Yesterday, as I was having sahoor, an academic cum cleric gave a talk on tv about sharia economy. He mentioned that one of the features of sharia economy is "gold or dinar standard". I'm not sure what he meant by putting gold and dinar side-by-side (maybe he thought now the dinar system is still fully gold-backed, and therefore the two are interchangeable).
A couple of days ago I participated in a seminar held by MOF. At lunch, an official, out of blue, asked my opinion about that same idea, ie gold standard. My response was "I don't think we will ever go back to gold standard. That BI storage will not be able to house the entire gold backing the money in circulation".
Today, Paul Donovan of UBS Investment Bank gives a more sophisticated answer (The Jakarta Post, 25/8). Bottomline is the same: There is not enough gold in the world. Here's his reasoning. Assume that globalization is steady with global trade stays at 20% of the world's GDP. If the the world's nominal GDP grows at 6-6.5%, then the supply of reserve currency should also rise by 6-6.5% to keep the international trade intact. Now, if we are to go back to gold standard, trade growth will not stay at 20%, let alone expand: it will shrink, as the supply of gold rises at 1.5% growth rate.