REFORMING MONEY AND BANKING: HOW A FULL-RESERVE, INTEREST-FREE SYSTEM CAN ELIMINATE GOVERNMENT DEBT, DEFICITS, AND INFLATION.

Abstract

The foundation of the global financial order has long rested upon the model of fractional reserve banking and interest-based lending (riba). This framework has, over time, produced widespread economic distortions, burdening nations with unmanageable debt, fostering financial instability, fueling inflation, and deepening socio-economic inequality. Against this backdrop, the Islamic economic perspective not only illuminates the causes and consequences of riba but also offers a comprehensive and ethical alternative: an interest-free full reserve banking system. This model envisions a path toward liberation from the persistent crises of debt, deficits, and inflation. In what follows, we shall first examine the concept of riba and the mechanics of the prevailing banking structure; next, we shall explore the framework of the full reserve system; thereafter, we shall analyze the detrimental effects of debt, deficits, and inflation; and finally, we shall demonstrate how the interest-free and full reserve paradigm provides a viable foundation for genuine financial reform.