Monday, March 31, 2008

Justice and Torah (5)

More tough questions followed.

In any event, I would, at the end of the day, go back to Jesus and the New Testament for my view of the Kingdom of God and politics. And I just don't see them trying to make Gentiles live by the Torah.

In Acts 15, the council only required 4 things for Gentiles to adhere to -- and that so as not to offend Jewish borthers and sisters?

And what do you make of Paul's tirad against requiring circumcision (Galatians) -- and then saying if you require ONE law, you're under the WHOLE law (and that this is a BAD thing)?
The answer to these questions is quite simple. The Torah is a big box containing a lot of stuff, a way of salvation based on sacrifice, principles of behavior (assisting overloaded donkeys), and signs of separation from surrounding nations (not having clothes with mixed fibre or working on the Sabbath). All these were rendered obsolete by Jesus. The Kingdom requires a higher standard of behavior than the Torah, so we now turn the other cheek. The cross provided a far better way of salvation, so Paul is quite right in his letter to the Galatians. The law is totally useless as a way of salvation. Love and the spirit are now what mark us from the rest of the world. So of course Acts 15 does not require that Gentiles comply with the old signs of separation from the world. The Jerusalem council was wrong in even asking for a few practices to remain. Paul actually got rid of these for Jewish Christians too, because they were redundant once the Spirit had come.

So of course we do not want to impose the Torah onto Gentiles. And we do not want to impose those requirements on to Jews or Christians either. Christianity provides better salvation, a better way of life and better signs of to mark us off from the world.

However, there is one other thing that the Torah provided that we still need. God raised up judges in Israel to settle disputes and allow a society made up of some ratbag people to function reasonably. The laws that the judges applied when doing that task were given by God in the Torah too. The judges were able to advance justice because they had laws from God to apply. Those laws are all we should take from the Torah.

All I am is saying is that Jesus has not annulled that subset of the Torah essential for a peacful society and those laws will be needed until the Kingdom has more fully come. If the majority of people followed Jesus there would be no violence and no disputes, so there would be nothing for judges to do, and these laws would be dormant.

Modern society is a mixed bag just like the Israelites. So until the kingdom comes, we will need some laws to restrain evil and to provide a basis judges to resolve disputes. We need some laws, and if God has given some good one, we should use his. I would sooner have God’s laws than man-made laws, if God’s laws will do the job better. They will be obviously good to non-Christians too, if they are really that good.

Sunday, March 30, 2008

Justice and Torah (4)

My previous posts led to another question.

I'm glad you admit the difficulty/ambiguity of deciding what is and is not applicable today from the Torah. I wish you the best on sorting this out. I'm no expert on the topic, but I'll confess I'm not optimstic about anyone's ability to do this in a way that other observers would onsider "objective."
I believe that most politics is a waste of time. Politics is generally the problem, not the answer. However, until the kingdom comes, all societies need some laws to restrain the worst violence and to provide a basis for solving disputes between people who do not follow Jesus (the latter have better ways of solving disputes).

If God has universal laws, that are efficacious in any society, they will be in the Torah, and he will have provided objective principles for finding them. Our challenge is find the principles that will allows us to see beyond the rules and instructions that applied only to Israel to the laws that will allow any human society to function peaceably. Searching through the stuff that is no longer relevant will not be easy, but we should be wise enough to find the correct classifying principles.

Most Christians just give up without trying. They acknowledge the need for law, but just assume that God’s law will not help. Simply adopting human law, before putting in the effort to identify God's law is lazy and arrogant. We cannot say that God’s law is unusable, if we have not even attempted to discern which of his laws are relevant in the operation of civil society in the modern world.

I am going to try to find the appropriate principles, even if it is hard. I am encouraged by the promise of Psalm 119:97-100.
Oh, how I love your law!
I meditate on it all day long.
Your commands make me wiser than my enemies,
for they are ever with me.
I have more insight than all my teachers,
for I meditate on your statutes.
I have more understanding than the elders,
for I obey your precepts.

Saturday, March 29, 2008

Justice and Torah (3)

My reader's third question is interesting.

What do you think Jesus and Paul and James meant when they said Loving God and loving neighbors as ourselves fulfills the whole law? Just curious.
With regard to the various statements about “love fulfilling the law”, I believe that if we love, we will not break the law. If I love people, I cannot steal from them or assault them. If everyone was to love, we would not need any laws; but we are not there yet. In the interim, we need laws to restrain the worst of evil, (that is all that laws can do, they cannot change hearts). Paul explains this in 1 Tim 1:8-9.
We know that the law is good if one uses it properly. We also know that law is made not for the righteous but for lawbreakers and rebels.
The law is for restraining rebels and lawbreakers.

The other side of these statements is that law and love are consistent with each other. This means that the Torah (correctly understood) is consistent with love. If our understanding of the law is harsh and cruel, that is not consistent with love, so our understanding must be wrong.

I believe that we have misunderstood the Torah, because it has been translated and interpreted by people who hate the law, and have presented it in a way that highlights the contrast with the gospel. This causes them to misunderstand it. I note that in translation, they often seem to take the harshest of the several possible meanings, when those who believe it is consistent with love would seek the meaning that is consistent with love.

I am seeking to understand the Torah in a way that is consistent with love. Lev 19:18 seems to confirm this approach.
Do not seek revenge or bear a grudge against one of your people, but love your neighbor as yourself. I am the LORD.
An interpretation of the law that justifies revenge is wrong.


Steve has a great post on Democracy.

Friday, March 28, 2008

Justice and Torah (2)

My reader's second question about the Torah (Genesis to Deuteronomy) is really important.

Which laws would you include and exclude?
This question is critically important. Unfortunately it has been ignored by the church for most of history, because we have been happy to take over Roman laws, or whatever else the world had to offer.

I realise that it is a hard question to answer, but I am confident with the right effort by the right people we could determine which part of the Torah is God’s standard for law and justice. This is the task that I have set myself, so I have been studying the Torah over the last couple of years to this end. However I realise that I cannot do this alone. God needs other godly people working at this as well.

I have not reached a final conclusion on what parts of the Torah are still applicable, but three principles do stand out.

First, most of the laws in the Torah are not laws in the modern sense, with a prohibition and a penalty for failure to comply. Only small subsection of the Torah has penalties specified. The rest are just moral imperatives. They are “power under” laws. They are moral statements about what is required but without power of enforcement (the laws about mixing fibre and crops are examples) They could simply be ignored. The laws penalties specified are quite limited in their scope.

Secondly, I have concluded that Leviticus was specifically for Israel. This is stated at the beginning and the end and about twenty times through the book. Therefore this book does not have any universal application as a source of judicial laws, although it may have other didactic uses. The irony of this is that it makes life difficult for those who are hard on homosexuality. The other irony is that the command to “love your neighbour as yourself” comes from Leviticus.

The third important point that is often missed is the guidance about how the law should be applied. Once you take into account rules about three witnesses, non-guilty witnesses, financial compensation, penalties being applied by the juries, allowance for hardness of heart, etc., the situations in which the death penalty could be applied are extremely rare. I am sure if these principles were applied in America, the death penalty would almost disappear.

The other conclusion I am arriving at is that most of the policies of both the religious right and the chrisitan left go way beyond what God's law allows.

Thursday, March 27, 2008

Justice and Torah (1)

A reader asked the following question. I enjoy questions, because they stimulate me to think more clearly.

I like your system of "voluntary justice, but I'm really surprised you think its God's will to have a system of justice still run according to the Torah. Are you serious? Leviticus? Deuteronomy?
I am not surprised that you were surprised that I am saying that Gods justice may come from the Torah (Genesis to Deuteronomy), because most Christians hate God's law.

My belief is that we cannot avoid God's law. If we assume that societies need laws to function they must come from somewhere. The only place in the scripture where God gives law is the Torah. So if we are going to get law from God, we must get it from there.

The alternative is that laws are something decided by a human parliament. The implication of this is that God does not care about what laws we have. I am not prepared to accept that God has no view on whether there is a law against murder or not. I just cannot accept that God would leave something as important as the standard of justice and law to human opinion and worldly rulers controlled by the devil.

The issue is quite simple. We need laws. If it is a choice between God’s law and human opinion, I want God’s law. God's law is in the Torah. It is not in the gospels or the prophets. There is nowhere else to go for laws, but the Torah.

Wednesday, March 26, 2008

Normal Credit (11) - Brown Suits

The shenanigans of these credit crunch characters cannot change reality. Banking is quite simple. Banks borrow money from one group of people and lend to another. The difference between the interest they pay on what they borrow and the interest they get on what they lend is their margin. The profits of banks depends on the size of their margin and how well they manage the risk of defaults on their loans.

House prices can go up and house prices can go down. People make mistakes, so the risk of mortgage lending can never be eliminated.

The credit crunch will destroy the dreams and ambitions of the clever people who thought they knew better. The world will be safer when mortgage lending is managed by bankers in brown suits who understand the risks of lending and whose lifestyle does not require them to squeeze enormous profits out of small margins.

The full series is here.

Tuesday, March 25, 2008

Credit Crunch Characters (10) - Alan and Ben and the Foreign Men

The reason that bankers were able to lend so much money to the hedge funds and sundry investment vehicles was that the Federal Reserve has been pumping money into the economy for most of the decade. The big commercial banks had large amounts of money sloshing round in their coffers that they were only to glad to lend to highly leveraged hedge funds.

Thus it was Alan Greenspan and Ben Bernanke who allowed the high level of leveraging to occur. Every time they increased interest rates, the leveraging increased. There are two reasons. Firstly, as interest rates fall, yields fall, so profits are harder to make. Secondly, debt is cheaper. The fall in yield can be compensated for with an increase in leverage.

At the same time, China has kept its currency low to encourage exports to the rest of the world. One consequence was that the Chinese monetary authority was left with large volumes of dollars to invest. They chose to invest in US treasuries. The government of oil exporting countries also had huge surpluses to invest. All this cash eventually ended up in the vaults of the bankers, who quickly moved it on to the hedge funds and investment vehicles.

Alan and Ben empowered the credit bubble.

This full series is here

Monday, March 24, 2008

Credit Crunch Characters (9) - Kings of Leverage

In the end, the margin between 3% and 5% was just to small to sustain the life styles that bankers deserve, even after all the efforts to expand the margin by reducing risk. So they came up with one more trick. Many of the mortgage backed securities and CDOs were sold to hedge funds and sundry other investment vehicles. The trick was that these companies became highly leveraged by borrowing most of the money they used to buy these securities. By most, I mean about 95 percent.

The benefit of this high gearing is that the profits are multiplied by the degree of leveraging. In this case the margins are small. These institutions were able to squeeze a large profit from a low margin by being highly leveraged.

Here is an example. If is spend $1000 on a bond with a 4% percent yield, I get a return of $40 on my investment. I can increase my return by getting a loan of $3000 from my bank at 3 percent interest to buy more of the bonds with the 4% yield. The return is now (1000 x 0.04) + (3,000 x (0.04 - 0.03)) = 40 + 30 =70. This is a 7 percent return on my investment of 1000. The loan has nearly doubled my return, even with a gearing ration of 4 to 1.

If I increase my borrowing to $30,000. my return is (30,000 x (0.04 - 0.03)) = 40 + 300 =340. A leverage ratio of 30 to 1 increases the return on my investment of $1000 to 34%. You can see the appeal of high leveraging. A high return can be obtained, if the margin of the yield over the cost of funding is quite small.

High gearing is fine while the activity remains profitable. When losses strike, the leveraging works in the same way to amplify any losses. If in the last example, the value of the bonds that I have bought drop and my yield of 4% turns into a loss 10 percent, I have to deal with a loss of $3,000. My original capital is totally wiped out and I still have to pay $2,000. Not quite so nice.

This is what happened to several of hedge funds and investment vehicles. When the securities they had bought declined in value, their margin disappeared and turned in to a large loss.

These funds had borrowed the money they used to buy their securities from commercial banks, using their securities as collateral. When the value of the collateral decline, the banks demanded that they reduce the size of the loan or come up with more collateral. However, they could not produce more collateral, because their leveraged losses were chewing up their small capital.

High gearing is fine while an activity remains profitable. When losses strike, the leveraging works in the same way to amplify the losses. This is what happened to several of these funds. When the securities they had bought declined in value their margin disappeared and turned into a large loss.

Carlyle Capital fell into this trap. It controlled $21.7 billion in AAA rated mortgage debt issued by Freddie Mac and Fannie Mae. It had leveraged aggressively, borrowing $31 for each dollar of capital. When its investments lost value the banks started worrying about their debt exposure and demanded that Carlyle Capital put up more collateral for the loans. A $150 million credit line from its parent, the Carlyle Group, was not enough to keep it out of trouble and a couple of weeks ago it collapsed.

Bear Stearns got into trouble by lending money to two funds that it had set up to buy mortgage backed securities using bank debt. It then had to take the debt and the low-value securities back onto its own balance sheet. It never recovered.

Most investment banks are highly leveraged. According to the Wall Street Journal, Morgan Stanley, Bear Stearns and Lehman Brothers are also leveraged by more than 30 to 1 Merrill Lynch and Goldman Sachs are leveraged more than 25 to 1.

Sometimes the securities bought with leveraged capital are CDOs that already have some leverage built into their construction. In some cases the resulting effective leverage is over 50 to 1. This produces enormous profits in good times, but a drop of 2 percent in asset values can wipe out the capital of the investors.

High leverage amplifies profits, but it also amplifies the losses.

Sunday, March 23, 2008

Credit Crunch Characters (8) - Freddie and Fannie

The normal way to reduce risk in America is to get the federal govenment to ban the cause of the risk. That was beyond their powers in this case, but they gave the world Freddie and Fannie.

Banks and mortgage brokers attempt to reduce the risk on mortgage debt by selling it to Freddie Mac and Fannie May, the lending agencies sponsored by the federal government. The assumption has been that be this eliminates risk, because the federal government is guaranteeing the debt. Not really.

William Poole, the President of the Federal Reserve Bank of St. Louis, gave this warning about Fred and Fan.

An understanding of the risks facing Fannie Mae and Freddie Mac – which I will sometimes refer to as "F-F" to simplify the exposition – is important from two perspectives. First, investors should be aware of these risks. Although many investors assume that F-F obligations are effectively guaranteed by the U.S. Government, the fact is that the guarantee is implicit only. I will not attempt to forecast what would happen should either firm face a solvency crisis, because I just do not know. What I do know is that the issue is a political one, and political winds change in unpredictable ways.
These federal agencies create a false sense of security, but the implied guarantee could have an enormous cost. If it were to be honoured during a collapse, the American tax payer would pay the bill.

The value of Fred and Fan shares has been declining rapidly. No one knows how this will end, but one think is certain. The risk that was supposed to be eliminated will be born by someone and that someone is likely to be the same taxpayers who are struggling to pay their mortgages.

Politicians think they can legislate risk away.

Saturday, March 22, 2008

Credit Crunch Characters (7) - Monoline Insurance

The monoline insurance companies like Ambac and MBIA got started insuring municipal bonds against default. This was a profitable activity. They took in regular insurance premiums and only paid out if the municipality or bond issuing institution were to default. This rarely happened, because these organisations do not default, they just raise taxes. Monoline insurance was a great line to be in. Premiums rolled in and very little money rolled out. It rolled into the owners' pockets.

The municipalities benefited too, because their bonds took on the AAA rating of their insurers, so they got very low interest rates on the money they borrowed. These companies are called monoline, because federal laws prevent them from going into general insurance.)

However, the Monoline insurers were ambitious to expand their profitable business into other fields. They saw all the securities being offered by investment banks as a good opportunity. Soon they were offering insurance against default on the variance MBSs and CDOs. The banks enjoyed this too, because any action to reduce risk would allow them to squeeze more out of the 3% to 5% margin that limits the profits that can be made from mortgage finance.

While property prices were going up, the monoline insurers had a great business. They took in even more premiums and they hardly ever had to pay out, so profits the profits kept rolling in. But then house prices fell, and defaults followed right behind. Now the monolines had to make payouts to the owners of securities subject to default. The payouts were soon larger than their reserves and their capital. Ambac will only survive, if it can sell $1.5 billion in stock to expand its capital.

The various municipalities have also suffered. They took on the AAA rating of the monolines. However now the monolines have had their credit ratings down graded severely. This also down grade the rating on the bonds of the municipalities they insure. These organisations are now paying higher interest rates, because they are theoretically more risky.

The monoline insurers tried to insure risk that was bigger than they were.

This full series is here.

Friday, March 21, 2008

By His Stripes We Are.......What???

Have you ever wondered why Jesus was flogged by the Roman soldiers? This punishment was so severe that most of the flesh would have been stripped off his back. This suffering was not necessary to pay the penalty for our sin, as his death on the cross was sufficient for that.

Isaiah suggests that Jesus was beaten for our healing: "by his wounds we are healed" (Is 53:5). Given the amount of pain that is caused by sickness and disease, this seems to be a reasonable suggestion. However, although millions of people have claimed the benefit of Jesus death on the cross, very few have received the healing that was bought by his wounding by the Roman whip.

Maybe we need a better understanding of the salvation that Jesus prepared for his people. Unless we rediscover the healing power of Jesus stripes, his wounding appears to be being wasted.

Credit Crunch Characters (6) - Credit Rating Agencies

Margins on mortgage lending are tight, so the best way to extract more profit is to reduce the cost of funding by reducing risk. The credit rating agencies, like Moody’s and Standards and Poor’s had developed sound reputations over many years of assessing the creditworthiness of corporations and financial institutions. They started assigning their rating to Mortgage Backed Securities and Collateralised Debt Obligations.

An AAA rating from one of these agencies increases the value of a security and reducing the cost of borrowing, because investors just assumed that these AAA rated securities would never lose value. The increase in profit received by the investment bank more than covered the cost of obtaining the credit rating.

The credit rating agencies earned enormous fees and the investment banks gained more profit. Everyone was happy… until houses prices dropped and foreclosures increased. Suddenly, the risk attached to the mortgage based securities has increased significantly. Now it is becoming clear that the credit rating agencies had totally misunderstood the quality of the securities they were assessing. Many of these securities still have an AAA credit rating, but everyone knows that they not a safe investment.

The credit rating agencies were naïve or devious.

Thursday, March 20, 2008

Credit Crunch Characters (5) - Mathematicians

For most of history, mathematicians have been boring and poor. Then a couple of mathematicians named Black and Scholes were awarded the Nobel prize in economics for coming up with a clever model to assess the value of a security.

No one knew the value of many of the synthetic securities created by the investment bankers. Some clever mathematicians saw an opportunity to escape the ignominy of academia, so they started applying their complex mathematical Black Scholes models to mortgage backed securities. Bankers and financiers did not have a clue what these entities were worth but the mathematical geniuses came up with a number that looked credible.

The wonderful thing is that these models took the risk of default into account. Everyone assumed that risk was under control. This was good for the bankers as they could squeese a little more profit out of the 3% to 5% margin - until the finance markets clogged up. Suddenly the mathematical models no longer produced sensible results and no one had any idea about the value of many securities.

Gretchen Morgensen wrote in the New York Times:

As of last Nov. 30, Bear Stearns had on its books approximately $46 billion of mortgages, mortgage-backed and asset-backed securities. But who knows what those mortgages are really worth? According to Bear Stearns’ annual report, $29 billion of them were valued using computer models ‘derived from’ or ‘supported by’ some kind of observable market data. The value of the remaining $17 billion is an estimate based on ‘internally developed models or methodologies utilizing significant inputs that are generally less readily observable.’
Mathematicians are less dangerous when they are boring.

Wednesday, March 19, 2008

Credit Crunch Characters (4) - Investment Banks

Securitisation opened up another way to squeeze a bit more out profit out of the 3% to 5% margin. Investment Banks got in on the act and started creating various synthetic securities called Collateralised Debt Obligations (CDOs) that restructured the MBSs by splittin the risk into high and low risk tranches. The low risk tranches came with an AAA credit rating so the cost of funding was further reduced, providing more profits for the bankers.

The problem with these CDOs is that they soon became so complicated that no one, not even their creators, understood the risk. Everyone just assumed that all these instruments were risk free, but no one really knew. Of course we all know now that there much more risk left, than investment banks realised.

The investment banks were either naïve or arrogant.

Tuesday, March 18, 2008

Credit Crunch Characters (3) - Securitisation

In the good old days, you got your mortgage with a bank. They paid their depositors about 3% interest and charged about 5% interest on house mortgages. The margin between 3% and 5% covered the risk and provided the traditional bankers with a reasonable income. However, this margin is not sufficient to sustain the lifestyles of the whiskey-drinking graduates of Harvard and Princeton who moved into investment banking in recent years. They had to find a way to squeeze more out of the margin between lending and borrowing. Competition prevented them from pushing up the interest rate paid on mortgages, as home buyers were shopping around for the best deal. The only way to increase the bankers margin was to reduce the cost of the money they were lending.

Securitisation was the answer. The bank take all the mortgages on a their loan book and wraps them up in one security, commonly called a Mortgage Backed Security (MBS). An MBS uses hundreds of mortgages as collateral and the interest payments from the mortgagors provide a steady stream of income. Securitisation has two benefits for the bank. Risk is reduced, because even if one mortgage turns sour, the others will cover it. Managing one security is cheaper than managing thousands of small depositors, so the cost of funding is reduced. This allowed the bank to squeeze a bit more out of the 3% to 5% margin. The other benefit was that these securities could be sold to a Pension Fund or Hedge Fund and moved off the banks balance sheet (more on that in a couple of days).

The problem with securitisation is that the owner of the MBS bears the risk of defaulting mortgages, but is too far removed from the process to understand the risk they carry. By separating those who scrutinise borrowers from those who carry the risk of default, securitisation reduced accountability.

Monday, March 17, 2008

Credit Crunch Characters (2) - Mortgage Brokers

Once upon a time when you wanted to borrow money through a mortgage on your house, you went to a bank, but things have changed. Over the last couple of decades mortgage brokers have sprung up. Borrowers liked them because they took away the formidable task of dealing with the bank. In fact they go round all the banks and get the best deal for you.

The banks like the brokers because they took over the task of completing all the paperwork and assessing the creditworthiness of borrowers. Soon most of this work was outsourced to the mortgage brokers. Countrywide Financial became largest mortgage broker in the United States.

The problem with this model is that mortgage brokers work on commission. They get a fee for every mortgage they sell, but they carry no risk if the mortgage goes wrong. This gave them an incentive to organize mortgages for people who could not afford them. The mortgage broker got their fee and someone else would have to deal with the mess when the mortgage turned sour. They were not accountable for their actions. Soon the Ninja loan emerged, lending large amounts to people with no income, no assets and not jobs, in the hope that their mortgage would be taken care of by rising house prices. Applications in which people lied about their income also slipped through.

Mortgage brokers were irresponsible.

We have mortgage brokers here too; Mike Pero Mortgages and Wizard Loans, for example. They have not been as rash as those in the United States, but I suspect that they have organized huge mortgages for many people who cannot afford them. The consequences will only come to light, if houses prices fall significantly or unemployment increases. As Warren Buffet said. You only find out who has been swimming naked, when the tide goes out."

Sunday, March 16, 2008

Credit Crunch Characters (1) - House Buyers

The Credit Crunch is still spreading around the world. These disturbing events are the consequence of actions by a wide variety of characters.

The first group of actors to arrive on the credit crunch stage were the home buyers who pushed house prices up to record levels. They believed that house prices would always go up and never go down. Housing is the ultimate safe investment. Their faith has now been destroyed as house prices have fallen dramatically over the last year.

My father used to say,

When times are good, people think they will last forever.
When times are bad, people think they will last forever.
He had observed this with his own eyes. His Father had brought a farm during the post-war land boom for £20 per acre in 1925. The Great Depression destroyed that optimism and by 1940, the same land could not be sold for £12 per acre. The price only got back to £20 per acre in the mid-1950s, after the wool boom caused by the Korean War. Thirty years went by before prices returned to the level that they had been in the previous boom.

For the rest of my father’s long life, land prices continued to rise, but he knew the boom would not last, just as the slump in prices did not last. Nothing lasts forever. Good times and bad times always end.

Home buyers in America who thought that house prices would always go up are finding that they were wrong. The same thing may be now happening here, as the steam has gone out of the property market.

Home buyers sspeculating on ever-rising house prices were foolish.

This full series is here

Oil Seal

As the price of oil increases, many countries are changing to ethanol based fuels. In the United States, a third of all the corn that is grown is used to produce motor fuels. The result is that corn prices have increased by 250 percent in the last two years.

The same thing is happening all over the world. The price of grain is rocketing up, as more and more grain is used to produce biofuels for motor vehicles.

The book of Revelation described a time like this.

When the Lamb opened the third seal, I heard the third living creature say, "Come!" I looked, and there before me was a black horse! Its rider was holding a pair of scales in his hand. Then I heard what sounded like a voice among the four living creatures, saying, "A quart of wheat for a day's wages, and three quarts of barley for a day's wages, and do not damage the oil and the wine!"
The price of wheat will be so high that a day’s wages would only buy a loaf of bread. The price of barley will be so high that it took a day’s wages to buy a couple of loaves of poor quality barley bread.

However, the supply of oil will not be harmed. Producing fuel that can be used in cars will be more important than producing food for hungry people. Are we seeing this now, because the world is awash with wine, too.

Friday, March 14, 2008

Greg Boyd - Power Under Justice

Greg Boyd's second fundamental point is that the Polis is dominated “power over” methods. I agree that this is true of the modern polis. I also agree that “power over” methods do not belong in the Kingdom of God. My difference with Greg is that I believe we can have a system of justice that is based on the “power under” principle.

The system of justice established in the Old Testament was a “power under” system. God gave his law. He demonstrated his power on the mountain, but he invited the people to accept the law. Anyone who did not want to remain in the Israelite community and live under God’s law was free to go back to Egypt. The people were free to reject God’s law and often did. God gave his law in a “power under” way.

God raised up wise judges to apply the law. They did not have a police force to enforce their decisions. All they could do was listen to the testimonies of the people before them and give their verdict. They could announce the amount of restitution that should be made when a crime had occurred. They had no power to enforce their decisions.

Every person belonged to a family and tribe. They had agreed to submit to the leaders of their family. Wise family leaders would compel the guilty person to comply with the judge’s decision, for the sake of justice. They would realise that the shoe might be on the other foot in the future and they might be the ones seeking justice.

However, if the criminal’s family did not support his verdict, the judge would be powerless to do anything. The criminal could escape justice and nothing could be done. This is justice by “power under”, because it is justice that only works if innocent and guilty people freely submit to it.

This is just a brief sketch of “power under” justice. Elsewhere, I have described a voluntary system of defence. My point here is to show that these things are possible. Much of the work is still to be done, but I believe that we can develop a process for justice that is consistent with the Kingdom of God.

I agree that most of the modern Polis cannot be part of the Kingdom of God. I believe that as the Kingdom of God advances in its beautiful way, God will sweep much of the Polis away (the book of Revelation is describes this). That does not mean that there will be no law and no justice. No! God will raise up his perfect civil law and justice and teach us to function live under it in a “power under” way. God has provided a system of voluntary justice. I cannot understand why we are so reluctant to live under it.

Thursday, March 13, 2008

Greg Boyd - Polis and Opinion

Greg Boyd's first fundamental idea about the Polis is that it is dominated by opinion.

I do not believe that what should happen in the Polis is just a matter of opinion. I cannot believe that God does not a have a view about what are good laws and bad laws. Laws are enforced morality. A righteous God must have a view on what morality should be enforced and how and when it can be enforced. The indication from the scriptures is that God is quite serious about laws.

Greg is right about modern politics. It is totally controlled by opinion, but that does not mean that is the way that it should be. If sincere Christians disagree over a political issue, there are two possibilities. One could be wrong and the other might be right. What is more likely is that both are wrong, because their opinions are shaped by the Polis and not by the standards of God.

The fact that Christians disagree does not prove that God does not have an opinion about a just system of laws. I take the intense disagreement between Christians over political issues as a sign that most Christians are stuck in a wrong paradigm. When we get the paradigm right, we see a convergence of opinion.

It is true that Jesus did not attempt to articulate a system of just laws. He did not need to because his Father had already given one. All he had to do was tweak this system a little.

This is the key to our problem. God’s just laws are found in the Torah. Most Christians hate God’s law. This cuts them off from God’s law, so they are stuck with human opinion.

At a meeting at which Greg and a colleague dealt with questions about the Myth of Christian Nation, they were asked this question. “Don’t we want Christian laws for our land?” Greg answered by saying that the problem is that the only laws we have are in the Old Testament and we do not want to go there. He and his colleague mocked the law by saying we do want laws that require men without beards to be stoned (although this is not in the Old Testament).

This is typical of modern Christians. They do not take God’s law seriously. They just ignore it, because they do not like it, despite Jesus saying that it still stands and Paul saying that it is perfect. It is true that the Torah contains a lot of stuff, including instructions for the tabernacle and sacrifices, that were fulfilled in Jesus. It also includes instructions specifically for Israel that are no longer relevant. That does not mean that it does not contain the laws needed to allow a human society to function peaceably.

We should be wise enough to find the parts of the Torah that are needed for the functioning of civil society in the modern world. We cannot say that God’s law is no good until we have done the work to determine which of his laws still apply. Just rejecting God’s law and making up our own law is laziness. If we hate God’s law, we will be stuck with opinion.

I agree that the modern Polis is stuck in opinion and compromise. However it does not have to be that way. I believe that God has revealed laws that will make a society function better. They will not make people good. Only the gospel and the Spirit can do that. However, they could restrain the worst of evil, and that is all that law can do. That should not be our primary goal, but it worth doing.

I also believe that, if we were to pull out the three laws of God that are still relevant, the people of our pluralistic and secular world would recognize their goodness. The world hates Christian politics, because they see us trying to impose our opinions on them. On the hand, if we discarded opinions and presented God’s law, they would see its goodness (Deut 4:6,8).

Wednesday, March 12, 2008

Greg Boyd - Kingdom or Polis

The problem that I have with Greg Boyd's teaching is his understanding of the political system. He contrasts the Kingdom of God with the “Polis” or the political system. His aim is to keep the two separate. This is not necessarily a physical separation, but a moral separation. Everything in the Kingdom of God must be Christ-like. The Polis involves law, force and punishment. Law cannot be Christ-like, so the Polis can never be part of the kingdom.

The political arena uses law and force to change behaviour. “Power over” does not belong in the Kingdom of God

Greg seems to be ambivalent about Christian involvement in the Polis. On the one hand he says that the Polis is the domain of the evil one. On the other he says that Christians should vote if they are asked to vote and should participate in politics, if they feel that is right for them. What they must not do is label their policies as Christian, because there are no political solutions that are uniquely Christian. The only Christian way of bring change to society is the Kingdom way.

He says that sincere Christians can have different opinions about political issues. One will vote Republican another will vote democrat. Those who are not Christians may have different opinions. Politics is the art of bring a variety of opinions together to obtain a compromise. We should not label our policies as Christian. Our opinions about what are good and just laws are no better than those of others involved in the Polis.

The fundamental points in his arguments are the following.

  1. The Polis is dominated by opinion.
  2. The Polis is dominated by “power over” methods.
I believe that both these points are partly right and partly wrong. I will explain why tomorrow

Tuesday, March 11, 2008

Greg Boyd - The Myth of A Christian Nation

I have not read Greg Boyd’s book, the Myth of a Christian Nation. However, I have listened to the series of sermons called the Cross and the Sword on which this book was based. In these messages, he very clearly describes the kingdom way and warns of the dangers of using political power to accomplish God’s purpose.

His core message is that political systems use “power over” to achieve their purposes. Jesus way is “power under”. He demonstrated this by willingly submitting to the cross. He has called us to follow his example. We must change peoples hearts, not regulate their behaviour. If the church starts using “power over” to do good, it distorts the gospel. When we use the power of the state to make society good, we ultimately harm our cause. Political power is destructive to the church. I would recommend these talks for all Christians.

Greg's claim that the United States is not God’s gift to humanity is obvious to many people living outside America, but it is encouraging that an American can see it too.

I recently listened to his message called Being Beautiful. This is an eloquent description of how we can advance the Kingdom of God by living like Jesus.

I will describe the weakness I see in his views tomorrow.

Monday, March 10, 2008

The Free Rider Problem (4) - The Voluntary Way

If a group of people come together and put purchase a fire fighting service to protect their properties, they should ask for voluntary contributions from those who will benefit. Most people support the initiative and choose to make a contribution. Christians should lead the way in paying for every service from which they gain a benefit.

Give everyone what you owe him: If you owe a contribution, pay a contribution; if revenue, then revenue; if respect, then respect; if honor, then honor. Let no debt remain outstanding, except the continuing debt to love one another (Rom 13:7-8).
Paying what we owe for services received is bound up with Jesus commandment to we love one another. Paying for free riders is a good way to love those who do not love us.

If some people in a town or street decide to hire security guards to protect their town or street from crime or attack, contributions to the cost should be voluntary. Good people will willingly contribute to the cost, but some may not be able to afford it. Others who can afford it will deliberately decide to free ride. This is not a serious problem. It provides an opportunity for Christians to demonstrate practical love and generosity. Some Christians will contribute extra to cover those who cannot afford to pay. Others will pay extra to make up for the free riders. Compulsory taxation will be unnecessary.

Politicians love the free loader problem because it provides justification for political power. They argue that compulsory taxation is needed to pay for public goods and eliminate the free riders. Their argument makes sense to the people of the world, because they hate being ripped off. It does not wash with Christians because they know that being ripped off is normal for those who free ride on Jesus.
Bless those who free ride on you, as you have been blessed by free riding on Jesus.
For politicians, the end always justifies the means. Coercion is justified, if free riders can be forced to pay. Christians function in a different paradigm.
Do not be overcome by evil, but overcome evil with good (Rom 12:21).
We understand that using the wrong means to achieve a good end will eventually fail. The only way to overcome evil is by doing good. Compulsory riding is not the solution to free riding.

The full series is here.

Sunday, March 09, 2008

The Free Rider Problem (3) - Love and Generosity

Christians are all free riders on Jesus, so we cannot hate free riders. We should love freedom, more than we dislike free riders. When it comes to a choice between freedom with a few free riders tagging along and taxation with coercion, we should choose freedom. God made us free, so we will not give up freedom, just to deal with a few free riders. The gain is not worth the cost.

Christians should like being around free riders, because it gives them an opportunity to show love.

If someone forces you to go one mile, go with him two miles (Matt 5:41).
The soldier who forces you to carry his pack for a mile is a free rider. He wants a service without paying for it. The Christian should not resist or hate the free rider, but should show love him by carrying the load an extra mile.
And if someone wants to sue you and take your tunic, let him have your cloak as well (Matt 5:41).
The person who wants your tunic without paying for it is a free rider. He wants to consume a good without paying. The Christian response is to love the free rider by giving more than him more than he expects.

God made humans free. Since he values our freedom, he does not coerce people into doing the right thing. That perspective should shape our approach to taxation. The Christian solution to free riding is not compulsory taxation, but love and generosity.

Saturday, March 08, 2008

The Free Rider Problem (2) - Freedom or Coercion

Economists hate free riders, because they fear that free riding will prevent necessary services from being provided. If paying for defence or fire fighting is voluntary, too may people might free ride making the service uneconomic.

The popular solution to free riding is coercion and taxation. To prevent the free rider problem, payments for public goods are made compulsory. This usually takes the form of a tax or compulsory levy. A government is elected. They decide what defence or fire fighting services are required and then impose taxes to cover the cost. Free riding is eliminated, because everyone is forced to pay taxes.

The two options are freedom with free riding and coercion with no free riding. We have a choice between voluntary payments for services with a risk that some people will free ride and public provision with compulsory taxation. Economists choose public provision and compulsory taxation, because they hate free riders more than they love freedom.

Christians love free riders, because we are all free riders. We are free riders on Jesus. Christians received salvation through Jesus work on the cross. We pay nothing towards the cost, as Jesus paid the full price for everyone. Every Christian is a free rider.

(Salvation is not a true public good. Salvation is non-rivalrous because more and more people can enjoy its benefits without additional cost. Salvation is excludable, because those who refuse to repent and believe are shut out of its benefits. Salvation is a non-rivalrous, excludable good, so it does no meet both criteria for a public good.)

Friday, March 07, 2008

The Free Rider Problem (1) - Public Goods

Economists hate free riders. Christians love them. Before explaining why, I need to define the term. A free rider is a person who receives the benefit of a so-called public good without paying for it.

Economists define a public good using complicated words for simple ideas. The two big words are “nonrivalrous” and “nonexcludability”. The easiest way to explain these words is to describe their opposites.

  • rivalrous means that consuming a good prevents other people from consuming it. A loaf of bread is a rivalrous good. If eat the bread, you cannot eat it too. Unlike bread, a non-rivalrous good can be consumed by many people without preventing others from consuming it. A concert by an orchestra is a non-rivalrous good, because my listening does not prevent other people from listening at the same time. Additional people can listen with no increase in cost.
  • excludability means that people can be prevented from consuming a good once it has been produced. A concert in a theatre is excludable, because people who are unwilling to pay can be shut out of the theatre. An outdoor concert is non excludable, if anyone can walk up and listen.
A fire fighting service is a public good. If some people in a town decide buy a fire engine put out fires that threaten their property, they can provide protection to additional people at no extra cost. The service is excludable in theory, because they owners could refuse to fight fires for anyone who will not pay. In practice, the owners cannot refuse to put out a fire due to the risk of the fire spreading to affect their properties. Someone who has not paid for the service will have their fire put out to prevent it blazing out of control and spreading.

The person who refuses to pay for the fire fighting service is called a free rider. They get the benefit of the service without paying for it.

The classic example of a public good is defence. If some people decide to employ soldiers to protect their town from invaders, people who have not paid for the service will also benefit. Defending the town protects everyone in the town, regardless of whether they have paid for the service or not. Free riders will have their lives and property protected without contributing to the cost.

The full series is here.

Thursday, March 06, 2008

Poltical Space (9) - Poltical Idol

Political power is the modern false god and state power is the idol of the age.

Control of political power has become the key issue of our time. Christians have bought into this and are trying to gain influence over political power. We believe it will be good for us to have political power, because we will use it for Christian purposes. We believe that political power is okay, if used for good. Is this the lie of our age? Have we been duped by the gospel of political power?

State power is the great evil of the age. As long as churches worship this idol, we will not see the salvation of God. This idol is probably the greatest obstacle to the advance of the gospel that we are so desperately seeking.

Idols cannot be Christianised. Idols must be destroy. As the Kingdom of God comes the idol of political power will have to shrink, or be smashed by God.

The full series is here.

Wednesday, March 05, 2008

Poltical Space (8) - Nationalism?

11. Does nationalism have a place in the Kingdom of God? During the last two centuries, the political space has been dominated by nationalism. The nation state has been the main actor in the world stage. What place will nations have in the Kingdom of God?

12. What is the link between American democracy and the Kingdom of God? Some Americans make them sound like the same thing.

13. Does a united states have a place in the Kingdom of God? Should it remain united in face of the dangers of accumulation of power? (The larger the state entity, the larger will be the minority whose views are suppressed by the majority, unless the society is completely homogeneous). The prophets and the apocalyptic writers are all hostile to political empires. Secular writers are talking about the American Empire warning of the dangers of United States hegemony. Christians tend to be silent about this issue. Many Christians see a future united Europe as the epitome of evil, but the see no problem with a united America, which equally powerful.

14. Will the United States disintegrate and disappear as the Kingdom of God expands? I cannot see any reason why not.

Tuesday, March 04, 2008

Poltical Space (7) - More Hard Questions

6. How does the coming of the Kingdom of God affect the use of political power? Does it shrink the political space?

7. What should be the limits on political power in a world where political power seems to be the main vehicle for action and change? How should political power be used? Who should control political power? What can political power achieve? Jesus was very hostile to the use of political power. Does that change the shape or colour of the political space? What does that mean in a world where the political space is expanding rapidly.

8. What is the legitimate role political power in a society where a majority of the people are Christian? The funny thing is that political power is not very effective anyway. Political power is not doing very well at creating democracy in Iraq. It is not doing any better at eliminating poverty. We have a far better gospel.

9. What is the relationship between the church and the state? What is the role of the state in the Kingdom of God?

10. What is the place of democracy in the Kingdom of God? Democracy produced the golden calf, so does democracy remain relevant as the Kingdom of God increases. Is Democracy legitimate in the Kingdom of God? If so, how does the Kingdom of God influence the political space?

Monday, March 03, 2008

Poltical Space (6) - Hard Questions

Christians need to do some hard thinking about the role and nature of the political space. Here are some of the questions we need to answer. If God’s word relates to the whole of faith and life, we should be able to get Christian answers to these questions.

  1. What should be the shape and nature of the political space? How does the intrusion of the Kingdom of God change this space? Should not the Kingdom of God bring a dramatic shrinking of the political space.

  2. What does biblical theology tell us about the role, size and shape of the political space? If we do not answer these questions before entering the political space, we are likely to be beaten up by politicians who are familiar with their terrain.

  3. What is the relationship between morality and law? Law is enforced morality, but legislation against every sin is impractical and not appropriate.

  4. What can law achieve? The modern approach is to passing a new law as the solution to every problem that emerges. The Bible is quite realistic about the limitations of the law. Moses allowed divorce, despite the seventh commandment forbidding adultery. He knew that when people’s hearts of hard, enforcing a law with a high standard is a waste of time.

  5. Paul spoke of “what the law was powerless to do” (Rom 8:3). Christians must understand the limitations of law and have a clear view of what law should be used to achieve. So we understand what the law is powerless to do.

Sunday, March 02, 2008

Political Space (5) - Radical Thinking Required

The politicians and parties are comfortable with political power and are very experienced in using it. Politics is about power:

  • power to tax
  • power to decide who will pay taxes
  • power to spend vast amounts of money
  • power to make laws
  • power to force people to obey laws
  • power to force people to do what they do not want to do.
  • power to decide how other people should live.
Politics is about power and coercion. Politicians are comfortable with this power.

Christians do not do power very well. We should not do power very well.

If we naively think that entering the political space is just a matter of voting or joining a political party, we are treading on dangerous ground. If we just join the struggle for control of political power, we will find ourselves being transformed by the political space.

Instead of being transformed by the political space, we should bring a radical perspective on the shape and role of the political space so God can transform it.

Before rushing into the political space, Christians should do some hard thinking about the purposes of political power and what they want to achieve. Otherwise we will just become “cannon fodder” in the left/right battle. We will get sucked into the struggle for political power, and lose our distinctiveness.

If we just take sides in the existing struggle as defined by the political space, the gospel of Jesus is likely to be swamped. This has already happened. Listening to many Christians arguing about political issues sounds just like the debates of secular politicians. The categories are the same and the arguments are similar.

Saturday, March 01, 2008

Political Space (4) - No Retreat

We have a real dilemma, but retreat is not possible. If we believe that God is sovereign over the whole of life, we cannot stay out of the political space. We cannot ignore the political space, because it affects so much of life.

Balmer says that that “religion flourishes best at the margins and not at the centers of power”. That might be true in a culture where Christians are a minority, but as the gospel advances and Christians cease being a minority, Christianity cannot remain on the fringes of life. The influence of the gospel must move towards the centre of life, including the political space.

One pastor said that he never preaches about politics, but this creates a problem for Christians trying to understand the political space. They must learn from those already in it, so they find the truth hard to find. We cannot ignore the political space. Pretending that it is not there does not help, as it leaves a major area of life outside God's scope.