Saturday, October 31, 2009

More Precision

No one likes to be wrong. A fear of being proved wrong can affect the presentation of prophecies. Two common ways are:

  • Vague prophecies with precise timing
  • Precise prophecies with vague timing.
These two types of word can never be proved wrong. The problem is that no one can be sure if they have been fulfilled, so God is not honoured.

Giving dates is not necessary, but listeners need to know, if the word is for the next few months (urgent), the next few years (get prepared), or later in the century (hope for long-term victory).

Friday, October 30, 2009


The main problem with the neoclassical theory of the firm is that business processes takes time and the future is always uncertain. At the point when the firm makes a decision to invest in a product, they might know what the marginal cost, but they do not know what the marginal revenue will be. Production plans must be based on the current prices of factors of production and the anticipated future prices of consumer goods.

The neoclassical model tends to ignore uncertainty. If any firm can do what any other firm does, and all firms are on their production-possibility frontiers, and if all firms always make optimal choices of inputs, then there can be no economic profit. If there is no uncertainty, economic profits can only be the result of monopoly power or random error.

Modern entrepreneurship literature has begun to recognize the need for a more sophisticated treatment of uncertainty. One solution to this issue has been to decompose business income into interest and profit. Interest is a reward for forgoing present consumption, is determined by the relative time preferences of borrowers and lenders, and would exist even in a world of certainty.

Profit, by contrast, is a reward for anticipating the uncertain future more accurately than others (e.g., purchasing factors of production at market prices below the eventual selling price of the product). This profit only exists in a world of "true" uncertainty. In such a world, given that production takes time, entrepreneurs will earn either profits or losses based on the differences between factor prices paid and product prices received.

Thursday, October 29, 2009

Fools Gold

I have been reading Fools Gold by Gillian Tett, a senior editor at the Financial Times. This is an important book for understanding the global financial crisis.

Tett describes how staff at JPMorgan developed a new credit derivatives to sell the risk of loans on the banks balance sheet defaulting. The derivatives were carefully designed to ensure that none of the risk remained with JPMorgan, but was sold to parties willing to bear the risk in exchange for a higher return. This eliminated the most difficult to manage risk that existed for a bank.

Soon a wide range of banks were producing similar products, but they were not so carefully designed. To boost revenues from these derivatives, competing banks cut corners that meant a significant part of the risk remained on their books.

The irony is that bad practice turned a product designed to mitigate the risk carried by banks into one that magnified default risk.

The derivatives team at JPMorgan was asked to develop a similar derivative for mortgage backed securities. However, when they looked for statistical data to track mortgage defaults over several business cycles, they found that it did not exist. Without that information, they believed that a safe product could not be produced, so they refused to get into the business, despite huge opportunities for profits.

When they heard that other banks were producing CDOs based on mortgage debt, they wondered how the problem had been solved. Once the credit crisis struck, it became clear that the problem had not been solved, and that these banks had been left carrying huge risks that they did not understand.

A different approach to risk, explains why JPMorgan remained strong, whereas others like Bear Stearns and Lehman Brothers failed.

Wednesday, October 28, 2009

Qualifications of Pastor-Teachers

The qualifications of pastor-teachers are determined by their role. They will need strong people skills, balanced with the gift of discernment. Pastor-teachers will do a lot of discipling, so they will need experience in teaching new Christians. They should have the ability to get on with all types of people and see the best in them. Pastor-teachers should be good at building strong relationships between diverse people. They will be experts on the “one another stuff”.

The elders have an important role in protecting the church from sickness, so they should have gifts of healing in their midst (James 5:14,15). To be recognised as a pastor, a person will need to have proved that they have the ability to deal with sickness. They should have demonstrated this by resisting sickness in their household/family, before being appointed to the position of elder.

The passage on qualifications of an elder in 1 Tim 3:5 says that an elder will “care for the church”. The Greek word translated as “care” is only used in one other place in the New Testament. The Good Samaritan used the same word when he asked the innkeeper to “care” for the wounded man until he was well (Luke 10:34,35). This suggests that a person should not be appointed as a pastor-teacher if they do not have victory over sickness in their family.

When David was a shepherd, he dealt confidently with a bear and a lion. He did not just chase them away, but killed them so they would not attack again. Pastor-teachers are not wimps. They should be tough enough to deal with evil with the same confidence as David (Being Church Where We Live, p.80.)

Jesus had victory over sickness. He saw this as a sign of the impact of his kingdom.
The Apostles of Acts had victory over sickness, indicating the further advance of the Kingdom of God.

The modern church does not have victory over sickness. This might be a sign that the Kingdom of God is flagging. I wonder if the problem is with the leadership?

Monday, October 26, 2009

Where are the Pastors

The pastor/leader model, so prevalent in the modern church, has created a desperate shortage of pastoring. The problem is that most pastor/leaders are not true pastors at all, but unfulfilled apostles, or businessmen who have not found their calling in the Kingdom of God. A genuine pastor cares too much about people to have the drive needed to lead a large organisation. They simply do not have the toughness and energy to be a modern leader.

The result of inadequate pastoring is that only a fraction of new Christians are fully discipled and even fewer move into a ministry. Many churches are full of half-done Christians. Large numbers of Christians get lost and fall away each year. This problem is so serious that we now take it for granted that many new Christians will fall away, despite the fact that Jesus did not lose any of the people entrusted to him (John 17:12).

When Jesus saw the people suffering from sickness and disease, he was filled with compassion for them (Matthew 9:35,36). He saw them as being harassed by Satan, like sheep without a shepherd (pastor). I suspect he looks upon many sick Christians today and sees them as harassed and without a pastor. He wants to send them shepherds, who will not preach at them, but see they are healed. The most urgent need in the Church is for pastors who can set their people free from sickness. True pastor-teachers will have the both the compassion and the faith needed to get the sick healed.

Most pastor/leaders are wonderful, dedicated, loving, enthusiastic people, but they are spread too thin. A weekly sermon, a monthly chat and a program once a year will not defeat evil attacks and transform lives. The inevitable result is a few very exhausted pastor/leaders, far more frustrated potential pastors, and a large number of immature and defeated Christians.

Ezekiel 34:1-4 is a strong word to church leaders. The prophet does not criticise them for shortage of anointing, or lack of vision or inadequate management and organisation skills. His concern is that the shepherds are neglecting the following tasks:

  • Caring for the flock
  • Strengthening the weak
  • Healing the sick
  • Bringing back the weak
  • Searching for the lost
These are the things that Peter and Paul challenged pastors-teachers to do.

Many voices are saying that God is restoring the apostolic and prophetic ministries. That may be true, but I believe that the greatest need is for the restoration of a true pastoral ministry to the church. Considering the large numbers of Christian who remain immature, and the equally large number who fall from the faith, we urgently need God to restore the ministry of the pastor to the church.

Being Church Where We Live, pp81,82.

Sunday, October 25, 2009

Publishing Dreams and Visions

When publishing a dream and a vision, it is important to separate the dream or vision from the interpretation. If the Lord gave some interpretation during the dream, then that should be spelt out clearly too.

The person who had the dream or vision knows what they saw, so there cannot be any debate about the content. They should know what they saw.

However, there can be debate about whether the dream came from God, or the forces of evil, or was just the working of the dreamers mind. Dreams and vision should be tested by the body of Christ to establish that they have come from God.

Unless the Holy Spirit gives a specific interpretation and application during the dream or vision, the interpretation of a dream or vision can be open to debate. Sometimes the person who receives the dream or vision may not be the best person to provide interpretation. Joseph and Daniel were prophetic people who were skilled in interpreting the dreams of other people.

I see many dreams and visions on prophetic websites, where the person has received a valid revelation, but seems to have got the interpretation wrong. In these situations, someone else in the body of the Christ may have the interpretation. If the interpretation is mixed up with published account of the dream, it becomes difficult to suggest an alternative interpretation, without questioning the inspiration of what has been published.

I believe that the best practice is to record accurately the dream and vision as received, and then give the interpretation separately. This was Daniels approach in Daniel 7 and 8. In the first part of the chapter he describes what he saw. He then gives the interpretation that was given to him by the angel. Not only did he keep the description and the interpretation separate, he did not give his own interpretation or application at all.

The book of Revelation is similar. John recorded all that he saw very carefully and precisely. He rarely gives any interpretation (except for stars are angels, lamp stands are churches, waters are people, heads are kings, hills are kings). I presume that the Holy Spirit did not give John the interpretation, so he did not give it.

Most Christians who have a dream or vision to share seem to feel bound to give the interpretation and application at the same time. Moreover, the content and the interpretation are often mixed up together. For example, when reading John Paul Jackson’s Perfect Storm, it is quite difficult to discern what he actually saw and what is his interpretation and application (I am not questioning the validity of what he saw?).

Mixing up the dream and the interpretation makes it hard to assess the source of the dream. It also makes it hard to assess the interpretation. Likewise if the dream or vision is not described clearly without interpretation, it is very difficult for a person who is gifted in interpreting dreams and visions to give an alternative vision, because they do not have all the material that they need.

To progress in the prophetic, the body of Christ must be come better at distinguishing between vision and interpretation. Similarly, we must get much better at separating what the Lord said from what we think it means.

Saturday, October 24, 2009

Prophetic Excellence

The widespread acceptance of the prophetic ministry that emerged out of the Charismatic Renewal during the 1970s was a huge step forward for the church, but there is still a long way to go. An emphasis on quantity, rather than quality, was okay while the gifting was re-emerging, but now that it is well established, we should be focussing more on quality.

Daniel and his mates did not just make a splash on Jewish bulletin boards, their insight and ability were recognised by a tough anti-god king.

The king talked with them, and he found none equal to Daniel, Hananiah, Mishael and Azariah; so they entered the king's service. In every matter of wisdom and understanding about which the king questioned them, he found them ten times better than all the magicians and enchanters in his whole kingdom (Dan 1:19-20).
Daniel was recognised by a worldly leader as being ten times as good as the other wise men of his times. That is why he was asked to serve three different kings in two world empires.

That is what the Christian prophetic ministry should be aspiring to. Where are the Christian prophets who are recognised by the world as being ten times as discerning as Thomas Friedman and Paul Krugman. Provided we do not become complacent about the quality of prophecy, that level of gifting could emerge.

I am looking for prophetic excellence and believe that God has much more to give than we have seen so far. In the future we will see much more tactical and strategic guidance coming from clear prophetic voices.

The Old Testament prophets did not just predict calamities. They gave tactical advise to local and national leaders (1 Chron 20:13-30). They also revealed God’s long–term plans and strategy and what his people should be doing to participate with God in his work. Moses was a great prophet. He announced God’s plan and timing for establishing his people in the promised land. He also explained what Israel must do to enter in the land.

We have the fullness of the Holy Spirit, whereas in Old Testament times, the activity of the Holy Spirit was intermittent. Therefore, Christian prophets should be at least twice as effective as Old Testament prophets.

We have a long way to go. We must not be satisfied with what we have now, but press in to receive all that God has for us through the prophetic ministry.

Friday, October 23, 2009

Delivering a Prophetic Word

Four principles for people delivering a prophetic word.

  1. Ask the Lord how he wants the word delivered. If he is able to reveal a prophetic word to you, he is also able to give instructions about how he wants it delivered.

  2. The speaker’s only responsibility is to deliver the word in the way that he guides. Prophetic people are not accountable for the success or failure of the word, or the distance it travels.

  3. The Holy Spirit is responsible for watching over his word and ensuring that it gets to those who need to hear it. He can achieve that in a multitude of ways. If a word is pure and clear, he will get it to those who need to hear it. He is an expert at getting the word of a voice crying in the wilderness into the anterooms of kings.

  4. Communicate clearly and precisely. The task of the prophet is to listen to the Lord and get the word clear. A confused or impure word will go nowhere.

Thursday, October 22, 2009

The Role of Banks - Loan Brokerage

An important role of banks will be to match the savings of their depositors who want to lend with those who want to borrow. Each loan would be matched with a deposit or group of deposits with the same term. Every loan and every deposit will a timestamp on it. Each loan with a particular timestamp will have to matched by a deposit or group of deposits with same date/timestamp on it.

Interest rates for various terms will adjust, so that the supply of deposits matches the demand for loans for each term, ie to clear the market. The bank will charge a margin on the interest rate to cover the cost of this service. Banks would take responsibility for assessing the credit-worthiness of potential borrowers and the viability of the projects for which they are borrowing.

The bank could also agree to take responsibility for bad debt. The cost of this service would be built into the bank's charge. Sometimes the bank may need to combine a number of deposits together to supply a large loan. This would be part of the brokerage service.

Part of this brokerage function will be organising the re-financing of loans. Sometimes a person will have placed money in a bank for fixed term. It will have been lent out to another person for the same time. If the depositor’s situation changes and they need the money, they may want to withdraw it early. This would be possible but there may be a cost.

The bank would have to be able to replace the money with a deposit from a new lender. The bank would have a charge to cover the work involved in refinancing the loan. If the market interest rate had fallen, the first lender may also have to cover the differential for the rest of the term. The cost should be small, as in a sound financial system interest rates would be very stable.

Loaned money on fixed term cannot be paid back early unless another lender has been found to take over the loan. Therefore there is no need for banks to hold cash reserves.

More at Money.

Wednesday, October 21, 2009

The Role of Banks - Money Records

A legal method of recording claims is essential for the functioning of the economy. The most efficient monetary system is for those claims to be recorded by an organisation like a bank. A major function of banks will be to record money valid claims and to execute transactions between clients. It will not really matter whether this is done by paper records or computer records, as long as they are recorded correctly.

Bank accounts are records of those claims. Provided bank records are accepted as legitimate proof of these claims by everyone in society, then records on bank ledgers are a satisfactory way of recording them. Provided they have good back-up systems in place, computer records will be as secure as written records. As they make transactions between people easier and cheaper they are probably better than paper money.

In the modern world most money is a bookkeeping entry in the ledger of a bank. Mostly that ledger entry is a digital record on a computer file. When I am paid my wages, my account is credited and my employers account is debited. When I buy groceries on EFTPOS my account is debited and the supermarket’s account is credited. All these are electronic transactions. A cheque is an instruction to the bank to debit my account and to credit another person’s account. When the cheque is lodged with my bank, it issues an electronic instruction to debit my account. Most money that I hold at any point of time is just an electronic record in a banks computer. This is quite acceptable to me provided it can be used for the purposes which I need money.

The only risk with this electronic bank money is the bank is dishonest: making transactions that are not legitimate or have not been authorised by the owner of the funds. However, this will be largely self-policing. If a bank starts making illegitimate transactions, its accounts will become less acceptable for settling debts or buying goods and services. People will very quickly transfer their money to another bank, and the dishonest bank will go out of business. Dishonest banks will disappear, as they will lose their clients.

Banks will have to remain honest to maintain their business. They will need to subject their accounts and accounting systems to the scrutiny of gatekeeping individuals or organisations to demonstrate that they are honest. The more they can demonstrate their reliability, the more their business is likely to grow.

The money represented by bank records would all be on call (unless otherwise specified), so it would not be possible for it to earn interest. The money is a legal entitlement to goods or services. The banks cannot lend these claims, because they do not own them. They simply record them in the same way that a share registry records the ownership of shares. Therefore banks would need to charge a fee for this service. This is not a problem; they are providing a service so it is reasonable to charge for it.

The banks bookkeeping charges would be based on the length of time that money was in the bank. This would encourage depositors to put money that was not being used into savings accounts where it would earn interest and not be subject to charge.

Tuesday, October 20, 2009

Three Prinicples for Honest Banking (3)

3. Banks should not record deposits on their balance sheet.

Modern banks record deposits as assets on their balance sheet. This is wrong. A bank is just a warehouse. A storage company does not record the furniture it stores for people who have gone overseas as an asset. If the owner transfers the furniture to another storage company, its business has declined, but it has not affected its balance sheet. It would want as much business as possible, but the value of the furniture stored would be largely irrelevant.

Similarly, a share registry is not concerned about the value of the shares for which it registers ownership. It is only interested in the number of companies that it has as clients. A bank would want to have as many as clients as possible. However, the size of the claims recorded would not matter to the bank.

A bank is recording an entitlement that belongs to someone else. The claim does not belong to the bank, so it is not entitled to include it on its balance sheet.

Modern money is just digits on a computer file. These digits are records of wealth that belong to other people, so they are not the banks assets at all. Digital records should not be recorded as assets.

More at Money.

Monday, October 19, 2009

Three Prinicples for Honest Banking (2)

2. Money on Call should not be loaned.

Money deposited on call is money that can be withdrawn at any time that the depositor chooses, ie whenever they call. The deposits in all cheque accounts and many savings accounts are on call. Modern banking practice is based on the fact that in general only a proportion of money deposited on call is withdrawn at any time. The rest is used to finance overdrafts and other short term loans or loans on call. Honest banks will not make loans against money on call.

This will eliminate the practice of paying interest on deposits that are on call. Banks can only pay interest, if they can earn interest by making a loan. Banks that do not loan money deposited on call would not be able to pay interest on it.

This change to banking practice would make depositing money on call less attractive, as there may be bank charges, but no interest. Therefore, people will only deposit money on call if they expect to use it fairly immediately. If they do not want to use it immediately, they will be better to deposit it for a fixed term (even if only a few weeks) so the bank can lend it and they can be paid interest.

Sunday, October 18, 2009

Three Prinicples for Honest Banking (1)

1. All bank loans must be matched with a deposit for the same term.

If this principle is followed, then no theft will be possible. Every term loan issued by a bank will be matched by a deposit or group of deposits with the same term. All bank loans will be for a fixed term, so a loan could only be made, if the bank has already received a deposit or deposits with the same term. Banks will only lend money that has been assigned to them for lending to others.

This principle is incredibly simple, but it is the key to sound money. It means that whenever someone borrows a valid claim, there is someone else who is willing to give up an equivalent claim to goods and services at the same time (at a price). This will have the effect of raising the interest rates on longer term deposits. This is reasonable, as the longer the term of the loan, the greater is the risk of loss.

Saturday, October 17, 2009

Money and Futures

A market where people buy and sell entities, which they do not own, is called a futures market. Futures markets exist for a number of commodities and for a variety of financial instruments. Such a market is legitimate for people who want to speculate on or hedge against future changes in price.

All participants in the futures market understand that the person who is promising to sell at a future date does not currently own what they are promising to sell. There is a risk that when they try to buy what they have agreed to sell; the price may have risen so high, that they cannot afford to buy so that they have to default on their agreement. Everyone in the market understands this risk.

Futures markets are inherently unstable, as prices can fluctuate rapidly and players default if unexpected events occur. This is fine, provided all participants understand the type of market they are operating in and a prepared to take these risks. However, this type of arrangement is not appropriate for a nation’s banking system, where stability is essential.

The modern banking system is essentially a futures market, where banks borrow short and lend long. Monetary regulators attempt to add stability to the market, but its nature is essentially unchanged. It is still a futures market.

Friday, October 16, 2009

Universal Health Care

Universal health care has become a big issue in the United States and Christians are getting really stirred about it.

The lost and hurting people living in America are entitled to universal health care. What many Christians seem to have forgotten is that Jesus has already paid for a comprehensive universal health care package that is far better than Obama’s. He died on the cross to purchase healing for all those who have faith in him.

But he was pierced for our transgressions,
he was crushed for our iniquities;
the punishment that brought us peace was upon him,
and by his wounds we are healed (Is 53:5).
For the fine print on this health care package see Healing for Christians.

Jesus also delivered health care to unbelievers as a sign of God grace. The early church healed unbeliever’s as confirmation of the effectiveness of the gospel they preached (Mark 16:20; Acts 3:3-10). Jesus told us to go the lost, to heal the sick and then preach the gospel.
When you enter a town and are welcomed, eat what is set before you. Heal the sick who are there and tell them, 'The kingdom of God is near you (Luke 10:8,9).
Note the order. More of the policy details are in Healing Evangelism.

Jesus health care is comprehensive, even in Syria.Jesus went throughout Galilee… healing every disease and sickness among the people.
News about him spread all over Syria, and people brought to him all who were ill with various diseases, those suffering severe pain, the demon-possessed, those having seizures, and the paralyzed, and he healed them. (Matt4:23-24).
I wish that Christians were as passionate about Jesus universal comprehensive health care as they are about Obama’s unfunded, specified-conditions, palliative health care scheme.

If Christians will not provide Jesus universe health care to the lost people of this world, they are entitled to look to the state for universal health care. If we do not have enough faith to deliver Jesus health care to the world, we are being churlish not to let the state have a go. We should not object to paying taxes to provide health care for the less fortunate, if we unwilling to bless them with health care that Jesus has already paid for.

Thursday, October 15, 2009

Problems with Modern Banking

The practice of loaning money deposited on call is unacceptable. Money is a legally enforceable claim to goods and services and two people cannot hold the same claim at the same time. If I entrust my claim to a bank to look after, and they loan it to someone else, that person will be able to obtain and use the goods and services to which I am entitled.

The bank cannot be certain that when I come to take up my claim, goods and services will be available for me. They have allowed those to which I am entitled to be stolen. The bank is an accessory to theft. It has allowed someone to buy the goods that are mine. They have breached their duty to me (Exodus 22:7-9).

This can be seen more clearly from an example. Suppose that I give my gold jewellery to a friend to look after, saying that I will come and get it when I next need it. If that person then lends that jewellery to someone else, hoping that it will be some time before I want it, or that he will be able to get it back or buy some similar jewellery when I come to ask for it, he has breached his duty to me. He has put goods entrusted to him at risk. If the friend is unable to get them back when I want them, I would be justified in accusing him of theft.

Economics textbooks describing the origins of money, give the example of a gold broker, who finds that only a fraction of people come back for their gold held in his store at any one time. Therefore, he can lend most of it out to other people, keeping a fraction for those who do come back for it. The textbooks describe this as clever use of gold. Actually, it is nothing more than theft (as is shown when there is a run on a bank).

For a detailed analysis of this problem see Bank Deposits and Loans.

Wednesday, October 14, 2009

Volume of Money

The volume of money is not something that the government should control. Nor should it be kept constant, or only allowed to increase at a constant rate. People generally sell things (including their labour), so that they can buy other things that they want. Therefore, the volume of claims, which exist at any time, will depend on how many people have completed both their buying and selling. The number and value of half completed transactions will fluctuate dramatically.

It is possible in theory, say at the end of the financial year, that all people will have completed all their transactions. There might be no outstanding claims to goods and services. The total volume of claims could be zero. In practice this is unlikely to occur, as in the modern economy the flow of transactions from producers to retailers is continuous. However the fact that it is theoretically possible for all legitimate claims to be extinguished at a particular point in time, shows the stupidity of trying to control the volume of money. It can be very small at one point in time and quite large a few days later, depending on how people stream their transactions.

Tuesday, October 13, 2009


I was intrigued by the following statement by Bob Hartley in his preface to a message about called Quartermaster Generals.

I was behind a big dark cloud with a group of people; some were "Daniels" and "Josephs." This dark cloud represented the challenges of the day. These people were called to be "Hope Reformers," however everywhere they looked ahead of them, they couldn't see through the fog and were not able to perceive solutions. As a result, they felt hopelessness and were overwhelmed because it felt like they could not get ahead.

In the encounter, I also saw many prophets in the cloud prophesying; even though they were stating true facts or circumstances, they were not seeing or prophesying the answer in Him. Therefore, they were not to prophesy according to their discernment in the dark cloud, but to move ahead of the dark cloud, and here was how from the dream: those in the dream had to make a choice of whether to focus on the black cloud or to focus on His Eyes.
This vision points to a weakness with much modern prophecy. Many prophets are warning of future disastrous events, but very few are explaining what God is doing and how he will work through these events to accomplish his purposes. Seeing from within the dark cloud of events seems to prevent them from seeing what Jesus is seeing.

A related problem is that many Christians seem to enjoy warnings of judgement on the world, more than they want strategies that would require them to take action to bring in the victory of God.

God does not cause troubles and calamities; they are rooted in human evil or folly with a bit of demonic mischief thrown in. During a judgement, God takes this human mess and works it for good to achieve his purposes. One role of the prophet is to warn of troubles before they come, so God’s people can prepare. Their more important task is to explain what God is doing through the event, so his people can participate in his purposes. Prophets can only accomplish the latter task, if they are standing outside the dark cloud of human events and seeing with the eyes of Jesus.

When a prophet receives a warning of a calamitous event, their task has just begun. The next step is to find out what God plans to achieve through the event, and his strategy for the people who want to participate in his purposes during that event. We need more of eyes of Jesus and less of the dark cloud.

According to Romans 12:6, Christians with the gift of prophesying should prophesy in proportion to their faith. Bill Johnson has noted that when a nation is in decline and has lost the blessing of God, prophesying judgment does not take much faith. Prophesying the strategy by which God will use the judgement to change the nation and bring a great victory for his cause takes much more faith. That is a challenge for modern prophets.

Money is Risky

Holding money does not guarantee that I will receive back the same value that I gave up. I bear the risk of the money devaluing between the time when I give up my goods or services in exchange for money and the time when I use the money to purchase other goods or services.

If prices have risen I may not be able to obtain goods or services of the same value to me as those I have given up. Of course, if prices have changed in my favour, I may gain additional value. My only risk is the effects of changing relative prices between the time of selling and the time of buying. However, I can be certain that if I sell my goods or services, I can buy some goods and services from some other people (provided I can find someone willing to sell at a price agreeable to me).

Trade will only expand in a society if this risk is relatively low. This is why reliable money is so critical for economic development. If the risks associated with holding money are too high, then people will tend to make do with what they have, rather than attempt to sell it and buy something better. This will have a limiting effect on economic activity.

Money is a social phenomenon. No one has their own personal money. Money only functions if it is recognised and accepted throughout society. If it loses this property, because the owners are no longer unwilling to exchange it for their goods and services, it has ceased to be money.

The problem with any form of money is that people will only accept it if they are sure it is reliable. In a fallen world, there will always be some people who try to obtain money without working to produce goods or services, which can be exchanged for it.

Monday, October 12, 2009

Record of a Claim

Money is a record of a claim to goods or services that other people recognise

We can now start to see the function of money. Money enables me to obtain goods and services. This is an important and basic principle. People accept money, because they know that other people will accept it in exchange for goods or services.

When I want goods or services, I can obtain them by working for someone else or by selling goods that I own. However, the people that I sell to will not generally have what I want. I will need to get what I want from someone else. This means that I cannot buy and sell simultaneously. Buying and selling will usually occur in different places, with different people, at different times. There will be a time gap between selling and buying. I will have to sell first and buy later, but once I have sold what I had, I need some other proof that I made the sale and am entitled to buy. Money is the solution.

Money is proof that I have given up goods and services to someone in my society and am entitled to complete the exchange by getting goods and services from someone else in society. Money is a record of a half-completed transaction. It is a record of a claim to goods and services that is recognised by the rest of society. The usefulness of money depends on it being accepted by other people.

Sunday, October 11, 2009

We Need Money

The need for money originates with the concept of private property. A key biblical principle is that a person is entitled to control the goods produced by their own labour, or with equipment that they own, or on land that they own, or using ideas that they have thought of, or techniques that they have developed. This means that if someone wants something that has been produced by another person, they must obtain that person’s consent before they can take it. That consent will usually be given in exchange for something else that the purchaser owns.

If the goods are taken without that consent being given, then person taking them is guilty of theft. The sixth commandment states that theft is a crime punishable by civil courts (Ex 20:15).

If there is no concept or convention of private property, there is no need for money. If someone wants something they can just take it, regardless of who has produced it. If everything is in abundance, this might work. However, as scarcity is a fact of life in a fallen world, this is not practical. The outcome would be determined by force. The strong would have plenty and the weak would get nothing. This would result in a different concept of property; one where everything is controlled by the strongest, regardless of who produced it.

A concept of property is really inescapable. The important issue is whose property the law will protect. Biblical property laws protect those who have produced goods and services.

If a system of private property is to function efficiently, there must be a process for the exchange for goods and services. It is not practical for each person to produce everything that they need. Most people will produce more than they need of what they are best at and exchange it for other things that they need. This division of labour allows people to be more productive and the economy to be more efficient. For this to work, there must be a way for people to freely and confidently exchange the goods and services which they produce and own.

More at Money.

Saturday, October 10, 2009


From an individual point of view, every trading transaction has two parts. In the first part I sell something, which I no longer want, in exchange for money. However, I really don’t want money. I want something else that I can use. I use the money to buy the thing that I really want. The full transaction is not complete, until I have bought it. Buying is the second part of the transaction.

A transaction consists of two parts: selling and buying. After the transaction is complete, I am better off because I have replaced something that I did not want with something that I wanted more. Both the buyer and the seller are better off, because they end up with something they value more than what they gave up.

A link with the first part of the transaction that allows the second part of the transaction is essential. In the example above, money provides the link between the two parts. When I sell my goods, I accept money in return, because I expect that I can use the money to get what I want to complete the transaction.

I only hold the money for a short time. I start with something I did not want. I end up with something that I wanted more. The money is my security for the short time between the first part of the transaction and the second part. Money allows exchanges to to happen.

Holding money is quite risky. Once I have handed over my thing to the buyer, I cannot get it back, but I cannot be certain that I will be able to buy the thing that I want with the money. If no one will accept the money in exchange for what I want, I will be left with nothing useful (I did not want money). Once I have made my purchase, the risk is gone, because I have the thing I wanted. The risk has passed to the person who takes the money from me.

The possession of money is a sign to other people in the society that a seller has completed half a transaction, by giving up something. It allows him to buy something from someone else to complete his transaction. Money is a record of a half-completed transaction.

More at Trade.

Friday, October 09, 2009

King or Lord

An interesting feature of the New Testament is that the gospels have many references to the kingdom of God, whereas Paul does not speak of the kingdom much at all. In Ephesians 1:10, Paul explains that God’s God's ultimate is,

to bring all things in heaven and on earth together under one head, even Christ.
This is the lordship of Jesus.

Jesus spoke of the Kingdom of God because he is humble. He was not going to go round preaching, “The Kingdom of Jesus” is coming. He could not preach that “I am the Lord”.

Paul did not face this constraint and wanted to honour Jesus. He understood that Jesus is the king of the Kingdom of God. By the time Paul was speaking and writing, Jesus had ascended into heaven and was seated at the right hand of God. By declaring that Jesus is Lord, Paul was acknowledging that the Kingdom of God is now the kingdom of Jesus.

Many Jews would have been happy if Jesus had become King of Judea, but Paul did not want any confusion about this issue. In Roman times, local kings like Agrippa and Herod were minor political hacks, whereas Caesar was Lord of the entire empire. When Paul described Jesus as Lord, he was putting him in a place far above these local kings, and far above Caesar.

Thursday, October 08, 2009

Money Cartel

Gary North explains that central banking is a cartel.

Monetary theory should therefore reflect the presuppositions, logic, and evidence that undergird general economic theory. Any attempt to segregate monetary theory from general economic theory is an admission of the failure of the general economic theory. This general theory is not general, because it does not apply to monetary theory.....

Nowhere in introductory economics textbooks do we find an analysis of central banking that is consistent with the chapter on economic cartels. No textbook in money and banking begins with an analysis of the banking system in terms of the economic analysis that applies to a cartel. Yet modern banking is unquestionably a cartel.

When money is controlled by a cartel that uses political power to keep out entrants into the industry, we can be sure that the members of this cartel are acting in their own economic self-interest. They are not acting on the basis of concern for the general public. They are not public-spirited individuals; they are self-interested individuals, just like everybody else.

Here is an example. When members of the school of economic thought called "public choice theory" analyze any government- protected cartel except central banking, they begin by showing how government protection of the cartel leads to higher prices, reduced productivity, and actions in opposition to the public interest. Yet when public choice economists write a chapter on central banking, they abandon their entire system of economic analysis. They speak of central bankers as public-spirited individuals who must be protected from interference by self- interested politicians, because banking is too important to be left to politicians. What banks need is legal independence, they say. What they need is immunity from democracy.

They seem completely oblivious to the fact that they are totally schizophrenic, analytically speaking. This goes on, decade after decade, yet other economists do not point to this inconsistency, precisely because they hold the same position.
I deal with this topic at Deposits and Loans and Mistrust and Banks.

Wednesday, October 07, 2009

Schizophrenic Economists

Gary North is currently publishing a series on money in his fortnightly newsletter. His latest article, highlights one of the most serious problems with modern economic theory.

If monetary theory is accurate, it is a subset of general economic theory, which must also be accurate. Monetary theory is not an independent theory of human action that is divorced analytically from a general theory of human action.

Only the Austrian School of economics believes this and adheres to it in practice. All other systems of economic thought segregate monetary theory from general economic theory.

There is a reason for this. Bankers for five centuries have benefited from a grant of privilege from the state: a legal privilege. Banks are allowed to write contracts that are prohibited to all other profit-seeking agencies. They are allowed to promise depositors immediate payment, yet they lend the depositors' money to borrowers.

Non-Austrian School free market economists do not challenge this legal arrangement, either in the name of economics (counterfeiting) or law (special privilege). They accept it. They do more than accept it. The applaud it, but in a value- free, totally neutral academic way. They are apologists for this grant of privilege.

They pay an intellectual price for their cheerleading. They cannot conceptually integrate this grant of privilege into their general theory of economic causation, which rests on a concept of private ownership and enforceable contracts. They make no attempt to square the analytical circle. They remain silent about this anomaly.

They pretend that their various rival theories of economic causation are coherent. They aren't.
This disconnect between monetary theory and general economic theory is the major flaw with modern economics. It is also the main reason that mainstream economisst did not foresee the financial crisis.

Tuesday, October 06, 2009

Not Perfect but Sufficient

Judges and law are the best form of government, but this method of justice will not achieve perfect justice in every situation. Law and judges cannot eliminate all problems and cannot prevent violent or evil men from doing harm. But Christians can still survive, if this happens.

Judges and law deal with minor injustice. If evil becomes widespread, their effectiveness will decline. Ruthless people may seize control and try to achieve order, but they will fail, because coercion and control always amplify evil. In these situations the Holy Spirit is the only solution. He can change the hearts of evil men. He can turn widespread evil into love for God.

We must not use force to bring in the kingdom. If evil men choose to use force, we might have to surrender to them for a time, rather than stooping to their level.

We trust in the Holy Spirit to deal with evil. He can tame the hardest heart.

The gospel is effective.

Monday, October 05, 2009


I do not put a label on my calling. I notice that soon As soon as something has a name, people think that it must be done the way that they like that calling to operate. For example, if someone takes the label evangelist, people assume that they should be a clone of Billy Graham. That can sometimes make it hard for them to become the person that God wants them to be.

God is immensely creative. Just as there are numerous species of trees, and no two trees of the same species are exactly identical, there are amazingly diverse giftings in God's kingdom, and no two callings are exactly the same. . We have only discovered a few aspects of this diversity so far. There are many ways of operating that we have not even dreamed about yet.

I am not interested in being put in other people's boxes. I am only interested in being in God's box.

Sunday, October 04, 2009

War and Peace (7)

On understanding history.

Because we see out of the past only the general historical interest of that period, and we do no see all the personal human interests of the men of that time. And yet in reality these personal interests of the immediate present are of so much greater importance than public interests, that they prevent the public interest from every being felt—from being noticed at all, indeed. The majority of the people of that period took no heed of the general progress of public affairs, and were only influenced by their immediate personal interests. And those very people played the most useful part in the work of the time.

Those who were striving to grasp the general course of events, and trying by self-sacrifice and heroism to take a hand in it, were the most useless members of society; they saw everything upside down, and all that they did with the best intentions turned out to be useless folly…

In historical events we see more plainly than ever the law that forbids us to taste of the fruit of the Tree of Knowledge. It is only unself-conscious activity that bears fruit, and the man who plays a part in an historical drama never understands its significance. If he strives to comprehend it, he is stricken with barrenness (p. 1072).

Saturday, October 03, 2009

War and Peace (6)

Tolstoy on the Public Good

Ever since the world has existed and men have killed one another, a man has never committed such a crime against his fellow without consoling himself with the idea. That idea is le bien publique, the supposed public good of one. To a man not swayed by passion this good never seems certain, but a man who has committed such a crime always knows positively where the public good lies (War and Peace p.1019).

Friday, October 02, 2009

War and Peace (5)

Weakness of Power

Every governing official in quiet, untroubled times feels that the whole population under his charge is only kept going by his efforts; and is this sense of being indispensably necessary in which every governing official finds the chief reward for his toils and cares. It is easy to understand that while the ocean of history is calm, the governing official holding on from his crazy little skiff by a pole to the ship of the people, and moving with it, must fancy that it is his efforts that move the ship on to which he is clinging.

But a storm has but to arise to set the sea heaving and the ship tossing upon it, and such error becomes at once impossible. The ship goes on its vast course unchecked, the pole fails to reach the moving vessel, and the pilot, from being the master, the source of power, finds himself a helpless, weak, and useless person (War and Peace p.1013).

Thursday, October 01, 2009

War and Peace (4)

I enjoyed his comment about the German General Pfuhl, a war theorist.

Pfuhl had been one of those responsible for the plan of campaign that ended in Jena and Auerstadt. But in the failure of that war he did not see the slightest evidence of the weakness of his theory. On the contrary, the whole failure was to his thinking entirely due to the failures that had been made from his theory, and he used to say with his characteristic gleeful sarcasm: "Didn't I always say the whole thing is going to the devil?"

Pfuhl was one of those theorists who so love their theory that they lose sight of the object of the theory—its application to practice. His love for his theory led him to hate all practical considerations, and he would not hear of them. He positively rejoiced in failure, for failure, being due to some departure in practice from the purity of the abstract theory, only convinced him of the correctness of his theory (War and Peace p.729).