Short-Selling is Haram

With short-selling set to come back into the markets today, there are lots of worried people out there. I’ll confess to being somewhat more sanguine, if only because I struggle to see how things could have been materially worse in the last week, what with having had the worst year-to-date in history (including the Depression years).

Anyway, for those of you still pushing for a continued ban on short-selling — and yes, I see your emails and messages and I know there oodles of you — you may be interested in trying a different approach. Perhaps you might think about, say,  converting to Islam.

‘In Islamic Finance, we deny the conventional way of thinking, which aims of creating a new dollar out of every dollar’, says renowned Pakistani Shariah scholar Sheikh Dr. Taqi Usmani. By selling a stock short, the ‘investor’ may gain while the underlying company loses value – a clear violation of the ban of unjust deeds, stated in the Holy Quran, Sure Al Baqara, 2, 278 – 279: ‘Deal not unjustly, and ye shall not be dealt unjustly’.

Islamic Finance is about serving society. By selling a stock short, an avalanche of more short-sellers might be triggered, leading the firm to expensive stock buy-back initiatives or in the worst case to bankruptcy.

There you go. Convert to Islam and declare short-selling haram and get it over with. Then again, short-selling isn’t the only thing that’s haram:

As well as short selling, day trading is labelled as speculation and therefore is counted as haram as well. Market participants are certainly allowed to profit, but this should add value to the entire economic system.

Oh, you go too far! Day-trading is haram!? Next thing you know selling useless insurance against credit defaults will be haram, and then …. hmmm, wait a minute.

More here.