
due to the rate of inflation.
The Impact of Inflation on People's
Economic Activities
Impact of Inflation on Cost of Goods Calculated
● The state of inflation causes the calculation to obtain the
cost of goods to be too small or even too large. Due to the
unstable percentage, we cannot be sure of the cost of
goods and the selling price. This state of affairs can
destabilize the economy, especially for producers.
Inflation in an Islamic Perspective
● By bringing up the facts of the famine that
has occurred in Egypt, Al-Maqrizi stated that
the inflation event is a natural phenomenon
that has befallen the lives of all people around
the world from ancient times to the present.
● Inflation occurs because prices in general
increase and continue to persist.
● At the moment, the inventory of goods and
services is experiencing scarcity, since it is in
dire need of them they (consumers) have to
spend more money on the same amount of
goods and services. (Al-Maqrizi, 1986 :30
cited in Euis Amalia's book, 2005 : 268)
Inflation in an Islamic Perspective
Al-Maqrizi revealed that inflation does not occur
due to natural factors alone but due to human
error. So based on the causative factor.
● Al-Maqrizi asserts that inflation is divided into
(two), namely
● Natural factors (Natural inflation) and
1. Human Error Inflation.
Inflation in an Islamic Perspective
Natural Inflation
● When a natural disaster occurs, various
foodstuffs and other produce experience a
very drastic decline and there is a shortage.
● On the other hand, due to its very significant
nature in life, the demand for various goods
has increased.
● The soaring prices far exceeded the
purchasing power of the people. (Adiwarman
Karim, 2014 : 425) Al-Maqrizi said that this
inflation is inflation caused by a decrease in
Aggregative Supply (US) or an increase in
Aggregative Demand (AD). (Adiwarman
Karim, 2006 : 140).
Inflation in an Islamic Perspective
Natural Inflation
● If you use a conventional device, namely the identity
equation :
MV = PT =Y
Where :
M = Money supply
V = Speed of circulation of money
P = pricing tier
T = Number of goods and services (Q)
Y = national income level (GDP)
Then Natural Inflation can be interpreted as :
● Disruption to the amount of goods and services produced in
an economy (T). For example T ↓ while M and V remain then
the consequence is P ↑.
● The increase in people's purchasing power in real terms. For
example, the export value is greater than the import value,
so that net import of money occurs which results in M ↓ so
that if V and T remain then P ↑. (Adiwarman Karim, 2006 :
140).
Inflasi dalam Perspektif Islam
Natural Inflation
● Further if analyzed by equation :
AD = AS
● And AS = Y
AD = C + I + G + (X-M)
Where : Y = National Income
C = Consumption
I = Investment
G = Government Spending'
● (X – M) = net export
Inflation in an Islamic Perspective
Natural Inflation
● Then Natural Inflation will be able to be
divided based on the cause into two groups,
namely as follows :
a) As a result of too much money coming in
from abroad, where exports (X↑) while
imports (M↓) so that net exports are of
very large value, it results in an increase in
Aggregative Demand (AD↑). Graphically
this can be graphed as follows :
b) As a result of the decline in production
levels (AS ↓) due to the occurrence of
pacekelik, war, or embargo and boycott
Inflation in an Islamic Perspective
Human Error Inflation
● This inflation is known as human error
inflation or False Inflation. It is also found in
the Qur'an surah Ar-Rum: 41
● According to Al-Maqrizi, inflation caused by
human error includes corruption and poor “Corruption doth appear on land and sea
administration, excessive taxes and increased because of (the evil) which men’s hands
circulation of the fulus currency. have done, that He may make them taste a
1) Corruption and Poor Administration
Al-Maqrizi stated that the appointment of
part of that which they have done, in order
government officials based on bribery, and not that they may return” - Al-Qur’an surat Ar-
capability, would put people who have no Rum : 41
credibility in important and respectable positions,
whether in the legislature, judiciary, or executive.
●
Inflation in an Islamic Perspective
Human Error Inflation - Corruption and Poor
Administration
If we refer to the MV = PT equation, then
corruption will disrupt the price level (P↑)
because producers will increase the selling price
of their production to cover the "stealth" costs
they have incurred.
If you refer to the AS=AD equation, it will appear
that corruption and poor administration of
government will result in contradictions in the
aggregate supply curve (AS↓). (Adiwarman, 2014:
143). This is reflected in the following figure.
●
Inflation in an Islamic Perspective
Human Error Inflation - Excessive taxes
● According to Al-Maqrizi, due to the
dominance of corrupt officials in a
government, state spending has increased
drastically.
● As compensation, they implemented a tax
system that oppressed the people by
imposing various new taxes and raising the
level of existing taxes.
● This greatly affects the condition of the
farmers who are the majority group in the
community.
Inflation in an Islamic Perspective
Human Error Inflation - Improved circulation of Fulus
Currency
● Initially, fulus money that had an intrinsic value
was much smaller than its initial value, it was
printed as a transaction tool to meet the
insignificant needs of daily life. Therefore, there
is only a small amount of this currency in
circulation.
● When there is a budget deficit as a result of
the bad behavior of officials who spend state
money on various personal and group
interests, the government carries out a
massive printing of fulus money.
Human Error Inflation - Improved circulation of Fulus
Currency
● According to AlMaqrizi, such activities
became more widespread at a time when the
government's ambition to make substantial
profits from printing currencies that did not
require uncontrolled high production costs.
● As rulers, they issued proclamations forcing
the people to use the currency. The number
of fulus owned by the people is getting bigger
and the circulation has increased very sharply,
so that fulus has become the dominant
currency. (Al-Ashraf Sha'ban, in Al-Maqrizi
1986 : 71 cited in Adiwarman Azwar Karim,
2007 : 429).
Inflation in an Islamic Perspective
Consequences of Inflation:
Causing disruption to the function of money, especially to
the function of savings, the function of upfront payment
and the function of the unit of calculation. As a result of
inflation people have to break away from money and
financial assets. Inflation also results in self-feeding
inflation.
● Weakening people's enthusiasm for saving (turunya
MPS)
● Increasing shopping tendency, especially for non-
premier and luxury goods (rising MPC)
● Direct investment to unproductive things such as the
accumulation of wealth in the form of land, buildings,
precious metals, and foreign currency and sacrifice
productive investments such as agriculture, industry,
trade, and transportation. (Westi, 2003 : 59)
Inflation in an Islamic Perspective
Solutions to Overcome Inflation in an Islamic Perspective:
● Abdul Qodim Zallum in his book the financial system in
the caliphate state revealed that "the monetary system
based on gold and silver is the only monetary system
that is able to solve the massive inflation that afflicts
the whole world, and is able to realize the stability of
exchange rate currencies, and can encourage the
progress of international trade. ( M. Hatta, 2016)
● Import ban if indeed domestic production is still
sufficient
Inflation in an Islamic Perspective
Solutions to Overcome Inflation in an Islamic Perspective:
This happened during the reign of caliph Umar ibn Khattab
r.a. At that time caravans of merchants who sold their
goods abroad bought from abroad less value than those
they sold (positive net export).
● The existence of positive net exports will make profits,
profits in the form of excess money will be brought
into Medina so that people's income and purchasing
power will increase.
● Rising Aggregative demand (AD ↑), or on the chart is
described as AD shifting to the right, will result in an
increase in the overall price level (P ↑). (Adiwarman
Karim, 2003: 141).
Inflation in an Islamic Perspective
Solutions to Overcome Inflation in an Islamic Perspective:
● What did caliph Umar ibn Khatab r.a do to address the
problem? He forbade the people of Medina to buy
commodity goods for 2 consecutive days. As a result,
aggregate demand (AD↓) has fallen in the economy.
After the ban expires, the price level returns to normal.
(Adiwarman Karim, 2003 : 14.
Question
1. What is the definition of inflation, and how
does this happen in the modern economy?
2. How does inflation affect people's daily lives,
especially in developing countries?
3. What is the Islamic view of inflation, and how
can Islamic teachings help solve the problem
of inflation?
4. What should the government do to address
inflation according to Islamic teachings?
THANKS