The Next Round of EU Funding - A New Place?

Let me raise up a word about our own finances and don't let your eyes glaze over until the end. No doubt, you have heard about the imminent global banking collapse?  Well, here is the rest of the story as it appears to me, an American bystander. 

The European Union is imploding with no way to look for help including to Germany where seventy percent of the German electorate is against bailouts. It’s not like the United States where there’s a commonality of purpose and a vision of national unity.  It's the same feeling for the United European Union BannerKingdom. The IMF, International Monetary Fund, even the United States which is a huge IMF contributor is tapped out. China is standing on the sidelines. So where can the EU turn to that hasn't been that involved in this European debacle yet? It lies in Sharia Law!

After nearly three decades, as of this November 2011, a group of sixteen Islamic Could an Abacus have helped? banks finally resolved a stalemate in the $1 Trillion Islamic interbank financing market on their terms. Under Sharia Law earnings are lawful, interest from earnings are unlawful.  Operating since 1986 under the London interbank offered rate, LIBOR, used an interest rate which was considered socially unethical under Sharia.  Now, a new benchmark rate class, the Islamic Interbank Benchmark Rate, IIBR, will open the Islamic bankers to outside world investment markets by providing an international reference rate showing what the financing process is and how it is setting the rates ...real transparency to investors outside the Islamic financial world.

The development of a Shariah-compliant benchmark rate comes amid regulatory investigations into investment banks and rate-setting practices.  Why is a probe about these "regulatory investigations" Quran Holy Bookinto investment banks and Shariah-compliant rate settings happening now?  What financial motivation currently is driving the world banking community to seek a universally accepted Sharia benchmark rate for Islamic banks?  Who will benefit mostly by these substantiated rate calculations?    

The academic answers are the lower IIBR rates will encourage corporate borrowers to use Islamic banks over LIBOR rates, it increases bank liquidity with deposits, and it encourages investors to seek diversified portfolios with a wide range of various infrastructure projects in the Islamic world.

The instinctive answers are more telling since they beg the question about the timing of the rate probes since the world financial markets could use a new capital source to tap and borrow needed funds. Then, regulatory pressures were exercised to force the Islamic banks to comply to lending practices that facilitated universal rates for interbank lending.

What's happening in the European banking sector right now is banks are increasingly unwilling to lend to each other for any period longer than overnight. So, these newly available funds on deposits can be diverted by the Islamic bank to a wide range of various infrastructure projects in the world, i.e., EU countries. Here is the best part for last.  Who backs these EU countries up to prop up their loans?  It's us, the United States of America.  I think we U.S. taxpayers are going to be left "holding the bag" ...again!

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FYI: (If you really want to know -The "Nuts and Bolts") By introducing an indigenous Islamic benchmark with a reference rate called the Islamic Interbank Benchmark Rate, IIBR, everything from over-night to one-year funding will be determined from rate member banks contribute each day. The data will go through an "ethical" cleaning called "fixing".  It is where the top and bottom rates are removed and an average of the middle eight contributions is taken. The results are authorized by a panel of Islamic Banks and approved by a committee of Shariah scholars. This liquidity has attracted outside investors interested in diversification and will increase funding flows to finance infrastructure projects in the Islamic world.

Seventy percent of the German electorate is against bailouts. It’s not like the United States where there’s a commonality of purpose and a vision of national unity.