Stabilizing Business Cycles by PLS Banking and Ethic Economics

In addition to discuss economic cycle’s theories in this paper by decomposing money market into two markets of "saving-depositing" and "investment-credit facilities", we study the time structure behavior of depositor-bank-investor and conclude that the traditional banking structure creates fluctuations in money sector and interest rate. These fluctuations affect the real sector through saving and investment and undulate the economy as well. Mathematical derivations show that banking structure is one of the main factors of economic cycles. Therefore, the abolition of usury (Riba) is proposed as the solution to relate directly investment to saving via The Rastin Profit and Loss Sharing Banking. In this framework, the bank offers investment management services and obtains commission. In The Rastin Profit and Loss Sharing Banking risks are practically transferred from credit facility sector (loans) to deposit sector and bank does not face any losses. On the other hand, the creation of a strong structural relationship between the interest rate of deposits and credit facility interest rate does not let any losses to occur in the capital market while there is profit in the deposit market. This concept is against the conventional banking system in which if the borrower obtains profit or loss; he has to pay interest (profit) to the depositor.The second pathological defect of economic crisis is the excessive consumption and economic greed and similar bad habits which expand economic cycles. The adjustment of mankind behavior, according to Islamic and other divine religions ethical and mystical tuitions, will practically prevent the intensity of crises. Prevention of extravagance frees a large portion of economic resources, and therefore, the magnitude of the business cycle will be reduced, and economic stability will be relatively increased.


Introduction
Countries of the world have always experienced business cycles in the economy with a sinusoidal trend. These fluctuations, which are the result of the capitalistic nature of the economy, spread over other countries through international transactions of goods and capital. Practically, the price signals of commodities and various capital yields create the global flow and the movement of business cycles. Various business cycles caused by weekly, monthly or seasonal and cycles caused by inventory fluctuations which last less than half a decade and are called "Kitchin" 1 cycles are not considered in this paper. Fluctuations considered here are economic or business cycles which happen in a decade and turns the economy from prosperity to reces sion and crisis, and again, to prosperity usually within a decade. The large cycles which are usually caused by structural changes and occur within two decades are reputed as "Kuznets" 2 cycles, and longer fluctuations caused by science and technology developments and take about half a century to complete, are called "Kondratieff" 3 cycles. Sometimes, the overlap of these cycles with usual business cycles creates large global crises such as the crisis of the 1920 decade and the crisis of the end of the 2000 decade. This waviness is the result of the nature of mankind behavior; that is to say, the natural manner of men causes this behavior. This is because the human being is extravagant, and when he is rich, shows more extravagance, but the limited available so urces do not let him continue. Therefore, it has to stop during economic prosperity. That is because resources do not increase proportionally to people's economic activities. The scarcity of resources causes price increase and decrease of profit margin, which is the beginning of the recession and the turning point of the business cycle. production in the real sector and interest rate. That is to say; the interest rate has decreased to a very low figure, regardless of productivity rate. One of the reasons behind this situation is the increase in investment risk, which decreases the net investment yield. The point is that, if it was possible to make a negative interest rate in the economy, which is not possible operationally, monetary policies were capable of overcoming the crisis. Therefore, national policies are recommended, which are conducted in group 20 by injecting about $5 trillion to overcome the present crisis. This method practically causes the crisis-stricken economies to come out the crisis, but in order to achieve this effect, it is necessary to wait about half a decade until economic mechanisms lead the economy to prosperity through natural ways. The overview of economic variables in the last decade shows the same in comparison with 1920 crisis. The sever oil and grains price increase and successive draughts, and unexpected ecological and meteorological events had increasing effects on this crisis. Similar conditions of the present crisis were also seen in the crisis of the 1920 decade. Also, during that period interest rate was severely reduced, but the economic conditions were so bad that even the low price of capital could not allocate adequate resources for production. Therefore, similar to the financial policy which took about a decade to recover the global economy from crisis, accordingly at present time we have to wait until the injection of financial resources could again turn the global economy to recovery and prosperity.
Money market and the role of banks in the creation of economic cycles The essential solution which is forgotten by economists is the reform of monetary and banking structure. Some theories suggest that banking structures are among factors which create a crisis. In spite of excessive inventory theory, the variation of inventory is the effect of cycles, not its cause. In contrary to what is formed in the minds of economists around the world, the recent recession was not because of the recession in the American housing market; rather, it was the consequence of this crisis. In spite of the set fort theories, the cause of the recession was not in the housing sector, but it was the result of structural behavior in money and banking sector. The theory of credit cycles by Irving Fisher 11 is one of the interesting theories about the cause of business cycles. He believes that credit cycles are the starting reason for economic cycles. Accordingly, the net increase of credits and equal with that, the debts as a percentage of GDP, create economic prosperity, and vice versa, the decrease of net credit, moves the economy towards recession and crisis. In the direction of the Fisher theory, Minsky 12 puts forward the financial instability theory and develops Fisher theory by describing credit bubbles and the burst of these bubbles and their effects on economic cycles. He believes that the reason is the accumulated debts to banks. In this connection, the Austrian school of thought 13 can be put forward, which believes that the cause of credit changes is the monetary expansionary policies of central banks. This school refers to the role of interest rate as the price of capital for investment and agrees that in an open economy without a central bank, interest rate describes the real-time preference of borrowers and lenders, but central bank disturbs this equilibrium between them and inevitably creates fluctuations in the economy. When Fisher put forward this theory, the dynamic mathematical tools such as difference equations were not used. If the application of difference equations which was set forth in 1950 decade were introduced into economic analysis a few decades earlier, by using this tool, Fisher could dynamize the occurrence of crisis, as he explained the richest monetary theory which is the quantitative theory of money with the help of Balance Law from physics 14 . In spite of the view of recent economists who believe in a single money market, we divide it into two separate markets where banks operate as intermediates between them. In other words, the demand of the bank for deposits is at one side of the bank, which intersects with the supply of deposits and fixes interest rate, which is called deposit interest rate. On the other side, the bank creates another market by supplying funds for credit finance, and its intersection with demand for credit facilities creates the interest rate for credit facilities. That is to say, bank stands between two markets of supply and demand of monetary funds. Now suppose that because of the consumption increase, deposit supply falls down. This will increase the deposit interest rate. The increase in deposit interest rate cannot instantly increase credit interest rate because credit contracts have been fixed for a period of time, and the bank has to wait for the duration of the contract before increasing the rate in new contracts for credit facilities and subsequently, the interest rate for credit facilities will increase in the economy. Bank will face losses during this period of time and after a time lag will compensate it by the increase of credit facility rate. Although this lag is not quite visible for people, from an economic point of view, it creates a special dynamic relationship between supply and demand for capital. It can mathematically be shown that because of this lag, the relationship between these two variables is a second-degree behavioral difference equation. Second-degree difference equations have a wavy character which creates cycles. Therefore, practically, the cycles created in the saving and families' consumption will transfer into the investment and production sectors. In other words, all fluctuations seen in the real sector of the economy are induced by fluctuations in the money market. Many studies have been carried out about this subject, which is one of the obvious subjects of monetary theories in the economy. If fluctuations of the money sector of the economy alleviate, many of the fluctuations of the real sector will also tend to be stabilized. The most important effect of the elimination of "usury" is the direct bridging of the investment sector to saving sector of the economy 15 . When banks try to maximize profit through optimizing their behavior, the intermediate sector (banks) acts as a separate sector of the economy and the differences created by them between interest rates of supply and demand of funds, create fluctuations in financial markets. Since loan contracts have maturity periods, changes in supply (sources) or demand (uses) side of funds take time to be transferred to the other side. This time lag creates continuous fluctuations in financial markets. This analysis can be seen in the following graph: Figure 1 Where: Bank's revenue at time t is equal to: (1) At equilibrium we have: (2) Now suppose a new condition in which demand for loans decreases and moves to the left side to In the new equilibrium, if the bank's revenue turns negative, we have: (4) Or: (5) Therefore, regarding time-loan contracts of the bank, the bank has practically to compensate losses during the t+1 period from other sources until the next period when the curve moves to the left-hand side. That is to say: By generalizing this hypothesis we clearly see that whenever shocks occur in deposit supply or demand for banks' credit facilities (loan), because of time contracts, these shocks will be transferred to the other market in the next period and the fluctuations transfer from market to market alternatively and permanently fluctuates other related markets. By considering the sign of three equations of (1), (5) and (7) The behavior of the two markets described above can be drowned according to Cob-Web model, which creates different fluctuation according to the gradient of different parts of supply and demand curves. The interest rates in the two markets are as follows: (8) (9) If according to the above assumptions, we adjust the relationship of the two markets with one time-lag, we have: (10) By replacing (8) and (9) in (10), we have: In other words, the interest rate in the deposit market is a function of the interest rate in the loan market in the last period. The adjustment takes place when the return movement occurs in the next period, which means that the interest rate of the loan market is itself a function of the interest rate of the deposit market in the previous period, or: By replacing (10) in (12), we will have: (13) This is a second-order difference equation which is characterized to fluctuate easily in time. This is also true about interest rates. By replacing (12) in (10), we have: (14) This equation, similar to equation (13) can be completely oscillatory. By replacing (12) in (9), we will have: (15) Since equations (15) and (11) are functions of and these two variables can completely be oscillatory according to (14) and (13).
Therefore, interest rate similar to the amount of deposits (savings) and loans in both loans and deposits markets can fluctuate.
Transfer of fluctuations from monetary sector to real sector Although the transfer of monetary fluctuations to the real sector can be clearly seen and understood, in order to clarify the subject, we consider the equilibrium at the macro level and its relation with interest rate fluctuations induced by the banking behavior. According to national accounting relationship, we can write: In which: Gross domestic product = Gross domestic expenditure By solving equation (16), the equilibrium condition in the macro economy will be obtained: Foreign exchange markets relate international capital markets to real sector through foreign exchange rates and financial derivatives such as options, futures, forward contracts, and time deposit certificates where these markets also oscillatory affect the real sector through interest rate similarly, but for simplicity, we do not consider it, and according to equations (15) and (11), we will only consider the two variables of investment and saving as functions of interest rates of saving deposits and loans ( S r and L r ). In other words, the equilibrium condition in the economy in time t will be as follows: (18) By replacing and from equations (15) and (11) in equilibrium condition, we will have: If the government has balanced fiscal policy which means and the trade balance is also balanced ( ), again the equilibrium (19) is a second-order difference equation which can lead the economy into disequilibrium in different times. In other words, the mathematical behavior of equation (19) will be different regarding the behavioral characteristic of saving and loan contracts and the reaction of depositors and borrowers (investors) to interest rates of deposits and loans which can show any kind of oscillatory behavior. But this behavior cannot be expanding (diverging) or dampening (converging) forever, because disequilibrium tends to zero in the long run. Therefore, necessarily, even if the equilibrium is a moving equilibrium, it should oscillate around its long-run equilibrium, and this phenomenon creates economic cycles. It may be necessary to brief that by using fiscal policy ) according to Keynes theory, we can compensate disequilibrium in equation (18). But by injecting financial resources to the economy equal to )>0, the excess government budget in time t Ceteris Paribus will be government debt to the central bank at time t+1 and disrupts budget balance, and the government has to levy more tax to compensate this deficit in the next period which leads to recession and disequilibrium and fluctuation in the next period. The same is true about the last parentheses of equation (19) about trade balance, which is . By creating export incentives and import barriers for imports at time t, the government increases the trade balance equal to , and by an increase of exchange rate in period t+1, exchange stability will be disrupted, and we will face a deficit in foreign trade which will have negative effects on the economy and creates fluctuations.
The capability of the second order difference equation in explaining fluctuations In order to clarify more second order difference equations' behavior, we will brief the time trend dynamism of linear nonhomogenous difference equation with fixed coefficients. Consider a linear non-homogeneous second order difference equation with constant L and fixed coefficients of a and b: yt+2 + ayt+1 + byt = L (20) According to the amounts of a and b, the time trend of this equilibrium can be linear or non-linear for each Special Solution. By foregoing L for the time being, the Complementary Function will be as follow: yt+2 + ayt+1 + byt=0 (21) This difference equation has the following second-order Characteristic Equation with roots x',x": The Final Solution is in the form of the sum of "Special Solution" (yp=M) (by solving the non-homogeneous equation) and "Complementary Function": yt = A(x') t + B(x") t + yp If the equation has two true positive or zero roots, when both of these roots are true and less than one, by the increase of t, yt tends to constant M (figure 2). But if x'=1 and x"<1, when t increases, yt tends to A+M (figure 3). If x"=1 and x'<1, when t increases, yt will finally tend to B+M. If one of the roots is bigger than the other (x'>1) and B and A are both positive, by an increase of t, yt will increase (figure 4). If A<0 and B >o, the result depends on whether x' or x" is larger. At the preliminary stages, by an increase of t, the amount of yt is more affected by the term whose root is larger ( figure 5).
If the two roots are true and negative (or zero), when x", x'<0, when t is even, (x") t and (x') t will be positive, and when t is odd, these items will be negative. This causes yt to oscillate in successive periods. If the absolute value of both roots are less than one, 0<|x'|, |x"|<1; which means: -1<x', x"<0, by increase of t, |A(x') t | , |B(x") t will reduce and the amount of yt tends towards M and finally will fit on line yp= M ( figure 6). If x'= -1 and -1<x"<0, A(X') t does not depend on the amount of t, but only on its being odd or even. When t is even, the last expression is equal to A, and when it is odd, it will be equal to -A. Also by an increase of t, the amount of B(x") t will decrease and yt oscillatory tends to A(x') t +M and A(-1) t +M ( figure 7). When x',x"<-1 , yt fluctuation will increase by the increase of t and the root with higher absolute value, will have a more effective role in fluctuations of yt (figure 8). If one root is positive and the other is negative, the absolute value of the larger root will have more effects on yt. The following cases may occur: If 1>x'>0 and |x'|>| x", yt will finally tend to M (figure 2). If x'=1 and | |x'|>|x", yt tends to A+M ( figure 3). If x'>1 and | x'|>|x"|, the increase of t will increase yt (figure 4).
If -1<x'<0 and |x'|>|x"|, by an increase of t, the amount of yt will fluctuate and finally will tend to M ( figure 6). If x'=-1 and | x'|>|x"|, by the increase of t, yt will oscillate around A+M and -A+M (figure 9).    If the roots are double and real, the solution of the difference equation will be as follows: yt = Ax t + Btx t + M (23) If 1>x>0, Btx t will increase by the increase of t and will have an expanding time trend. If x=1, and Btx t = Bt, we will have a similar case to the previous one. If 0<x<1, Btx t tends to zero when t increases. This trend is not compensated by the expanding trend of t, and when t increases, x t will be more than t and therefore, the term Btx t will tend to zero. If -1<x<0, we have a trend similar to the case 0<x<1, except that the term Btx t has a fluctuation trend which tends to zero. If x=-1, the trend of Btx t is similar to x=1, but with fluctuations. If x<-1, the result is similar to x>1, but with fluctuations. If the roots are imaginary or complex, the solution of the difference equation will be: where the roots of the complex characteristic equation will be c±di, and its module will be D= 2 2 d c  . The term in the bracket has an iterated fluctuation in each 360°. In other words, yt has a cycle equal to t=360°/R. Since Sin R=d/D, if for example R=60°, the range of the cyclical movement will be t=360°/60°. For, the curves and in figure 10 have symmetrical cycles. Since the amount of t is discrete, t may not be located at the beginning or middle of those cycles; therefore, figures 11, 12 and 13 look unbalanced. The term in the brackets of equation (24) has smooth fluctuations, but when reaches to power t, if D>1, by an increase of t, D t will increase and multiply by the amount of the brackets in equation (24) will increase the fluctuations (figure 11). If D=1, D t will also be equal to 1 and will have no effects on the amount of the bracket and yt will have a monotonous (smooth) fluctuations (figure 12).   In this figure: Area I: includes (I", I'): oscillatory dampening fluctuation (complex roots, module<1) Area II: includes (II", II'): explosive oscillatory fluctuation (complex roots, module>1) Area III: dampening and non-oscillatory (real roots, less than one) Area IV: finally dampening and without oscillation (real roots, both positive, one larger than and the other less than one) Area V: non-dampening and without oscillation (real roots and larger than one) Area VI: oscillatory dampening (real roots, both negative with absolute values less than one) Area VII: explosive with oscillation (real roots, both negative with absolute values larger than one) Area VIII: finally explosive with oscillation (real roots, both positive and less than one) Area IX: dampening without oscillation (real roots, both positive and less than one) Area X: finally explosive without oscillation (real roots with opposite signs, the positive root is larger than one, and the absolute value of the negative root is less than one) Area XI: finally explosive without oscillation (real roots, with opposite signs, the absolute value of both roots are larger than one, and the absolute value of the positive root is larger) Area XII: dampening with oscillation (real roots with opposite signs, the absolute value of both roots less than one) Area XIII: finally explosive with oscillation (real roots with opposite signs, the absolute value of the negative root is larger than one, and the positive root is less than one) Area XIV: finally explosive with oscillation (real roots with opposite signs, the absolute value of both roots are larger than one, and the absolute value of the negative root is larger than the positive root) In analyzing the time trend of yt in a second order difference equation, the characteristics of being real roots, complex roots and double roots, their signs, the absolute value of them and being larger or smaller than one, are critical. In figure 15, many other areas can be enumerated and studied like all the points located on drawn lines and curve or at the intersection of them and so on, but since it is time-consuming, we stop here 16 . All the above analyses are only about second order non-homogeneous difference equations with a constant term and fixed coefficients. But if the constant term is a function of time or the difference equation is not linear, or has a higher order, or the coefficients are functions of time, yt will have different trends which create moving equilibriums with various fluctuations. The mathematical behavior of this kind of equations can be coinciding with difference equation in the previous discussion about interest rates and deposit and loan sources which create any kind of fluctuations in the money and capital markets that can easily fluctuate the supply and demand in the real sector through investment and consumption demands functions.
Reforming banking structure by the elimination of usury As it is understandable from the relation (5), the clearest phenomenon of business cycles is the bankruptcy of banks, which is historically proved. This is because banks during continued recession and crisis, cannot suffer a position like relation (7) for several years. Therefore, in order to solve this difficulty, the banking mechanism should be changed in some way so that the negative and positive fluctuations of their income become minimized. The above-mentioned theory shows that the banking initiation of business cycles is the main source of crisis and therefore, in order to control the cycles, the structure of this important monetary structure should be reformed. Since the cause of this disease is observed, it can be cured. The method of cure of this economic problem is to prevent the time lag between the equilibrium of interest rates of deposits and loans caused by the banks, and fluctuates the markets of supply and demand of banking resources. This means that banks should not operate as a traditional economic firm, but as a financial intermediate to obtain income through commission. Banks operate as separate firms in traditional economies and not as financial intermediate who obtain a commission for rendering capital management services. Therefore, banks can create fluctuations in the market. In order to change the bank's position into a financial intermediate, we have to define the performance of interest rate of the loan sector in such a way that it affects depositors, rather than banks. The essential method of this remedy has been clearly mentioned in divine books such as Old Testament, New Testament, and Quran, which is the elimination of usury from monetary activities. The elimination of usury does not mean that banking activities should be eliminated. It means that the owners of financial assets always obtain a yield proportional to the real yield of their financial assets; that is to say, they should practically be shared in profit and loss of the borrower. This participation is described in various Islamic banking contracts. Lenders can share in the profit and loss of the borrower. This banking system is classified into Profit and Loss Sharing banking, which is the result of the elimination of usury doctrine in banking activities. Since profit and loss participation transfers banks from financial economic firms into financial intermediates, it can accomplish the previous descriptions and can equilibrate saving and investment markets without any time lag. In addition, established risks in loan market are transferred to depositor sector, and the lender (depositor) and borrower (investor) will both get benefit or loss in the market. 17 In other words, if we want to establish Profit and Loss Sharing banking system, we have to carry out special transformations in traditional banking. This includes the reform of usury free banking procedures, as well as the elimination of Shariah tricks used by banks to show their activities are in compliance with Shariah, and change of their organization structure.
As it is deducted from equation (18), it should be mentioned that the imbalances in government fiscal policy and foreign trade sector can also be encountered as instability factors, but these instabilities are not usually permanent, and the adjustment of government fiscal position or the exchange rate change will return the economy to equilibrium, and while they create annual fluctuations, but do not create business cycles.
Profit and Loss Sharing Banking In order to implement real Islamic banking, extensive researches have been carried out, and the Profit and Loss Sharing system is starting to be experimentally established in Bank Melli Iran 18 . After landing this system successfully, it will extend to other banks. We expect that investment risks will not be transferred to banks, and crisis would not find ground to spread. This is because Profit and Loss Sharing practically does not transfer investment risks to banks and operating risks will be covered by special insurance and a supervision unit called "Trustee", and credit risk is minimized because of Profit and Loss Sharing, and because of the special contracts with depositors and the ability to sell deposit certificates, liquidity risks will be limited, and bank will not face losses in economic fluctuations. In addition, the creation of a strong and structural relationship between the loan interest rate and deposit interest rate prevents profit in one market while the other market is facing loss. That is to say, when investor faces losses in the loan market, the Profit and Loss Sharing system does not let the loss to be transferred as profit to the depositor, but transfers the loss to the depositor, and both markets will enjoy relative stability. Therefore, the fluctuations in the supply sector, which is related to the loan interest rate and in demand sector in relationship with deposit interest rate will be stabilized 19 . This is in contrary to conventional banking where if borrower gains profit or loss, the lender will certainly obtain his profit (interest), and the bank will face credit, liquidity, operational and market risks. In the Rastin Profit and Loss Sharing system, if borrower gains profit, the lender will also obtain profit, and if borrower faces losses, the depositor will also lose. Regardless of bank ownership to be private or governmental, in the Rastin Profit and Loss Sharing banking, the base for defining loan rate is the yield of real sector and bank works as intermediate, obtains commission and allocates funds to investment project as an attorney or agent and by rendering capital management services and supervision of investment activities, earns commission and transfers the results of investment in the shape of profit or loss to the owners of funds who are depositors. Accordingly, the banks can use investment deposits on the basis of depositor's decision, and according to a general or special mandate in join t ownership in the form of a partnership contract divide the yields between depositors. Then the real profit or loss will be divided between the two parties according to their agreement contract and the defined standards, instructions, and directions. In this connection, in order to implement its task as a financial intermediate, after deducting its own commission, bank transfers the 17 -When talking about profit and loss sharing banking, it should not be associated with the present banking system of Iran. Because, it can easily be shown that many of the contracts set forth in the Usury Free Banking Law passed in 1983, are usuric. According to the exact definition of usury, contracts of Installment Selling, Hire Purchase Selling, Debt Purchase and compound interest because of the inability of the debtor to pay his debt are in the realm of usury. Clearly, loan facilities in the form of Good Loan (loan without interest), Civil Participation, Legal Participation, Direct Investment, Forward Deals, Modarebah (sharing), Joalah (giving loan to someone who does something on behalf of us), Modareah (sharing in growing crops), Mosaghat (sharing in growing trees) and Rent, if certain conditions are observed, are not in the realm of usury. In all of these contracts, except for Good Loan which does not have any interest and Rent which should be defined before the contract, the interest rate should not be pre-fixed, otherwise they are usuric For more information look through: profit to the owners of fund resources (depositors). Special financial innovations called Certificate of Mosharakah (Partnership), and Certificate of Pazireh (Subscripted) which can be bought and sold in internet secondary markets have also been considered in this project. These two new instruments practically create a market similar to a stock exchange for the transfer of deposits among people. According to the economic development in investment and productions, the price of these new financial instruments will increase or decrease. These two new instruments practically are financial papers which are used for the transaction of deposits and represent an investment in the form of profit and loss deposits allocated to entrepreneurs. Partnership Certificate is anonymous papers with a fixed face value and with a period equal to the duration of investment and is issued by the Rastin Profit and Loss Sharing bank. The holders of these papers participate in the profit of investment project according to the face value and the period of participation, and in exchange with its capital management services rendered to depositors, the bank can invest depositor's deposits in one of the three banking products defined by PLS banking instructions. The holders of Partnership Certificate can transact their Certificates at bank counters or over the internet; therefore, these Certificates can be transacted internationally. Pazireh Certificate is similar with Partnership Certificate and can be used in continuous or endless projects, so that after the end of construction or at the beginning of the operation, Pazireh Certificate holders become shareholders of the company in proportion to the amount of their Certificates and the duration of participation 20 . The intrinsic risk control characteristics of this banking system manage wavy financial markets automatically. This is becaus e when the interest rate is connected to the yield of the usually stable real sector, it will become stable too, and the risk of financial activity will be controlled. In addition, because of its intrinsic risk control and ease of use, this banking method will practically absorb foreign investment funds and since transactions can take place over the internet, the international transaction can be done all over the world, because the essential problem with the conventional banking system is financial risks which bankrupt the banks. This method of banking possibly solves the problem of exposure to crisis. The other interesting aspect of this banking system is its ability to absorb a variety of financial actives. Usually, people are divided into three general categories from risk accepting point of view, which are risk lovers, risk neutrals, and risk averters. The Rastin Profit and Loss Sharing banking absorbs risk averters very easily, because, with supervision and insurance measures, probability of loss tends to zero. The secondary market for the transaction of Partnership and Subscripted Certificates will absorb risk lovers, and risk neutrals can also easily invest in this framework too.
Squandering and ethic economics Another version of economic pathology returns to human being behavior. Mankind's inner tends to love and ameliorate the people materialistic aspects of her life, but without self-control, this will automatically exacerbate the conditions of economic crisis. That is to say, that by nature, Mankind tends to excessive consumption, economic greed and passion for accumulating wealth and unrestricted consumption and waste (meaning spending more than need) and lavishness (meaning spoiling resources) and similar behaviors aggravating the spread of business cycles. The am facts increase the intensity of crisis by deeper recessions and higher prosperities. Human behavior needs to be reformed according to ethical, moral and mystical advice raised by divine religions, to reduce the tenses of crises. When there is lavishness in a community, the practical extravagance makes crises wavier. 20 -The generalities of this project can be seen in the papers listed below:  Bidabad, bijan, Mahmoud Allahyarifard. IT role in fulfillment of Profit & Loss Sharing (PLS) mechanism. Proceeding of the 3 rd International Islamic Banking and Finance Conference, Monash University, KL, Malaysia, 16-17 November, 2005