In the wake of the new maniac and psychopath of the month (i.e Joseph Stack who did a homicide-suicide plane crash into I.R.S. building in a failed attempt to kill hundreds to Faisal Shahzad failed Times Square bombing that could of maimed/killed hundreds, maybe even thousands) who in some twisted sense of righteousness believe that killing innocent civilians equates to some deed of salvation or proper retribution for past misgivings. These characters are some of the more obvious examples.

terrorism, act of terrorism, terrorist act (the calculated use of violence (or the threat of violence) against civilians in order to attain goals that are political or religious or ideological in nature; this is done through intimidation or coercion or instilling fear)

Here is my open letter to “The Terrorists”, current and aspiring psychopaths and cowards who might not have thought they “fit the profile”.

Dear Terrorists,(but not limited to)

The “loose cannon” who claim they are Muslim and follow the Quran and Hadiths in Islam who like to blow themselves up (and others) thinking (Allahhualim) that they are going to see Jenna (Heaven). You better go back to the deen of Al-Islam (if you haven’t already blown yourself up) and re-study because your eyes, ears and hearts are sealed with wickedness and the shaytan.
That’s violent terrorism.

Police officers and those in authority in the justice system who beat down and kill civilians mercilessly because you think they are expendable. You have the disease of cognitive dissonance towards those that you’ve concluded have an “otherness” about them which does not fit into your own cultural matrix.
That’s enforcement terrorism. (not to mention xenophobic and prejudice)

The executives and investment houses/banks/firms sitting in their ivory tower embezzling tens of millions and creating questionable investment instruments (money schemes) while undermining the integrity of the financial system. Impoverishing tens of millions for your own selfish benefit.
That’s financial terrorism.

For the murderers and killers who worship gang violence while killing people in your own community including innocent women and children because you want a quick drug profit.
That’s social and urban terrorism.

Those in the halls of Congress (politicians and law makers at the state and federal level) that play up people’s worst fears to usurp power and mislead your constituents with a divide and conquer strategy. Laying in bed with lobbyists and playing both sides of the political coin for your own one dimensional power grab.
That’s political and institutional terrorism.

For the country that goes into other countries claiming (lying) that another country has WMDs (Weapons of Mass Destruction) because so-called intelligent organizations with fancy acronyms “certified the facts” with a faulty threat matrix then mercliessly kills over 150,000 plus innocent civilians (45 9/11s) for almost 10 years while injuring millions then arrogantly occupies the same country creating more violence and misery for the citizens. Or any country that uses occupation as a foundation for foreign policy.
That’s sovereign terrorism.

For the governments and related banks that are in cahoots with one another who indulge in “too big to fail” bailouts and print money like it grows on trees while causing inflation and devaluing the dollar. Not to mention the draconian practice of fractional reserve banking and usury which buries people under so much interest that they are financially impotent.
That’s economic terrorism.

For the racist bigot (and many don’t even know they are and will read this and say, “Oh that’s definitely not me”….well not so fast, it might be you) individual that foolishly claims to believe in God but sympathies with their ethnic, racial, or tribal identity over the inclusive and humanitarian guidelines of all monotheistic ways of life. Now called religion. 
You are a community terrorist. (Not to mention a hypocrite)

For the so-called news organizations that are muliti-milllon dollar partisan hack misinformation “non-thinking” tanks that spew misleading, demeaning, information and purposely confuse the public with empty politically inspired anecdotes and regurgitate sound bites from their corporate/ political slave masters.
That’s information terrorism.

If there was anyone who thought any one group of people have cornered the market on “terrorism”, you have not done your homework.

“He who kills a person without (the latter) having killed another person, it is as if he has killed all of humanity, and he who makes one person survive, it is as if he has caused all humanity to survive” – (32,5) – Quran

This is going to be short (at least relatively shorter than most of my posts), but over the years I’ve had quite a few online and face-to-face discussions/debates/conversations with people from different walks of life on a lot of political topics. Recently, my boy sent me a Facebook thread on a political discussion that pretty much imploded from the start. Rather than engaging in a respectful discussion about the topic, the discussion exploded into character assassination, dehumanization, and parables of mere conjecture.

In many instances these conversations fall into the trap of incessant bickering about labels and empty political affiliations. We bicker about the minutiae then go back into our social corners and preach to our choirs. Is this not madness, how can we get things done with such behavior? From my perspective, we have mastered the art of condescension, egotism, and intellectual show boating at the expense of empathy and a mutual respect for those who have walked a different path than our own. We demonize each other for cheap political points.

While we divide our selves into oblivion the same political psychopaths from the Republican, Democratic party and various Poli-tocrats will walk away with the spoils. We are all naive for not realizing this. Recently, I’ve been digging deep into a new book, You Are Still Being Lied To: The Disinformation Guide to Media Distortion, Historical Whitewashes and Cultural Myths by Russ Kick and there are several passages that reinforce my point:

Intellectuals have a problem: they have to justify their existence
pg 60 —Normand Baillargeion

Hate has the annoying tendency to turn into hypocrisy. I laugh with glee when my side catches the other’s lies and follies. To a point, that’s healthy and cathartic.

But you don’t hear me laughing when the other side returns the favor. Then I discount the point and quietly fume at the attack itself. Don’t they understand our side is the good one?

And so it goes: They smear us; we uncover the truth about them. They have corrupt contributors; we’re creating a badly needed war chest. Their moral difficulties are untenable; ours, if any, are excusable.

Hate also kills thinking.
— Seth Freeman

So here are some basic conversational rules that can lead to more progress and less pomp

1. Stay focused on the topic at hand.
2. Being a blind ideologue just makes you look ignorant of the topic at hand and biased towards others.
3. DO NOT assassinate the other person(s) character. The conversation will turn into a personal screaming match
4. Do your research and source empirical data. Don’t just say something because it sounds good or it’s some talking point that has been regurgitated from the “choir”.
5. Before you speak, think your thoughts through. If you are getting angry or frustrated about a particular response, take the higher ground. Pause, then break down your response into smaller chunks.
6. “Snarkiness”, condescension, and belittling might make for some good comment entertainment, but it can derail a good conversation into the black abyss.
7. Show a bit of empathy, morals and understanding. Try your best to know who your audience is. It’s not what you say but how you say it
8. Now if all this fails and the person you are speaking to still remains ignorant, just walk away. Although very difficult to do because it’s always nice to get the last word, but sometimes you have to agree to disagree before feelings get hurt
9. As a last resort you can just punch the person in the face. It will make you feel good but the moment will be turned into to fisticuffs (just kidding)

Don’t forget good conversational etiquette and manners. We don’t have to agree on every point to get things done.

• Real change in campaign ‘08: Stop hating the other party By Seth Freeman
• You Are Still Being Lied To: The Disinformation Guide to Media Distortion, Historical Whitewashes and Cultural Myths by Russ Kick

As a teenager I was a rowdy young thing; somewhat of a bully and most definitely a rebel. However, I possessed a teen’s innocence; the innocence of a child. Other than trying to curse every now and then or trying to meet with a boy I was interested from time to time (which I hardly got away with because my parents were hawks in nature), my mind was focused on fun activities like sports, girlfriend hangouts, writing and school.

I look into the eyes of our youth and I see pain, sadness, unnecessary responsibility and emptiness. I see hyper sexualized boys and sexually objectified girls (by both their own doing and parental neglect). I see babies with babies. I see boys lashing out in anger towards one another. I see girls disrespecting their minds and bodies. I see boys disrespecting girls and girls disrespecting boys. I see emptiness. I see aimlessness. I see hopelessness. I see shamelessness. I see adults trapped in youngins’ bodies wishing they could escape; yet, still believing they are grown enough to pave the way to success. Yet, some don’t care to be successful.

I see mothers smiling proudly at an ill mannered young child whose voice is unpleasant and rude to those around. I see fathers neglecting their parental roles in other ways; avoiding being a father or physically present but not mentally there. I witness parents being friends to their children rather than disciplinarians. Today’s youth is lost but not to their own fault. How is a child to direct him/herself when he/she lacks the most crucial thing; a role model to follow and respect.

I remember when I was young it took a village to raise a child. If a child misbehaved the whole community stepped in to educate and direct that one child. The worst parts of American culture seem to dictate new standards to our adults and youth alike. The worst parts of American culture seem to have removed the innocence from our youth; forcing them into an adult-like role at a very young age. Who is to blame? Parents? Media? Technology? The education system? Our youth? Freedom (in an exaggerated form of freedom)? Or is it all of the previously stated combined?

I write this not to judge nor to blame but rather to find solutions; solutions to help our youth heal today, so they can lead tomorrow. I write this with love. I believe that our youth are only as strong as our adults. However, I fear that when today’s babies are having babies and parents are no longer parents, how does our next generation become a Barack Obama, a Sonya Sotomayor, or just simply educated, respectful and successful adults!

IMPORTANT DISCLAIMER: In no way shape or form is this post aligning itself with any particular economic school, political party or ideology like the Austrian School of Economics, Keynesian(s), Saltwater/Freshwater Economist, Democrat, Libertarian, Republican, Left, Right, Socialist etc. The purpose of this post is a conversational starter about the questionable merits of interest. Although this topic is highly controversial and the world at large has accepted interest as the norm, it’s worth having a debate on the distortions that interest brings into the economy.

Shout out to Br. Halit for giving me the title for this post, originally titled The Case for NO Interest. I am no Islamic scholar or fancy economist. I’m a student of Islam and life. Although I don’t have the vast econ-textbook knowledge like many official economist, by the good graces of Allah, I do have common sense and a pragmatic mind. With all the thousands of economist around the world, only a few of them had the insight to foresee the recent 2008 financial crisis, not to mention past crises. Doesn’t mean that we don’t need economists, but I see a lot rear-view/hindsight economists out there. I wrote this post due to my interest, no pun intended, in understanding the Islamic law regarding the prohibition of Riba (interest). Many of the themes of this post are related to Islam. If you have a problem with that and topics that have to do with Allah (God) make you too uncomfortable, then you should go here:

Table of Contents

1. Allah’s (God) ruling on Interest
2. I’m NOT Interested
3. Economic Sophistry
4. A Fair Alternative to Interest
5. Conclusion

Allah’s (God) ruling on Interest

The purpose of this post is a conversational starter on the questionable merits of interest. In addition I’m doing a bit of education here for non-Muslims because they ask me question after question after I tell them that interest is prohibited in Islam. I will address some of their questions in this post. Regardless of your way of life, clearly there is room for discussion on abolishing interest based transactions. From an Islamic perspective, Riba (Interest) is prohibited. Taking interest or charging interest is prohibited. A transaction can be prohibited by adding money on top of money (giving or taking) or by overpricing assets that are sold to the public. In Islam, every financial action should be just. You can profit, but not at the gross expense of others. The whole point of Islamic finance is to create a proper balance between the basic needs of society and the profitability of those business transactions that impact that society. In today’s world of secular based ideology, a person in power can justify any act through legal sophistry, even if the act undermines the person and the surrounding community. In Islam, you don’t “Rob Peter to Pay Paul“, then wrap an act or law in some fancy legalese, while ignoring the financial imbalances and “moral hazard” that is inserted into the economic system.

In my view, this is the root of the problem. As long as their are lawyers, financiers, investors, and government regulators that can justify questionable financial acts with legal and economic sophistry, we could have continued systemic problems. It’s not just Islam that prohibits usury (interest), but every monotheistic religion has prohibited usury. Over time, with re-writing and revisions of theological law, the use of usury has been used as an acceptable mechanism for profit. Allah knows best, but I do believe that interest is 1 head of a 5 headed demon of what is wrong with the economy. In addition to interest, clearly we are suffering from a ethical problem, financial illiteracy problem, debt burden problem, regulatory reform problem and definitely a hubris problem.

I’m NOT interested

When I get into discussions on economics and Islam, while making it clear that Islam does NOT allow interest based transactions, many people ask “Well how do you make any money in Islam?”. That would be like me saying “Hey I don’t drink alcohol”. Then they ask me, “Well how do you quench your thirst”?

I find it strange that the same people who say “Hey, let the free and fair market take it’s due course”, are the same people that aren’t as excited to deal with the burden of all that “free market” activity when the economy collapses. I like to call these people “Fair Weather Market/Economy Capitalists”. All the interest in the world couldn’t even save two major investment firms in 2008, Bear Stearns and Lehman Brothers. What about AIG? Those are just the more recent victims and had other firms not been bailed out, many more would have gone under. Remember Long Term Capital Management in the 1990s? I thought interest was supposed to account for risk over time? Uh, what happened?

What is so interesting is if you talk to the so-called “interest specialists” about interest they will give you some economic sophistry on how interest is needed for true capitalism or interest is not responsible for our economic missteps. Being that interest is so tightly coupled to our economy how could anyone believe that interest isn’t part of the problem when many of the 140 financial crises we’ve had since 1978 had to do with debt or interest rates. Many times they will quote me some “classical theory of interest-esque or time preference theory” response or something similar to the Wiki definition below:

Definition

Compound interest is very similar to simple interest; however, with time, the difference becomes considerably larger. This difference is because unpaid interest is added to the balance due. Put another way, the borrower is charged interest on previous interest.

Did you folks just get what I just typed? Lets also keep in mind that these are “THEORIES“, not laws. Charging interest on previous interest. And this is what we call an equitable transaction? Says who? The gatekeepers of the economy? Or I should earn a return on money that I have not earned? I guess the supermarket should charge me double the “regular” price of milk because they built the supermarket, bought the trucks to deliver the milk, hired people to put the milk on the shelves, etc.

The typical response:

You see that’s how it works. It’s absurd to think that someone shouldn’t pay for money over time. Look, the consensus is clear, we smart people say so, and we have the theories (not laws) and dusty economic books to prove that interest is needed for capital markets, so get over it. Don’t let me quote Jeremy Bentham.

Absurd huh? I guess as long as we are using text book definitions, here is the text book definition of alcohol (Ethanol):

Any of a series of hydroxyl compounds, the simplest of which are derived from saturated hydrocarbons, have the general formula CnH2n+1OH, and include ethanol and methanol.

“Of course, there is nothing in that definition that seems harmful, right?” Just a bunch of hydroxyls and hydrocarbon atoms doing the bounding “two step”.

Lets just ignore the amount of murders, car accidents,alcoholism, addiction, rapes, drug abuse, broken families, bankruptcies, domestic violence, financial cost to the health care system, human cost to livelihood, brain damage, etc that this psychoactive drug contributes to and all is well. Nothing but a lipstick on a pig. As long as we dress it up with sophisticated language and words that only phds and so called “economists” can understand, we should be happy to deal with interest in the economy.

Economic Sophistry

What is even more perplexing, is you’ll have pro-interest individuals stating, “Hey, without interest we wouldn’t have the proper growth in the global economy” Really? Do these individuals realize how many times governments and monarchies around the world since the French Revolution have literally printed themselves out of an economic crisis (yes printing money out of thin air) while debasing the currency and sending inflation through the roof? [See A Free Nation Deep in Debt by James McDonald] Is this what free and fair market is? Whenever I get into deep trouble just print more money to fix the problem and still call the system a free and fair market? Fractional Reserve banking? We arbitrarily choose who the winners and losers (bailouts) are in the economy and then call it a “free and fair” market? Is this not hubris?

I’m curious what the economies around the world would look like if money wasn’t printed out of thin air to “fix” the economy? Oh, no problem, well just have deficits that we will never ever pay back. Can you imagine an American citizen telling the IRS, “Oh hey don’t worry about my debt, that is just a deficit and I’ll just carry it over for the remainder of my life while printing up money from my house to pay for new bills. See, I fixed the problem”. And this is what they call a “free and fair” market? With that being said I am not for the printing of money because this is just another form of interest, not to mention it is a economically flawed approach to monetary policy. With all the interest that is being charged, none of it was enough to account for risk over time. The current crisis is yet another indicator that the same Wall Street titans that profit off of interest based financial instruments are nothing but “welfare” corporations who got done in by the same interest they charged. In fancy econ-world talk they call this “over-leveraged”. This is just another word for “Hey I can’t pay this loan back with interest”. Every major bank/investment firm was almost insolvent, if not insolvent in 2008. You name it, Citibank, Lehman, UBS etc, and some banks like Washington Mutual have been banished to bankruptcy land, never to be seen again.

As Nassim Taleb states in Black Swan regarding the Savings and Loan Crisis:

The same happened in 1983 with money center banks losing cumulatively every penny ever made, and in 1991-1992 when the Savings and Loans industry became history.

Take a look at the “free and fair” market looks like with bailout after bailout since the 1970s:
http://www.propublica.org/special/government-bailouts

So what happened banks and investment firms? Wasn’t interest and your high returning investments supposed to dig you out of the hole when financial disruptions strike? Apparently not. So if interest is not even a mechanism that can properly account for risk over time, then why are we doing it in the first place? Don’t be fooled by the fancy language, “Re-capitalize” is just another fancy word for “Corporate Wic Check”. Instead of food, the tax payers are buying toxic assets. I would use the term “buying” lightly. “Off-Balance Sheet” has now become another word for “hiding risky assets that I know would completely deteriorate my companies net worth and possibly make my company insolvent”.

Fictitious Banker Convo:

Banker: Uh Mr. Oxford I noticed that you had 40K in credit card debt. I think this is going to be a problem with getting you that loan.
Me: Oh no problem, you see you actually weren’t supposed to see that. I have this thing called “off balanced sheet” which hides that 40K debt so my balance sheet looks better than it is.
Banker: Hmm, okay that makes sense, why would I want to get an accurate representation of the risk. That just preposterous. Ha ha ha (laughs nervously)
Me: Exactly, I kind of felt the same way, so can I get a “do over”?
Banker: Sure. You are approved.

The stalwart supporters of this farce economy are like the following story:
Let’s say a bunch of engineers (Bankers and Investment Firms) create a recycling water cleansing system (RWCS). They say that as long as you have 800,000 liters of water (cash) in the system, the system can maintain itself. Whatever run off (bad investments) and natural evaporation (risk) that happens will be replenished by natural rain fall (interest and fractional reserve banking) and the efficiency of the system extracting more water out of the system (profitable investments). Then over time, instead of 800,000 plus liters of water in the system, the amount decreases by 50,000 liters every 3 months. By year 3 the water system is struggling with only 200,000 liters. Even with natural rain fall subsidizing the system, they still can’t cut it. Now instead of admitting that the recycling water cleansing system is not working, the engineers siphon water from the Atlantic Ocean (Bailouts and printed money) into the RWCS to artificially bring back the system up to 800,000 liters of water while patting themselves on the back and stating “Hey look, our system works. All we need is the occasional water subsidy and we are in business”.

What a sad state of affairs. Are we so blind?

A Fair Alternative to Interest

Some might read this and think I’m some wacko dogmatic socialist. As if creating a profit mechanism that is an alternative to interest based profit makes you a socialist. Ha! I’m no “Capitalist” which means my motivation in life is not just profit. When I do business, I’m for making a profit but not at the expense of what Allah has intelligently decreed for society at large. In addition, equality and being just is more important than mere profit, and it’s not like that ideology has served ALL of society well, considering the current circumstances. A title I’ll steal from John Kim which is a Capital Anarchy. This is what we are dealing with in the 21st century. Many people outside of Islam might believe that people who believe in following the guidelines of Quran and the Shariah of Allah (SWT) are bunch of mindless drones that don’t actually reflect and ponder on those same rulings with proper intellect. This is far from the truth. When I found out that usury (interest) was prohibited in Islam, I spent a substantial amount of time researching the law and the mathematics behind the prohibition. Not to mention, that are many Islamic scholars who can elaborate even beyond my amateur approach to explains Riba and it’s consequences to the global economy. If you are interested in thinking outside of the box, hit me up on Facebook and I’ll give you the sources. There are some sources below too.

As I said earlier, there are lawful ways to profit that don’t involve interest. I’ll use the example of buying a house, which is a business transaction that most people can relate to. I touched on the Islamic Financing option in my the First Part of Economics Made Simple Renting vs Buying a Home.

As you can see the transaction is a equitable one that balances the risk. Each party owns their fair share of the investment, which brings me to my next point of Profit-Sharing also know as Mudarabah. You can read about more Islamic Financing options from here. There over 8 different options and all of these options cover various financing needs, whether a line of credit is needed, financing of large purchase items like a house, etc.

I don’t see how one of the main approaches from various venture capital firms is something that cannot be utilized in more areas of finance. If profit sharing was so inefficient why do multi-million dollar VC companies exist? Why don’t they charge interest on the money they lent you? It’s simple, what ever you put in is what ever you get out of the investment. If you own 25% of the investment you get 25% of the ROI (Return on Investment). If you own 66.6823% of the investment you get 66.6823% of the ROI. What is also very beneficial with this model is it allows people with smaller amounts of liquidity to get in on the ground floor of a particular investment. Very similar to how a fractional shares work.

Check this out:
Just imagine that a supermarket wanted to move into your neighborhood. Instead of going to a bank with interest, the locals of the community can become investors too. So the total start-up cost for the supermarket, let’s call it GroceryMart, Inc need 20 million dollars. The company has the first 10 million. So they go to an Islamic bank for the 7 million and that Bank now own 35% and the rest of the 3 million is financed by the local community giving them 15% of the business. If anyone wants to offload their shares, you find another buyer or negotiate with GroceryMart.

As income streams into the business, money is equally distributed based on the percentage of ownership or other contractually negotiated payment schedule. In the contract it is stipulated that at any point in time GroceryMart can put in a bid to buy out shares of the other share holders. No different than when a company on the stock market buys back shares. Now what is great about this scenario is the risk is evenly distributed. If the business does well, we all do well and if the business does bad we all do bad. Although I mentioned the stock market example, none of these shares can be traded or bid up in price. The only way the values of the shares go up, is if the company brings in more income.

There are couple things that are accomplished with this one tactic of Islamic Finance:

1. Risk is evenly distributed based on how much you put into the business
2. There is no compounding interest that is exponentially accruing on one side of the business transaction.
3. This will actually allow people who don’t have a lot of disposable income to become investors. No different than buying fractional shares. This will greatly contribute in upping the financial literacy of the community and create a starting point for non-wealthy individuals to invest in simple straight forward businesses.
4. No more winner take all.
5. No distortion of assets from speculation and interest. Because there is no interest we don’t have wild swings in asset valuations running away from the actual value of the asset. (Very similar to what happened to the housing market in 2008)

Now some may argue that this methodology is crude or inflexible and might not maximize the highest potential for profitability. I would ask, in comparison to what? To the current so-called “free and fair” market that gets the luxury of being bailed out with printed money out of thin air whenever an economic financial crisis happens? Since the 1900s we have never had a market that did NOT have the luxury of being bailed out. In just about every instance there was never enough interest earned to properly cover the inherent risk over time. So not only do the banks and investment houses get the luxury of charging interest which is supposed to account for risk over time, but when their risked based models fail miserably the tax-payers have to bail them out. If this is a “free and fair” market, then maybe we should go back to sharecropping because this is no different.

Conclusion

I would like to reiterate that this post is a conversational starter. I would like for pro-interest individuals to watch the movie Life and Debt, or read the history of how IMF and World Bank policies have “benefited” the countries that they have done business with, or read about PayDay loans, or the 1978 Marquette Decision, or The History of the Credit Card by Frontline or any financial crisis that has happened since the 1900s. In every circumstance interest was involved which distorted the true value of assets in the market or the interest rate that banks were charging were incorrectly pegged against the assets that they were holding. In many instances, the wealth was completely wiped out be taking on loans with interest. Also keep in mind if we had let the “free and fair market’ play out, there would be way more companies going under. What we are seeing today is a fraction of bank failures due to this fiat currency/interest/fractional reserve based system artificially propping up the system.

Some might argue about savings and not getting interest. In today’s fiat based economy a dollar today is not a dollar tomorrow. The amazing part is no one every asks the big word..Why? Well, if I’m a government and I keep printing money out of thin air and dumping it all over the economy, that’s is going to lead to inflation and that milk, beans, bread or whatever is going to keep going up in price. Reserve banking (not fractional reserve banking) and stopping the demonic practice of printing money out of thin air would dramatically help in keeping prices tame. There is no reason why prices shouldn’t go down if there is not enough savings and resources in the global economy to buy everything. It’s almost impossible to know what the true price is of anything because of all this tinkering with the money supply.

In addition to this, how on earth can we trust a practice that financially punishes the most vulnerable people on the planet with higher rates of interest? Is that just? To add insult to injury now these “Credit Card Banksters” want to charge annual fees on credit cards users who don’t use their card as revolvers. What type of nonsense is this? Should we just continue this practice because the so-called financial specialist in their ivory towers say so? I would also ask those same individuals that claim to adhere to any one of the monotheistic religions to re-read their religious doctrine and put the use of usury under a microscope.

Here are some links to get you started

Bible: Kings James Bible on Usury
Torah: Judaic Ruling on Usury
Quran: Quranic Ruling on Interest

Profit sharing is class independent. It’s fair, transparent and easy to implement. With true profit-sharing, there is no distortion of the money supply (whether through interest or printing money out of thin air). For the most part, every dollar can be accounted for.

Even Warrent Buffet had to admit the following:

But Mr Buffett argues that such highly complex financial instruments are time bombs and “financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system.

He gave this warning in 2003.

How much financial carnage do we have to see to understand that interest distorts markets? Are we not tired of being thrown around like a rag doll in the economy by the so-called “financial czars” and “phd interest specialists” who act like they are the gate keepers of this economy? Do you actually feel like this market is fair or you actually feel that you have economic freedom in such a distorted market?

God willing, the root to proper economic prosperity is transparency, financial equality (ethical capitalism), efficient production, fair competition which is underscored by socially responsible driven economy. These 5 principles should underscore our financial decisions and destroy the 5 demons of the economy I mentioned earlier. Not speculation, wild gyration in interest rates, and corrupt laws that protect corporate malfeasance.

If you are going to live and die by the gun of “Russian Roulette” interest, I find it quite hypocritical for the same individuals to expect the bailout ambulances to come running to their rescue.

I refuse to sit as a back seat driver and go for the ride with “financial legalese that justifies interest, which no one can understand” driving and “economic sophistry” riding shot-gun. It’s time to pull over and get out the late model White Ivory Tower EX Edition sedan.

• Why Greece Matters
  http://www.npr.org/blogs/money/2010/02/podcast_yes_greece_could_defau.html
• Warning Against Riba Transactions
  http://abdurrahman.org/economics/ribaIbnBaz.doc
• Foreclosures Are More Profitable Than Loan Modifications, According To New Report
  http://www.huffingtonpost.com/2009/10/21/perverse-incentives-lead_n_328378.html
• How massive student loan debts are sinking American dreams and causing a national economic headache.
  http://www.pbs.org/now/shows/525/index.html
• Nassim Taleb
  http://rs.resalliance.org/2008/09/17/financial-resilience-taleb-and-mandelbrot-reflect-on-crisis/

Our beautiful son that Allah has blessed us with. Mashallah.

O mankind! Lo! We have created you male and female, and have made you nations and tribes that ye may know one another. Lo! the noblest of you, in the sight of Allah, is the best in conduct. Lo! Allah is Knower, Aware. – Surah al-Hujurat 49:13

I cease to understand why people cannot live united without scrutiny and judgment.

I was in Brooklyn yesterday with Malik and Saud. We were in the Atlantic Avenue/Flatbush Avenue vicinity running errands and enjoying the sun. In the span of one hour I observed so much unsaid criticism that I was reaffirmed with the notion that people have no trust in one another and fear the different.

First scenario:

As we entered a halal meat market all seemed fine; or, so I thought. As we approached the butcher at the back of the store I started to feel an instant resentment. I couldn’t figure it out at first but later put two and two together. Before the butcher served us, he was helping an Palestinian woman. His tone was very respectful, extremely courteous and ever so attentive. After she was handed (by hand from butcher to lady) her goods, he respectfully greeted her with an “Asalaam Alaikum” and she was on her way.

Now, it was our turn to be helped. I noticed instantly that the butcher’s entire demeanor had shifted. He went from respectful and helpful to passive and dull. Malik began to order what we needed politely. Yet there was hardly any response from the butcher. He assisted us in an almost tomb-like manner avoiding eye contact when he could.

After our chicken and ground beef was sliced and cut, it was left on the counter top with no “Asalaam Alaikum,” “thank you,” “do you need anything else,” or even a head nod. He proceeded to talk to his fellow butchers’, share some jokes and cut a sheep. As he turned to carry the sheep onto the weighing scale, he realized we were still standing there. Yes, we still needed some more items. Malik spoke first, letting him know that we still needed to order some more items.

Malik proceeded to order chicken breasts. At this point I decided to interfere and speak in Arabic as I realized we were receiving such special treatment as he assumed we were not Arabs. In Arabic, I asked him to slice the chicken breasts thin. He responded automatically by mocking me. I had used a Saudi word for slice and he was Palestinian and did not think my term was appropriate. He mocked me by repeating my word twice and then saying in English “you mean slice.” I, in turn, reiterated my same term back to him twice. He realized I was not amused and silently continued to slice the chicken.

His demeanor changed a little after this brief encounter in Arabic and he decided to ask if we would like anything else. We said no thank you and proceeded to the check out counter.

Second scenario:

We were still at the meat market when two Muslim sisters walk in.
First, she proceeded to let the salesman know that she was unhappy with the Quran plaque being on the floor outside. I agree. The plaque should not be on the floor with Quranic verses and Allah’s names. However, it was HOW she approached him. She walked in and very disrespectfully says “the plaque…on the floor…there’s Allah’s name on it.” She said it in such a unclear and arrogant manner that the salesman was baffled at first, as was I, as I had no clue what she was mumbling about. A situation like that can be dealt with in one simple politely stated sentence…”sir, the Quran plaque that you have outside on the floor should be removed as it is haram.” End of story.

Second, the scrutiny Malik and I got from one of the two sisters was unbelievable. First, she heard Malik say, Inshallah. This automatically led to a glare at me from her. She looked me up and down then proceeded to look at Malik up and down too. This type of scrutiny of “where are they from?” “Why is she not in hijab?” or whatever else was going through her mind is totally un-Islamic. We should not be judging each other all the time without knowing.

Third, a non-Muslim Caucasian woman was in the store purchasing some items. The same Muslim woman who glared at me and Malik was now literally twisting her eyebrows up, curling her lip, glaring at this woman up and down while telling her friend “what is she doing in here?” through eye contact.

Third scenario:

Malik and I decided to do shopping at Atlantic Center Mall. Once again, the scrutiny begins. Now, instead of Arab Muslims or African American Muslim women glaring at Malik and I; it was now African American women glaring at us because we are an interracial couple. Amongst the many glares at Malik, then me, then Saud, then back up at Malik and I again; one particular woman stood out.

While at DSW standing in line at the cashier, this woman decides to completely stop her shopping spree to eyeball me and Malik. She was not discreet about it nor was she polite. She just stood near the bag section and glared at us both until we had finished paying and left the store.

I deal with this regularly but am utterly fed up with all this negativity. Whether it be Arabs, African Americans, Whites, Africans, Latino/as’, South East Asians or Caribbeans’; I am sick and tired of peoples glares, judgments, assumptions and scrutiny. I truly feel that people need to work on their biases and insecurities. People need to learn to be more tolerant of others regardless of race, religion, class and ethnicity. It is not mine, Malik’s nor Saud’s problem if you cannot deal with your own insecurities. Find another way to deal with it! And if one more person labels America as the great melting pot, I think I will have to slap some sense into their head.

Well, at least I enjoyed my fish and chips from the Chipshop.

As I walk up the New York City blocks I see the sprinkle of puffed red heart pillows with “I Love You”, stuffed teddy bears laced in red, big bright roses on display, a sea of red stained cards in the window and lets not forget the mind numbing television advertisements from Zales, DeBeers, Hallmark, 1-800 Flowers and countless others pushing their products like a drug dealer on the hunt for another crack sale. Sometimes I wonder: How many millions of men/women will be dragged along and exploited for gifts and merriment because Valentine of Terni was martyred during the persecution under Emperor Aurelian? Why any human being in his or her right mind would obligate their significant other to mindlessly participate in a tradition that does not consider their true intentions and feelings is…well… disturbing, not to mention extremely unhealthy for the relationship. Below is an excerpt from a post a did a while back Why are our Relationships so Disastrous?. :

Valentine’s Day

By far the most hated, dreaded and feared day for hundreds of millions of young adult men around the world. I’ll never forget the first time I was indoctrinated with this pagan tradition. It usually starts out around kindergarten during an innocent class project where you create little valentines cards then give them to your classmates. For some daring students, they might give each other plastic flowers. Maybe we were even tasked to create a little Valentine’s Day card for our mother and father. We bring these little crayola stained pieces of construction paper home for our parents and there are instant smiles from ear to ear. Awww..how cute.

As the grades go by, and we enter into adulthood, somehow the stakes start getting a lot higher. The construction paper made card has now transformed to $5 dollar hallmark cards. The plastic flowers have now transformed to $100-$200 dollar roses. The McDonalds meal for 2 has now transformed to expensive dinners, and so on and so forth. Expensive gift exchanges for the so-called “sake of love”. The amazing part about this whole entire charade is not once, and I do mean this literally, once did any person ever ask me, “Do you want to express yourself to me in this way”? One of the biggest issues with Valentines Day is it’s a corporate tradition. A mindless tradition that has been imposed on men, with no consideration of our feelings or how we’d like to express ourselves. Just do what you are told and keep you mouth shut. No human being wants to be told how to do something and when they should do it, and if they don’t do it, they are seen as loveless and inconsiderate. What happened to the other 364 days of the year? Let me be clear, although most men don’t have the nerve to actually tell the truth about how they feel about Valentine’s Day, I’ll be the first to put out the truth. Most men hate this day. They do it with much contempt and actually resent you for imposing such a ridiculous pagan holiday on them. They do it, because they don’t want to hear you complain. Not all women do this, but I have talked to enough of my married friends, to know that they would rather jump into a pit of sharks than go through another mindless and imposed routine of Valentine’s Day.

How do you think a man feels when he has to bow down to a tradition because society says so? For the record I love my wife and don’t need the help of some foolish pagan tradition that was spawned from some Christian martyr name Valentine of Tern that was killed by Catholics in the 200th century. I find it ironic that the fans of Valentine’s Day talk about how important it is to feel special. Hmm…let’s look at the definition again, shall we?

Special: Surpassing what is common or usual; exceptional: a special occasion; a special treat.

It’s interesting that a person would feel special on a day that billions of people mindlessly do the same thing. Same ole overpriced flowers, over-crowded restaurants, stale chocolate, etc. “Joe” and “Jane” public expecting gifts and other forms of lavish treatment because of the killing of the now so-called St Valentine. I treat my wife like a queen everyday, and I don’t have to prove my love on Valentine’s Day. As if our whole entire relationship is riding on the perfection of this one day. I’m not saying that there aren’t some merits to spending quality time with your significant other and making them feel special, but how Valentine’s Day became the de-facto standard day of love is just ridiculous. Most men resent being financial fleeced for the so-called sake of love, and if they go against this day, they are treated like hot steaming pile of smelly garbage. No venom could be hotter than the criticism you’ll get if you don’t participate in the Valentine’s Day routine.

When you really love someone one, you come to an intelligent consensus on the minor and the major things in life, not to mention you are mindful of their true feelings. When Sarah and I feel like treating each other to something, it’s dynamic. There is no concrete prescription to our love. It flows like water and effortlessly moves about however it sees fit. Every molecule moving to the next moment in a shapeless, but controlled fashion. On Valentine’s Day, I look at the glib and distant faces of the men, and I have to laugh. Why? Because I was there and remember the deep seated resentment I had for being told like dog, how I should express the love I had in my heart. As if, Valentine’s Day is the only moment where I have to prove myself to my significant other. I’m sure there are some women who feel the way a lot of guys do on V-Day, but they are few and far between.

One of the most painful things to see is how pundits, cable networks, commercials, and hearsay can dominate the headlines, but practical financial advice on how to stabilize the economy fall to the waste-side. So the latest distraction is a Dow 10000 and other personalities selling the idea that only the government can dig us out of this economic mess. If it wasn’t clear before, let me elaborate who the guilty parties are in this current economic mess:

• Federal Reserve Bank aka The Government
• Financial apathy among the citizens of the United State of America
• Poor ethics among various investment houses, housing appraisers, rating agencies, mortgage brokers, commercial banks, especially Freddie Mac and Fannie Mae
• Unintelligent Regulation
• Capitalism (sike)

No matter what anyone says, capitalism is not the problem for the current economic crisis. Unethical individuals taking advantage of the financially naive, coupled with a rogue Federal Reserve Bank that clearly has mixed intentions is the core problem. I’m no psychologist but I’m going to be the first to offer a condition that has plagued Americans since the FED was instituted. It’s called Historic Economic Amnesia (HEA) Syndrome:

It’s the inability to grasp past guidelines of economic history and current financial events to prevent future prediction errors.

As soon as a tiny spark hits the economy, we forget about what sound economic policy really is. We also forget who the villains are who created this problem in the first place. We also forget that our financial decisions are a big part of economic policy. What really boils my blood is to see the same individuals who caused the problem claiming that they have the answer. As I said in a earlier post, we are going to the arsonist who burned our house down for advice on how to put out fires. Of course an arsonist probably understands creating and putting out fires more so than the average person, but clearly there is a ethical problem.

I have seen this author on several news shows (Morning Joe, GPS) in the last couple days; his name is Robert Skidelsky. His new book Keynes: The Return of the Master explains the career of John Maynard Keynes and his influence on today’s economic policy decisions. If you don’t have the patience to read Keynes’s original classic The General Theory of Employment, Interest and Money, this book will serve as a “Keynes in 24 hours” overview.

I would also suggest folks to watch the documentary Broke: The New American Dream. It serves as a good reminder of what we are dealing with.

• Keynes: The Return of the Master by Robert Skidelsky
• Foundation for Economic Education
  http://fee.org/
• Broke: The New American Dream.

IMPORTANT DISCLAIMER: In no way shape or form is this post endorsing the use of usury (interest) when terms like mortgage, investment, savings, loan, borrow, etc are used. This is merely an explanation of how I became a home owner and some of the choices I made to get out of renting an apartment.

Hello Ladies and Gentlemen, Welcome to Part I: Renting vs Buying a Home of my 4 part series Economics made Simple by Malik. With my blogs, I always like to set the tone of the post so there is no misunderstandings about what this post is about. The series will cover the following topics:

1. Part I: Renting vs Buying a home
2. Part II: Why Can’t I Make Ends Meet?
   (How I found the Austrian School of Economics)
3. Part III: Saving Money vs Serfdom
4. Part IV: Casino Capitalism

There is a lot of information in this post so for the sake of time I’ve chopped up the blog into sections. Feel free to jump to any section you want. For you convinence I’ve added “back to top” links that will send you to the Table of Contents. Enjoy!

Table of Contents

1. Malik’s home buying story
2. What you need to buy a home
3. Why are we selling our home?
4. Conclusion
5. Home buying tools and resources to help you buy your house

What this ISN’T, plain and simple:

1. Some get rich quick scheme where after you read this blog series you will become a mega-quadrillionaire in 24 hours. (BTW, no matter what you see on the lackof-Infomericals at 2am, there is no program that will turn you into a millionaire without hard work, thinking rationally, and the proper financial plan.
2. A forum for me (Malik) to spew some ideological financially driven nonsense while making myself feel good
3. A place where you will learn how to build a particle transporter, find out if aliens really exist, or whether there was some hidden plot for the U.S to fake landing on the moon

However, what this IS about:

1. A place where you will get practical advice on day-to-day financial concerns.
2. A place that serves as a spring board into understanding more complicated financial matters, which you will inevitable encounter throughout your life. Consider this series the beginning of the ginger bread path.
3. Remove some of your fears about the word “economics”. Understand that the economic world around you has every bit to do with your own life.

So what is economics anyway? By definition it is the following:
The social science that deals with the production, distribution, and consumption of goods and services and with the theory and management of economies or economic systems.

For the sake of this discussion I would like to call this “Personal” or “Household” Economics. Envision yourself as a small country. Your house is the country, the people in your house are the citizens, and the companies (Supermarket, clothing stores, car companies, dry cleaners, banks, etc) are other countries that you do business with. Your job is what you export/produce, and what you buy (products that you haven’t created yourself) are your imports. The capital (salary) you bring into your home annually is your GDP (Gross Domestic Product). As you can clearly see, you are a microcosm of a large country or continent. Put together all those little personal economies and you have a nationally economy. All the decisions that we do on a day-to-day basis impact the overall performance of the economy.

Malik’s home buying story

So back in 2005 I was living in Brooklyn, Williamsburg to be exact. Now known as hipster/heroine capital of New York. At the time I was paying about $800 a month. Towards the end of 2005 I was ready to move out and a good friend of mine was selling the Coop that I live in now. He said to me, “Well bro, if you got 20K cash I can get you into the Coop. I’ll give it to you at a discount because I’m saving tons by not going through a real estate broker”. From my perspective the deal was perfect. I’ll be a home owner, no more throwing rent money out the window, and I can do whatever I feel like to the apartment (break walls down, add new appliances, redo the bathroom/kitchen, etc). Normally, the Coop organization will ask for about 20% down, but because I was a first time buyer, and my salary was pretty descent, I only had to put down 10% (Later on I realize this was somewhat of a mistake, but not a deal breaker. Should have put 20% down. I’ll explain why later)

Before I get into the crux of renting vs buying a home, I have to give you bit of background information. Presently, my wife and I own a 1 bedroom Coop (An apartment that is treated like a house with a mortgage) in the Bronx. The Coop was purchased in 2005 for $175,000. Today, the value of the Coop is roughly 250K or more. If you include the amount of equity (Amount of the value of the house in 2005 minus the remainder of the loan in 2009) we have in the house, we should walk away with roughly 100K or more. So that is an increase in house value of about 75K over 3 years and 8 months. If I calculate the yield that is roughly 10% a year. Pretty good, even for the NYC national house appreciation averages. Considering I bought a piece of real estate in one of the most inflated real estate markets in history, not to mention during one of the worst financial collapses in history, while walking away with a profit, is not that bad. At the same time, had I not gone through a hook-up, I would have overpaid for a similar 1 bedroom Coop by about 15-20K. For my financial circumstances and situation, it really was the deal of the century. I was able to get into the home ownership world with no red tape, no hassle, and minimum upfront expenses. All I had to pay was the lawyer and closing fees. In addition, I could stem the financial bleeding of rent. That is money out the window that I would never ever see again. Had I rented the $1000 a month 1 bedroom (this is what I was about to rent until my friend came to me) the total in lost savings from rent would have been $52840. Here is the breakdown of what I would have paid with assumed rent increases because the apartment was not rent stabilized:

$12000 $1000 (year 1)
$12840 $1070 (year 2)
$13560 $1130 (year 3)
$14400 $1200 (year 4)
————
$52800

I would have thrown away almost 53K out the window. Not so fast ladies and gentlemen. This is true but we are not done yet. I never calculated the cost of Coop maintenance which is the fee you pay to maintain the building roof, landscaping, certifications, lobby, super who manages the building, etc). That was $470 a month which brings my maintenance costs for 3 years and 8 months to about $20,680 dollars. Now I have to minus that from the potential 100k profit (the amount I should walk away with after I sell my house [including closing fees). Now I'm left with around 80K. yes when i sell the house I'll still walk away with roughly 100K but I'm trying to calculate my TRUE profit margin.

What you need to buy a home

Whew!, lots of numbers. Are you still with me? I hope so. Lets remember that buying a house CAN be an investment. It's no different than any other investment. You have to know how much money you are putting in and get a sense of what your potential return is. Clearly during the last 3 years. Americans have spent a substantial amount of effort turning their houses into big fat credit cards by squeezing equity out of their homes without re-investing that equity back into the house. Bad idea. I'm going to split this section into three areas.

1. Prerequisites for buying a home: 20-30-10 Rule
2. Descent credit
3. Steady income
4. Benefits of buying a home
5. Benefits of renting
6. Patience

Prerequisites for buying a home: 20-30-10 Rule

My 20-30-10 rule is 20% down, the mortgage (no interest) should be no more than 30% of your take home pay, and you should have at least 10% of the value of the house in cash in some bank account. Yes this is after you put the 20% down on the house. So one of the biggest prerequisites for buying a home is to have 20% down. As I sated earlier I put 10% down, because at the time I didn't have the 20% and it was not worth passing up on the opportunity to own a Coop that was marked down 15%. From my perspective I started with a bit of equity from the beginning by getting the Coop at a discount. In addition to that, I had a steady income and enough disposable income to make extra payments each year on my mortgage so I don't get hit with too much interest from the additional 10% that I didn't put down. I also did something that no financial adviser would suggest any of their clients doing which is borrowing from your 401K. You are allowed to borrow from your 401K to buy a home, but if you leave your job before you pay back the full amount, you have two options:

1. Pay back the full amount.
2. Pay taxes on the amount you borrowed come tax time.

Now keep in mind that the 20-30-10 rule is a GENERAL guide. Meaning you can be flexible on the rule, but don't be so flexible that you bend the branch so far that you snap it in two. In my conclusion I'll explain why I broke just about every rule in the book when it comes to buying a home but it's all about your situation. Everyone has different circumstances and what works for me, might not work for you. You have to be smart enough to weigh the pros, cons, and risks of your decisions. There is no book or personal finance guru that will be able to give you the exact answer to you home buying choices. In the end, its up to you to weigh all the pieces to your home buying puzzle and put them together.

Descent credit

What does it mean to have "descent credit" in regards to buying a home? Descent credit means a FICO score that is at least above 700. If you don't know what a FICO score is, then go here and here. This number will impact how much you are able to borrow and how likely (risky) a financial organization sees you in regards to your potential to pay back the organization.

Steady Income

Make sure you have a steady income. Don't do things like "hope for the best" or "hope for a raise" that is supposed to give you the financial wherewithal to buy a home. Buying a home is a huge responsibility. This is not a game. A home is not one big credit card or some asset that you can use to hypothetically create unrealistic lines of income. You should make enough that you can pay for the mortgage, utilities, other monthly expenses, and you better make sure you can SAVE at least 5% of your take home income. I'm really leaning on 5% as the "I don't have a choice in the matter", but you should be shooting for 10-15% of your take home pay.

Benefits of Buying a home

This is pretty easy. First off, you are not throwing money out the window like rent and every payment you make towards your mortgage is just building more equity into your house. Second, owning real estate is one of the fastest ways to increase your net worth and build up your credit rating. (of course that is assuming you pay your mortgage on time, make extra payments a year, and didn't pay too much for the house, and it is likely that the house will appreciate in value). Unlike renting, you can use the equity in your house to re-invest in other money increasing investments. Notice how I said "money increasing" investments. Not clothes, sending your kids to private school, buying a car, or a flat screen or some depreciating asset that will erode what you just borrowed which is the equity in your house.

Benefits of Renting

Most times if somebody is renting, it's not by choice, unless you are Peter Schiff. Peter Schiff mentions some good points. He basically saying that he can utilize the mortgage and associated costs of a house better, by investing that money. There is something to say for all the overhead the comes with buying a home, not to mention the ridiculous maintenance fees that come with buying a Condo or a Coop. In New York, the real estate market is way more stable than the rest of the country, not to mention it's one of the hottest real estate markets in the world, but it's the exception. Renting has many perks. One plus is piece of mind. All the maintenance of the building, including the room you are renting is taken care of by the owner. The only unfortunate part of renting is the money you pay is money lost, but it depends? When you think about how many people are going under in their own homes, it makes you wonder whether those individuals should have rented in the first place. Renting is also a good option, if not the only option to use when you don't have enough money to buy a home. I don't think it's wise to rent indefinitely but it serves as a good pit stop before you can sum up the courage to buy a home, if that is your plan.

Patience

Before you cut that check to buy your first home make sure you have spent the necessary time researching all your buying and renting options, that you understand what a mortgage is and your financial obligations towards that potential house. Too many people get bit by the "He or she has a house, why not I?" or "It's the American dream" bug and do very little research resulting in financial ruin and sometimes bankruptcy. I've said this over and over in this post, do the proper research so you know what you are doing. Walking into a contract that's hundreds of thousands of dollars is not a small thing. Weigh all your buying and renting options before you take the plunge.

Why are we selling our home?

This past April we had a son (Saud) which means we need more space. For the past 2 months we have been looking to buy a 2-3 bedroom house, but there are a whole host of circumstances that played into why I bought the first Coop in 2005.

One other very important reason that started the whole decision of looking for a new apartment (prior to Saud being born) was getting out of an interest bearing mortgage. In Islam, interest (usury) is prohibited. Whether you are taking it or paying for it. So the plan is to so sell the house, releasing us from the interest and use an Islamic bank. Now you are probably asking, "Um, how does the Islamic bank make money if there is no interest?". Well in Islam you cannot make money off of money. [Don't worry, I'll be short because I know you want to finish this blog post] Very similar to an interest bearing mortgage a non-Islamic and Islamic bank actually start off the same way. They both cut a check for what you are borrowing from the bank, but the difference with an Islamic bank is they buy the house then add their profit on top of the house which you pay for 15 to 30 years. Here is a simple scenario:

1. House is 200K
2. I put 20% down, 40K
3. Islamic bank buys the house for the remainder, 160K
4. Bank calculates what I should pay based on future appreciation values, the current housing market, etc.
5. They say, “Hey we will sell this house back to your for 280K.”
6. They chop up the 280K over 30 years and that would be my monthly mortgage. It doesn’t matter how much interest rate fluctuate because there is no interest, just fixed payments of the agreed upon amount.

Here is another scenario, know as Ijara with diminishing Musharaka:

1. House is 200K
2. I put 20% down, 40K
3. Islamic bank buys the remainding share of the house, 160K
4. Islamic bank now owns 80% and I own 20%
5. The Islamic bank chops up my 160K over 30 years.
6. As I pay down the mortgage I increase my share of ownership.
7. Let’s say 10 years go by, and I’ve paid 60K in payments which means there is 100K of value that I own and 100K from the bank.
8. So the shares have changed, it’s now 50% and 50%. Let say the value of the house is now 350K
9. If I sold today, me and bank would split the profit by 50%. The total profit is 150K. Each of us would get 75K out of the deal
10. As you can see the house is treated as a true partnership. As I buy more shares I get more profit.

Conclusion

As you can see in 2005 I pretty much broke every rule in the book, but rules are made to be broken ONLY if you know the amount of risk you expose yourself to when you break the rule. In 2005, from my perspective, all I needed was about 6 months more to cover the remainder of what I borrowed from my 401K. As I stated earlier, I made a descent amount of money so I could afford the risk. I knew I wasn’t going to be jobless in 6 months, so I was at least okay in regards to my 401K loan obligations. It was not worth passing up on home ownership because I did not have the 20% I would have liked to put down, not to mention the house was being sold at a 15%-20% discount, fully furnished too. The owner sold me everything, so I did not have to deal with the burden of buying new furniture, tvs, appliances, etc. All I had to do was literally move in. All I had was a room of stuff from my Brooklyn apartment. A bed, some bedroom furniture, my weight set, and some clothes.

In regards to my 30-20-10 rule I broke 2 out of 3 rules in 2005. I broke the 20% down rule and I broke the mortgage should be no more than 30% of your take home pay. I think it was somewhere around 35%-40% at the time. I put 10% instead of 20% down. So how is that I broke my own rules but yet remained on solid financial ground? Remember what I said earlier. These rules are flexible, as are many rules in life. I didn’t bend my financial branch so far that it snapped. I needed a bit more wiggle room and I used it to my advantage. An example of snapping the branch is someone who puts 5% down and the mortgage is 60%-70% of their take home pay with less than 5% saving of your take home pay. Not only would this person have snapped the branch in half but they put the branches in the fire never to be seen again.

If there is anything that you should get out of this post is this. There is no clear cut straight answer to most problems, especially home buying. You have to weigh your personal situation, preferences, willingness to compromise, financial intelligence, practicality, and common sense to know whether you can or should buy a home. As you can see there were a multitude of things that I had to take into an account. A lot of it had to do with my financial situation, but one nice benefit is the neighborhood I live in is nice and very quiet. Young aspiring families, multi-cultural with access to the city in less than 40 minutes. You can’t beat that. Good luck on you home buying /renting travels and if you have any questions hit me up on Facebook. Just search for Malik Oxford or go here

Tools and Resources

• Home affordability calculator:
  http://homeloans.bankofamerica.com/en/home-loan-experience.html
• Buying vs Renting calculator
  http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html
• Home appreciation calculator
  http://www.moneytoys.com/home-sellers-profit-calculator.php
• Time to tackle the real evil: too much debt
  http://www.ft.com/cms/s/0/4e02aeba-6fd8-11de-b835-00144feabdc0.html
• Jackson’s Money Woes Can Teach Us About the Dangers of Entitlement
  http://www.washingtonpost.com/wp-dyn/content/article/2009/07/01/AR2009070103640.html?nav=rss_opinion/columns
• Less pay, same mortgage payment
  http://money.cnn.com/2009/08/06/pf/pay_cut.moneymag/index.htm?section=money_pf
• Bakes hereself out of financial ruin
  http://www.huffingtonpost.com/2009/07/28/woman-bakes-herself-out-o_n_246417.html

I have been pondering over the last several weeks on what my next blog post should be. I actually have a really juicy post coming up on my 6-month fact finding mission on what the Austrian School of Economics is and how it shaped my views on what the economic business cycle should be (or could be). It’s my John Maynard Keynes vs Austrian Business School post. But before I do that post, I wanted to get into several myths that people seem to believe are true, but don’t actually have any empirical knowledge to support their theories. As if thoughts about falsified ideas don’t have a negative meta-physical impact on the brain. As if the truthfulness of an idea does not matter. Yes, people holding on to ideas that are wrapped in falsehood have a negative impact on your mind, not to mention your life. Yes, people who don’t seek the empirical truth behind things and are too inebriated by apathy tend to be less happy.

If you lined up all the myths, there are enough myths out there to wrap around the world 50 times. No matter how much evidence you reveal, some people stubbornly hold on to these ideologies. Lets, just get into the list, this should be fun.

1. The Illuminati, Trial Lateral Commission, Council of Foreign Affairs, The Jason Society, Bilderbergs, Rothschild’s, 33rd Degree Masons, 13 families control the world NWO conspiracies
Let me be honest, I sometimes have a soft spot for conspiracies. I actually own some of these books. By far, Behold the Pale Horse is probably one of the most read conspiracy books out there. Considering the author is now dead (not by natural causes) makes believing in conspiracies even more enticing. Most times these conspiracies are so dubious and deliciously tyrannical that being the only one who has insider information about this secret tyranny makes us feel warm and fuzzy inside. The problem with conspiracies is that they are hard to prove, not to mention cannot be stopped. Guess what? If you know of a so-called conspiracy, it’s not a conspiracy anymore so stop wasting your time. In most cases you are seen as a “ham-fisted clown” [see Alan Moore] anyway and will further ostracize yourself by running up on your friends and family every minute with your, “I know something you don’t know” conspiracies. Living your life in the shadows of a conspiracy distorts your reality, makes you paranoid and often leads to poor decision-making. Please find a new hobby.

2. What he/she doesn’t know, won’t hurt him/her.
I have one question: How long do you think your lie is going to last? I’m not talking about coming home late and your significant other asking you why you came home late and you said, “Oh, I had some extra work at the office”, to cover up the two dozen roses that you had to pick up from this special flower shop to surprise your wife as a gesture of appreciation to her. I’m talking about the infidelity, affairs, relationship dishonesty and cheating that has now become the norm in so many relationships.

Let me be clear on this issue, before you get into a relationship or marriage, know what you are getting into. Personally, I think too many people discount this life changing event. As if they are just going by the Lindt Lindor Chocolate store, pick a flavor, then move on to the next chocolate. How would you like it if someone deceived you like that? It’s not a matter of if they will find out, it’s when. Save yourself the embarrassment of ending up on the show Cheaters, get out of the relationship and move on. Breaking up marriages, deceiving your significant other is…wel….pure cowardice.

3. Understanding Economics and Personal Finance is too difficult
It really pains me when people say this. Whether you are buying a $3 tube of toothpaste or a 300K house, you need to have a certain level of financial literacy to get through the day-to-day grinds of life. Understanding your liabilities and your assets, while living within your means is not optional, it is actually a requirement. I will dig a bit deeper on this topic in my next blog post on economics, but one of the main reasons why we experienced the economic collapse of 2008 is companies, governments, and citizens do not understand the dynamics of leverage (debt), risk aversion (investments), accountability (research) and liquidity (cash). As made very clear in this Wall Street Journal article New Evidence on the Foreclosure Crisis, even so-called “Prime” borrowers were the main culprits behind the Foreclosure crisis, NOT subprime borrowers. We just don’t seem to understand that all four variables impact the type of decisions we make on a day-to-day basis. Or it could just be that we are aware of these things, but we just don’t give a damn. Just Google, “Financial Literacy” and start with this link http://www.360financialliteracy.org/. Here’s yet another great article describing the importance of living within your means: http://money.cnn.com/2009/02/19/pf/expert/below_means.moneymag/index.htm See how simple that was.

4. If you believe or don’t believe in God, you’re an idiot
Regardless of what side of the religious or non-religious fence you’re on, demonizing someone because of their belief system is not doing you or the person you are vilifying any good. I mean, what are you actually getting out of verbally smashing others who have a different belief than you? Just let the right guidance fall on those who have an open mind and K.I.M (Keep it Moving).

5. My race, tribe, nationality or ethnicity is more superior to yours
Oh boy, if there is one thing that really kills me, is people who walk around as ____________ (plug in race of choice here) supremacists. They come in all walks of life, touting the accomplishments of their so-called uber intelligent group. Of course, we all have accomplishments within each respective corner of the globe, but to believe that one race, tribe, nationality, or ethnicity has cornered the market on intelligence is just…well..unintelligent. Over the centuries, every culture has borrowed (in some instances stolen and then said they are the creators) the creativity of others. Some see an original concept of one culture, and then enhance the foundation of that invention into something more productive. So why is behaving in racially loony and supremacist fashion so dangerous?

Well for starters, you ostracized yourself into a corner by limiting your interactions to just your “trusted” group of people. Not to mention the lost amount of collaboration time, friendships, and relationships you could have built with others, but you were too close minded to offer the olive branch. If you consider yourself religious, you are even a bigger hypocrite. Get over yourself. For those who are religious, Re-read your Quran, Bible, Torah, etc. (correctly). For those non-religious foks just google Secular Humanism. I don’t believe in the SH movement’s philosophy of rejecting the supernatural and the spiritual as the basis for reason, ethics, and justice, but upholding these three principles is the exact opposite of being a cultural supremacist. Always gauge someone by the content of their character, you’ll get further in life.

6. I’m proud of being known as a female dog (yes the B-word)
You all know what I’m talking about. Those women who walk around who actually revel in being known as the b-word. They’ll actually say to their friends, “I’m a b______”. Alright then, lets look at some of the definitions of the b-word:

1. A female canine animal, especially a dog.
2. Offensive.
   1. A woman considered to be spiteful or overbearing.
   2. A lewd woman.
   3. A man considered to be weak or contemptible.
3. Slang. A complaint.
4. Slang. Something very unpleasant or difficult.

How far in life do you think you are going to get by being associated with any of these things? Case closed.

7. Gender stereotypes: Nice guys finish last, all men are dogs, women are gold diggers
I would like to actually complete the first sentence. Nice guys finish last in the “I want to be in a relationship with a maniac women who will lead me to a divorce, take all my money, demonize me, and destroy me” race of life. That’s actually a race worth being last in. Nice guys are actually Beyond Stage One Thinkers See Thomas Sowell Applied Economics: Beyond Stage One. I don’t have anything against bad boys. To be honest, I was a closet bad boy in the past. Today I’m a nice guy from the inside to the outside. I have shed my closet, so-called bad boy antics. Don’t be fooled women, nice guys are cool. Yes, he might be a little geeky and nerdy [See Obama: Full-on-geek or just "nerd-adjacent'] around the edges, but you can share a roof over your head, money in the bank, loving person, unselfish and this person will be faithful to you. Do you really want to be in a marriage with the “other side”? You’ll just be a doormat. Don’t be a fool.

Now lets address the second part. “All men are dogs”. Incorrect, maybe it’s the type of men you attract? Maybe it’s how you carry yourself? Maybe it’s your behavior? I used to think that it was true what women said men being dogs until I started analyzing woman’s behavior. Trust me, they were dogs from the start, but you just didn’t do the science on the natural ebb and flow of how genders are supposed to interact with each other.

Third part. Are women all gold diggers? Of course they are…every last one of them…okay, Nah, siked your mind. I know there were some e-fumes for a hot minute. LOL. Personally I can speak to this issue, because I was a enabler. It’s not that women are gold diggers, we men are dumb enough to use our material power (or what appears to be material power) as an extension of defining ourselves. It takes two to tango. No women can just jump into your checking account and start spending your money, and if that is happening to you right now, you are a fool. She is just exploiting your ignorance and naivety. Just like men exploit woman’s naivety regarding “men being dogs”. Clearly money has become the central focus for most relationships. It’s disastrous way of thinking. See my blog post Why are our relationships so disastrous?

8. I don’t have to read books
This myth is up there with “I think the moon is made out of cheese”. To be honest, I think most people read books, but it’s the type of books that people read which is more important. Personally I’m a big fan of non-fiction. Most of the books on my shelf are non-fiction. If I’m reading any fiction (As I’m presently reading Atlas Shrugged by Ayn Rand), these are books that are close to real world-life experiences. It’s never a bad idea to drop in a “clear the smog” book in your reading rotation. In my view, “clear the smog” books are those books that can give you cleaner perspective on an already existing idea or concept. My favorite is Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb. Some other books that fall into this are the following:

• American Creation by Joseph J. Ellis
• Millionaire Mind by Thomas J Stanley
• Naked Economics: Undressing the Dismal Science by Charles Wheelan
• J Curve by Ian Bremmer
• Amusing Ourselves to Death: Public Discourse in the Age of Show Business by Neil Postman
• The African Origin of Civilization: Myth or Reality by Cheikh Anta Diop and Mercer Cook
• Ishmael: An Adventure in the Mind and Spirit by Daniel Quinn
• Collapse: How Societies Choose to Fail or Succeed by Jared Diamond
• America’s Great Depression by Murray N. Rothbard
• Buckminster Fuller’s Universe: His Life and Work by Llyod Sieden

Thanks for listening. Feel free to post a comment with your favorite myths.

I’ve been thinking about writing this blog post for a while now. I often break one of the biggest cardinal rules of blogging which is 1. To make your posts frequent. I’ve broke that rule some time ago, but I’m going to make the effort to not only make these posts more frequent, but more diverse. (inshallah)

So about 3 months ago I listened to a lecture by the late Dr. Amos Wilson on understanding the roots of power in culture. By far Dr. Wilson was one of the premier experts on human consciousness and many other pan-African related areas of interest. One very eye-opening area of interest was his explanation of how there are “vehicles” that are used in society to augment and distort your sense of values, consciousness, and level of cultural morality.

Now when he says “vehicles” he is not referring to Maybachs, Hondas, or even an investment vehicle, he is actually referring to mass media vehicles like television, music, print media and societal indoctrination vehicles by cultures outside of your own. One of the reasons I found this topic so interesting is I often find people discounting how the power of imagery and words can control minds and human behavior. A post I did a while back called “True Cost of Music”, touches on this topic quite a bit. This past Friday at Jumu’ah, (an obligatory congregational prayer/lecture that Muslims attend for Duhr [noon prayer] ), the Khateeb (speaker) said, “There are three areas that you need to watch out for when it comes to proper worship”:

1. Nafs (ego/self)
2. Satan
3. The people you keep as friends

For the sake of this post, I want to stay focused on the 1st bullet in regards to culture. There are 7 heads of evil when we talk about Nafs, and they are the following:

1. False Pride
2. Greed
3. Envy
4. Lust
5. Back Biting (Gossiping)
6. Stinginess
7. Malice

The main head I want to talk about is False Pride. If you listened to the entire segment by Dr. Amos Wilson, the root of what he is trying to explain is this: Ideas of self, role of self, and identity of self can be augmented through vehicles under the consciousness of your mind. Not only can your identity be manipulated to your own demise, but you can be used as a conduit to empower the standards of others. Meaning: Just because you think something is not happening from a physical standpoint, while you are unable to identify the point of manipulation does not mean you are not being manipulated. Central to the term, Quiet Weapons for Silent Wars. This is one of the main reasons why I stopped actively listening to music and have severely pulled back on what I watch. My wife and I restrict our viewing to mostly documentaries and other “Front-line C-SPANian friendly” material. Like Pinocchio being a puppet, human beings can be a puppet by identifying with an “Artificial Identity”, hence False Pride.

This is not a light matter, a recent study by Standford and Princeton university came to the conclusion that men objectify women by observing semi-nude images. How is it that a culture of objectifying women has now become normalized?

The research, conducted by a team including Princeton psychologist Susan Fiske, who first presented the findings in mid-February at the annual meeting of the American Association for the Advancement of Science, found that pictures of bikini-clad women activated brain regions associated with objects or tools.

Keep in mind that these are “semi-nude” images (e.g bikini) and not full blown nudity. I’m curious what that study would have revealed with full blown nudity. These results by Dr. Susan Fiske have been posted on hundreds of blogs, and the responses are quite dismissive. Not surprising, considering the average person is unwilling to have an honest level of self-critical analysis regarding their personal sensibilities. I have to be honest, I walk by those newsstands on the NYC train platform and the advertising windows are riddled with imagery after imagery of “soft-pornesque” women draped across various covers for profit. I can guarantee that they’ll be a bunch a men hanging around like a bunch of deviant vultures drooling over the next breast or booty sex pose.

Not to say I didn’t dabble in such material in the past, but I’m not going to deceive myself and act like these images did not augment my view of women in a negative light. In the words of Thomas Sowell, This is Stage One Thinking. To think that society is not paying a price for the often hyper-sexualized identity of women is quite shocking. Obviously I am not the gate keeper of women’s identity or sexuality. That is not my role, although many might accuse me of such acts because they misinterpret my language. I just think we have mountains of evidences from many areas of thought (scientific and religious) to realize that a behavioral change is due on the type of images we bring into our minds, and our household, irrespective of gender. To discount the negative impact is being dishonest. There is a severe level of cognitive dissonance when a man says he respects a women, but then indulges in imagery that is the exact opposite of what his belief claims to be.

The study above is just one example, but “False Pride” can fall into many other categories like child rearing, personal finance, culture, morality and various other behavioral sciences. In many instances, certain types of behavior not only disempower you, but destroy the glue that keeps your community and your relationships healthy. Sometimes we want to see an immediate result, like turning a light switch on and off. Self deception is a characteristic that can happen over several years, not to mention your entire life. Like a stream of water that smoothes the surface of a jagged rock over hundreds, if not thousands of years. These changes are gradual and cannot be captured in a moment. It’s not until you pull back, will you then be able to see the bigger picture.

• Amusing Ourselves to Death: Public Discourse in the Age of Show Business by Neil Postman
• Al-Ghazali on Disciplining the Soul and on Breaking the Two Desires: Books XXII and XXIII of the Revival of the Religious Sciences by T. J. Winter
• Influence: The Psychology of Persuasion by Robert B. Cialdini
• The Secret Sales Pitch: An Overview of Subliminal Advertising by August Bullock
• Applied Economics: Beyond Stage One Thinking by Thomas Sowell
• Blink: The Power of Thinking Without Thinking by Malcolm Gladwell