Thursday, November 29, 2012

Adair Turner on Finance

The Future of Finance and The Theory That Underpins It is a talk given by Adair Turner at the London School of Economics. It is available on a podcast here. It is a bit technical at time, but is worth a listen for those who want to understand the GFC.

Turner described the problems with the modern banking system very clearly, which is unusual for an insider. They usually pretend that the system is better than it is. Unfortunately, although he understands the problem well, Turner believes that the problems with the system can be managed. I think he is wrong. A more radical solution will be required.

Banks facilitate unmatched intermediation between lenders and borrowers. Lenders and borrower can obtain credit and debt contracts for different terms, risk and return. This mismatch is managed through the bank's balance sheet. On the liabilities side of the balance are short-term deposits. On the assets side are long-term loans, often twenty to thirty year mortgages. This creates a huge risk, as the bank ends up with many short-term debt contracts, which it could not honour, if all the depositors wanted to withdraw their funds at the same time. Banks depend on the central bank to act as a lender of last resort whenever this happens.

In addition to this liquidity risk, banks also carry the default risk. If a borrower default, the depositors still expect to get their money back. A bank needs sufficient capital to cover this default risk.

In the UK, business lending and borrowing net out. This means that most savings by households go in residential and commercial mortgages. This can create a self-reinforcing credit/asset price cycle. When real estate prices rise, banks are willing to lend more to mortgage holders. More mortgage money allows household to bid up prices. This self-reinforcing cycle creates frequent housing booms.

I describe a better solution to the liquidity problems of banks at Deposits and Loans and Money

Wednesday, November 28, 2012

Chicago Plan Revisited

Jaromir Benes and Michael Kumhof of the IMF have released a working paper called The Chicago Plan Revisited. They advocate government control of the money supply, which is dangerous, but they make a couple of interesting points along the way.

  1. They emphasise the benefits of separating the money and credit functions of the banking system. In the modern banking system, these two roles are intertwined. This causes immense problems. I explain a better way to separate the payments process from loan brokerage in the Money System.

  2. Benes and Kumhof explain the instability of modern debt-based money system. Bank liabilities are money that can be created and destroyed at a moment’s notice. This allows the banking system to engineer rapid lending booms and contractions. They advocate money that is government equity. In the Community Banks, I advocate money that represents the equity of the people.

Monday, November 26, 2012

Why Nations Fail

I have just read Why Nations Fail by Daron Acemogulu and James Robinson. The authors are looking for a grand idea.

We need a theory of why some nations are prosperous while other fail and are poor. The theory needs to delineate both the facts that create and retard prosperity and their historical origins.

They select institutions as the decisive bit idea. They divide nations according to whether their institutions are extractive or inclusive.

Our theory has attempted to achieve this by operating on two levels. The first is the distinction between extractive and inclusive economic and political institutions. The second is our explanation for why inclusive institution emerged in some part of the world and not in others. While the first level of our theory is about an institutional interpretation of history, the second level is about how history shaped institutional trajectories of nations.

Central to our theory is the link between inclusive economic and political institutions and prosperity. Inclusive economic institutions that enforce property rights, create a level playing field, and encourage investments in new technologies and skills are more conducive to economic grow than extractive economic institutions that are structured to extract resources from the many by the few and that fail to protect property rights or provide incentives for economic activity. Inclusive economic institutions are in turn supported by, and support inclusive political institutions, that is, those that distribute political power widely in a pluralistic manner and are able to achieve some amount of political centralisation so as to establish law and order, the foundations of secure property right, and inclusive market economy. Similarly extractive economic institutions are synergistically linked to extractive political institutions, which concentrate power in the hands of a few, who will then have incentives to maintain and develop extractive economic institutions for their benefit and use resources they obtain to cement their hold on power

The synergies between extractive economic and political institutions create a vicious circle, where extractive institutions, one in place, tend to persist. Similarly, there is a virtuous circle associated with inclusive economic and political institutions.
Aemogulu and Robinson cover broad swathes of history and discuss many nations to support their theory.

The institutional approach has real merit. Sound institutions are really important, so the book is really worth reading. However, one explanation is never enough. There are counter examples that do not really fit with their theory.

One example is China. The growth in the Chinese economy over the last two decades has been amazing. Several hundred million people have gone from poverty to prosperity in a very short time. Nothing like it has occurred in the world before. However, China has corrupt institutions and the rule of law is absent. The institutional theory does not explain the rapid economic grow in China.

New Zealand is another example that does not fit the theory very well. The country has a very well established legal system, and international surveys suggest it is one the best place in the world to do business, yet economic growth here has been sluggish.

At the beginning of the book, Aemogulu and Robinson discount two alternative theories that have been put forward.

Geography is the first theory that is discarded. Despite their arguments, geography does seem to be an important factor. Britain had plenty of accessible coal and iron ore, and was favourably situated for the trade winds from America. The United States has abundant mineral resources and a huge navigable river system going through the middle of the continent. These factors contributed to economic development. For New Zealand, thousands of miles from the next large market are a disadvantage. Geography is important, even if it is not the decisive factor.

They also reject culture as a determinant of economic development. Probably too quickly. A Confucian culture has a strong influence in China. It is one reason for the strong economic growth, despite the lack of stable institutions.

I believe that Christianity is an important factor for economic development too.
Christian faith produces honesty, trust, confidence in the future, thrift and service, which are all important for economic development. The distorted gospel that has been preached in Africa is an obstacle to development there.

In practice, this means that there is not one factor that can explain all economic development. A combination of factors is needed for long-term economic development to emerge. Institutions are important, but other factors may be important as well.

Wednesday, November 21, 2012

Unintended Consequences

I have just read Unintended Consequences by Edward Conard. He was the managing director of Bain Capital, the company established by Mitt Romney and his mates. He makes some interesting points about the causes of the Global Financial Crisis.

Part of the problem was that the United States and the rest of the world had a surplus of risk-averse, short-term capital.

Risk averse short short-term capital will only fund investment, if equity underwrites the risk. The United States and the rest of the world have a shortage of equity and risk taking rather than a shortage of capital more broadly.

Low-income households are far more disposed to consume than to invest. They tend to sell assets to increase consumption.

What little the middle class saves largely funds their personal housing. Housing investment does little to increase growth, productivity, employment and wages. Middle class saving over an above housing largely provides risk-averse short-term saving. They demand capital preservation and the right to withdraw their saving and consume them at any time. This type of capital underwrites too little risk to grow the economy.

Economic activity is proportional to risk taking. The willingness to take a risk drives both investment and consumption.

Investments to produce innovation are risky, and often produce no value at all. When they work, innovation create enormous increase and in value and subsequent economy activity.

Equity investors have the right to whatever profit is left over in a business after everyone else has been paid. Unlike equity investors, short-term debt holder demand capital preservation and the right to withdraw and consume their savings at any time. Because of these demands, short-term debt may fund investment, but only if equity holder underwrite the investment risk. Short-term debt bears too little risk to grow the economy. The amount of equity and its tolerance for risk grows the economy.

This difference in risk tolerance has a significant impact on the capital available to underwrite risk. The deferred consumption of the middle-class consumers largely yields risk-averse debt. These investors refuse to underwrite risk. Instead, they demand government guarantees as a condition for making their savings available for investment. These guarantees include government-issued treasuries, municipal bonds, and the debt of government-sponsored entitles like Fannie Mae and Freddie Mac as well as Federal Deposit Insurance. With an abundance of risk-averse debt flowing in to the United States from the trade deficit, additional risk-averse domestic debt is of marginal value to growth of our economy.

There is plenty of risk-averse capital to fund increased investment. So much so , that an abundance of investors willing to buy debt contributed to the growth of sub-prime mortgages and the erosion of credit standards that triggered the financial crisis. What was needed was more equity.

Traditionally, economists define saving as the accumulation of deferred consumption, because saving defined in that way are straightforward to measure. But savers largely lend deferred consumption as short-term debt. Successful risk taking that creates innovation large creates equity, not the accumulation of deferred consumption.

Government guarantees—the promise to cover losses with future tax increases, if necessary―encourage risk-averse offshore investment in the United States via government guaranteed debt.

Monday, November 19, 2012

Submitting to Caesar

Jesus warned to his listeners about submitting to political power.

Render to Caesar the things that are Caesar’s, and to God the things that are God’s (Luke 20:25).
Christians have made this complicated, but it is not. Everything on earth belongs to God. Nothing belongs to Caesar. So, Jesus was saying subtlety that we owe nothing to Caesar. I have written on this before in Voluntary Taxation.

I have just gained another insight on this passage. The coin bearing Caesar’s image represents the Roman political and economic system. The Pharisees and teachers of the law were all wrapped up in that system. They had gained their positions and wealth through collaboration with the Romans. They were dependent on Caesar’s money system for all their transactions.

Given that they were wrapped up in Caesar’s system, they could not object to paying taxes to the Romans.

Christians belong to the Kingdom of God. Caesar’s system has nothing to do with God’s kingdom. As the Kingdom of God, we should develop alternative economic system. Giving and sharing will be much more important. Christians might need to develop and alternative money system.

When we go into the world, we are like tourists visiting another country. A tourist might have to pay value added tax, but they do not pay income tax, because they do not belong to the country that they are visiting.

Christians may have to pay taxes to worldly governments, because they need to be in the world for their witness. But they do not owe taxes to the world system. If they do think they owe them, then they are probably too wrapped up in the world system.

Friday, November 16, 2012

Writing in the Dust

Why did Jesus write on the ground. This is a question that has puzzled many commentators. I think the answer is simple.

The teachers of the law and the pharisees had brought a woman caught in adultery before Jesus.

They made her stand before the group and said to Jesus, “Teacher, this woman was caught in the act of adultery, In the Law Moses commanded us to stone such women. Now what do you say” (John 8:4-5)?
They were testing Jesus, so his response is really important. Many commentators assume that Jesus rejected the requirements of the law of Moses and replaced them with forgiveness and mercy. That would be surprising, because Jesus had already said that had not come to abolish the law, and that not one jot or tittle would pass away while heaven and earth continued to exist (Matt 5:17-20).

The truth is that Jesus applied the law correctly in this situation.
If a man commits adultery with another man’s wife—with the wife of his neighbour—both the adulterer and the adulteress are to be put to death (Lev 20:10).
If a man is found sleeping with another man’s wife, both the man who slept with her and the woman must die. You must purge the evil from Israel (Deut 22:21).
These laws demonstrate the seriousness of adultery. The family is the basic unit in society, so adultery is treason against society. It is an evil that must be purged from society, or it will be destroyed.

However, the law has more to say about how the penalty for adultery should be applied. Firstly, a person can only be convicted of a crime if there are three witnesses to it.
One witness is not enough to convict anyone accused of any crime or offense they may have committed. A matter must be established by the testimony of two or three witnesses (Deut 19:15).
The Pharisees and teachers of the law understood this, so they stood the woman in front of the crowd and claimed as proof that she had been caught in the act.

Jesus knew that the law had another requirement. The witnesses must not have committed the crime they are testifying against. Adulterers cannot testify against adulterers. A witness who has committed the same crime is a false witness (Deut 5 :20) Jesus reminded the teachers and pharisees of this requirement, when he said,
Let any one of you who is without sin be the first to throw a stone at her (John 8:7).
This was not a new idea, it was a requirement of the law of Moses.

After saying these words, Jesus then continued writing on the ground. Commentators have speculated on what words he wrote that caused the crowd to slowly disperse, but they have missed the point. Jesus did not write any words. If he had, they would have been recorded. He wrote in the dust on the ground, because he wanted the people gathered to know where he was looking. Jesus was the only man in the crowd, who was not looking at the woman, and he wanted them to know that.

This woman had been “caught in adultery, in the very act”. Women in those times wore a single garment. They did not have fancy lingerie. So she would have removed her garment when she was caught in the adulterous act. When they dragged her out of the house and placed her in front of Jesus she would have been standing naked. This was part of their proof that she had been caught in adultery.

I presume she was an attractive woman, or she would not have been in this situation, so every man in the crowd would have been ogling at her. Except Jesus who was looking at the ground. When they noticed that Jesus was not looking at her, they would remember that Jesus had taught on the nature of adultery.
I tell you that anyone who looks at a woman lustfully has already committed adultery with her in his heart (Matt 5:28).
As they looked at her, and noticed Jesus had not, they would realised that they had committed adultery where they were standing. They disqualified themselves as witnesses, because they were guilty of the crime that they were accusing her of committing. There was nothing for them to do, but to leave in case Jesus revealed their sin.

When they had all gone, Jesus looked at her. He was the only man on earth who could do that without sinning. However, he had not witnessed her sin, (although he had witnessed the sin of the men who accused her), so he could not condemn her. He told her to leave, and to stop sinning.

There was no witness, who was not guilty of the same sin, so the woman could not be put to death. Therefore, Jesus fulfilled the requirements of the law of Moses, he did not set them aside.

Jesus did more than that. He demonstrated that the adultery laws could not be applied. Given the nature of human hearts, it would be impossible for three men to observe a man and a woman completing an act of adultery without committing the same sin by lusting after the woman. If they did not do it at this time, they would have done so previously. Therefore, there could never be innocent independent witnesses to testify against the adulterers. Adultery was an unenforceable crime.

This was not new. Moses understood this. Jesus had already explained that Moses did not enforce the laws against adultery.
Moses permitted you to divorce your wives because your hearts were hard (Matt 19:8).
Moses did not apply the death penalty for adultery, because he understood human hearts and knew that he could not get three independent, innocent witnesses. Instead he allowed divorce as a pragmatic solution to the problem Jesus did not change Moses’ standard.
I tell you that anyone who divorces his wife, except for sexual immorality, and marries another woman commits adultery (Matt 19:9).
Jesus did not abolish the law that required the death penalty for adultery. He left it on the books, to demonstrate God’s abhorrence for adultery. It is a serious evil that undermines society from the inside out. Jesus also confirmed that this law should not be enforced, because human hearts are not up to it.

Jesus demonstrated how judgment and mercy meet. He did not undermine the law, but he ensured that the women received mercy.

See Crime and Punishment for more.

Wednesday, November 07, 2012

Restoration of the Prophetic

I picked up something interesting from James Maloney. He was speaking about Isaiah 53, and explaining that everything that happened to Jesus, achieved something for us. He was pierced for our transgression. By his wounds we are healed. I knew this, but he went one step further. He says that Jesus face was punched and disfigured to restore the prophetic. He referred to Is 52:14-15.

His appearance was so disfigured beyond that of any human being
and his form marred beyond human likeness—
so he will sprinkle many nations,
and kings will shut their mouths because of him.
For what they were not told, they will see,
and what they have not heard, they will understand.
Jesus face was so disfigured that he looked ugly. The gospels explain how this had happened. Jesus had been taken before the Jewish Sanhedrin. They accused him of blasphemy and condemned him to death. Mark records what happened next.
They blindfolded him, struck him with their fists, and said, “Prophesy!” (Mark 14:65).
Then they spat in His face and beat Him with their fists; and others slapped Him, and said, “Prophesy to us, you Christ (Matt 26:67-68).
The Jewish leaders blindfolded beat his face with their fists. They also challenged him to prophesy. This ironic because the voice of prophecy had been silent in Israel for hundreds of year. Jesus had already restored the prophetic. He had prophesied against the Jewish leaders (Matt 23,24), but they had rejected his prophecy. They had now condemned him to death, which is what Jesus said they do in his prophecy (Matt 23:37).

The Jewish leaders disfigured Jesus while challenging him to prophesy. God saw it differently. Jesus face was disfigured, so that the prophetic ministry could be restored and prophets could stand before the face of God and speak his word to the people. Jesus was blindfolded, so prophets could see. Isaiah described the fulfilment in the verses quoted above.
Things that have not been written down will be seen.
Things that have not been heard will be understood.
This is the role of the prophetic ministry that was restored by Jesus. The Holy Spirit was poured out on the day of Pentecost and the gift of prophecy and the ministry of the prophet were put into action again.

There is something else that James did not mention. Isaiah gives a warning to kings.
Kings will shut their mouths because of him.
When the prophetic ministry is restored, kings and political leaders will be silent. In the modern world, political leaders have the voice that tells people what to think and what is right and wrong. When the Kingdom of God comes, kings and politicians will lose their place. The prophets have an important role in revealing the Kingdom of God and silencing all kings but Jesus.

The next verse describes the role of the prophet.
Who has believed our message
and to whom has the arm of the LORD been revealed (Is 53:1).
The stretching forth of God’s arm is revealed to his prophets. They proclaim his message to the powers of the world, but mostly they are not believed.

Tuesday, November 06, 2012

James Maloney

Last week we went to a meeting where James Maloney was speaking. He operates in a gift of faith and a gift of discernment. Towards the end of the meeting, asked people to go forward for prayer of healing. About a third of those present joined the line. These were people from some of the best and most alive churches in the city.

Seeing this made me sad and angry at the same time. These people believe the gospel. They believe that healing is part of salvation. They have experienced the Holy Spirit working in their lives. Those standing in line looked desperate, because they have not received what the gospel promises.

These faithful Christians looked harassed, like sheep without a shepherd. It make be wonder what is going on in their churches. What are the pastors and elders doing.

Is anyone among you sick? Let them call the elders of the church (James 5:14).
The Bible says that Christians who are sick should go to their elders. It does not say to wait for a visiting preacher from the United States. It does not say to wait in a healing line and hope. Something is seriously wrong.

My reading of James 5:14 is that elders are responsible for dealing with sickness in their church. My book on Healing provides insights for elders and pastors who want to get serious about dealing with the sickness in the church. It does not have all the answers, but it does have insights that will be helpful to those who take this challenge seriously.

Monday, November 05, 2012

The Corporation

The corporation has a long history, but it is only one method for organising for business. Limited liability laws have given the corporate model of organisation a huge advantage that has allowed it to dominate all others.

When limited liability laws disappear, we will need to find new and better ways for organising business. Cooperatives, trusts, and even contracting networks will become much more important. Christians should be at the forefront of this activity, because we should be experts on freedom and relationships.

Sunday, November 04, 2012

Wright and McKnight (5)

The Holy Spirit is the kingdom builder. Of course, that answer raises another difficult question. If the Holy Spirit has all the power of God and none of the restrictions of being human, why has he been so unsuccessful in his ministry?

In my book Times and Seasons, I bring these questions and answers together to explain how the cross and the Spirit work together to bring the Kingdom of God come to fulfilment. I am a big picture guy who could not cope with the life of footnotes, so I switched from theology to economics, where the concerns and questions seemed to be much bigger (wrongly). My style is more polemic than McKnight and Wright and is intended for a lay audience, but I attempt to put all these things together.

The Holy Spirit is the Kingdom Builder, but his power has been constrained because Israel is missing from the body of Christ. The church has not achieved its full potential, because of the ream is missing. The truncated church has been unable to give the Holy Spirit the authority that he needs to operate freely in the world. The result has been a limited kingdom.

The next step in God’s plan is to graft Israel back into the vine. When that happens, the Church will have a new completeness. When the team is complete, the Holy Spirit will have much greater authority to work in the world. He will be free for the first time to do what needs to be done to bring Kingdom of God to a much greater fullness. Jesus will not just be a King of heaven, but will receive widespread recognition as Lord of Lords on earth.

The Old Testament promises highlighted by McKnight and Wright will come to fruition. The Kingdom of God will achieve the much greater fullness that Israel was promised by the prophets. Wright acknowledged that too much prophecy about the Kingdom has been pushed out to after the parousia. That is right. Times and Seasons explains how they can be brought back into the present and how they become a reality on earth (and not just into theological ideal.

Messrs Wright and McKnight say that the coming of Jesus was the climax of the story of Israel. I do not understand how they can make that statement and not go on to discuss the future of Israel, particularly in books about the Kingdom of God. Jesus said some fairly stanch words to the people of Israel in Matt 23 and 24, but in the midst of that he promised hope for the future (Matt 23:29). This suggests that the story of Israel goes on beyond Jesus ministry on earth. If the story of Israel is important, and I agree that it is important for understanding, the Kingdom of God, then some discussion about the future of Israel seems to be essential. This lack is a serious gap in their books.

There is another important implication. The grafting back of Israel (whether spiritual or physical) brings blessing to the world. I presume that that blessing means greater fulfilment of the Kingdom of God. This means that the Kingdom of God is constrained during the times of the Gentiles. When the team is complete, the Holy Spirit will have much greater authority to work in the world. He will be free for the first time to do what needs to be done to bring Kingdom of God to a much greater fullness. He will do that without reverting back to the ugly Kingdom that Jews of Jesus time dreamed about. This must be part of the good news of the Kingdom.

Saturday, November 03, 2012

Wright and McKnight (4)

As a Kingdom nut from way back, I like the way that Tom Wright brings the cross and the Kingdom together. I have never been able to see the point of pushing them into opposition. However, I was surprised out how little emphasis he gave to the Holy Spirit, although he is seems to be an equally important part of the gospel. He simply says “And that theology of the Spirit is, of course, what the New Testament supplies, on page after page”, but leaves it at that.

Wright finds the cross and the kingdom together on every page of the gospels, but mostly ignores the increased activity of the Holy Spirit that runs along side. For example, in Luke’s gospel, John was full of the Spirit from birth (1:15), the Holy Spirit came upon Mary (1:35), Elizabeth (1:41), Zechariah (1:67) Simeon(2:25), and Jesus (3.22; 4:1; 4:14). The Holy Spirit was present to heal (Luke 5:17). Luke ends the gospel with the disciples being told to wait for the promised Holy Spirit. He begins the book of Acts with a repeat of the command to wait for the Sprit. The entire book is the story of the Holy Spirit and should more correctly be called the Acts of the Holy Spirit.

John the Baptist promised that Jesus would baptise his people in the Holy Spirit. All the gospels record the Holy Spirit coming on Jesus at the beginning of his ministry. During his ministry, Jesus rejected religious and political power, but embraces the power of the Spirit to heal the sick and cast out demons. The gospel writers repeatedly say that the Kingdom is near. Matthew explains what it means. The Kingdom coming near is the Holy Spirit doing stuff among the people (Matt 12:28). John recorded that Jesus needed to go away, so he could sent the Holy Spirit to get the job done on earth.

When I read the gospels, I see the cross, the kingdom and the Holy Spirit. We need all three brought back together.

The gap raises a serious question about the nature of Jesus kingship. Jesus might be king, but he has gone back to heaven, so how can his kingdom come on earth, and be more than just a nice theological idea. When the king is not here, his kingdom can be ignored, no matter what status, he has back in heaven. The key is the Holy Spirit. He is the Kingdom Builder. When Jesus ascended out of the earth, he sent the Holy Spirit to establish his Kingdom on earth. To understand how the Kingdom comes we must understand the ministry of the Holy Spirit on earth. Wright says, “All this demands, of course, a strong theology of the Holy Spirit as the one who dwell in Jesus’s followers and enables them in turn to be kingdom-bringers…..” but does not develop this further. That is a pity.

The fullness of the Spirit is an essential part of the gospel that makes the coming of the Kingdom on earth possible. The good news is that Jesus is King and is sending the Holy Spirit to bring his Kingdom into being.

Friday, November 02, 2012

McKnight and Wright (3)

McKnight and Wright explain how the story of Israel was fulfilled in Jesus ministry. They do not deal with the role of Israel in the New Testament age. With his second speaker, Wright emphasises that God has returned to Israel in Jesus. He does not discuss the fact that after Jesus ascended out of Israel, Israel was sent into exile. Now some of Israel seems to have returned to the promised land, but God has not returned with them. How does this fit within in God’s plan.

This leaves some big questions. What is happening to Israel now? How will they be grafted back into the vine? When will that happen? What will be the impact on the Kingdom of God, and how will it bring blessing to the world. How does Israel come into the Kingdom of God, without reverting to the militaristic version of the Kingdom that Jesus rejected?

The McKnight and Wright account of the gospel does not answer these questions, although they are an important part of the story of Israel. The gospel was good news for Israel, not just good news for the world. The good news for Israel is more than just some land defended with nuclear weapons and F16 jets. To fully understand the gospel, we must understand how it is good news for Israel.

I explain how the gospel is good news for Israel in my book Times and Seasons, and it is good news for the whole world.

Thursday, November 01, 2012

Prophetic Ministry in NZ

My latest book is now available in New Zealand. It can be purchased for directly from Kingwatch Books for $NZ12.00 including free postage at Prophetic Ministry. Look for the New Zealand Only option.

McKnight and Wright (2)

I find the emphasis of McKnight and Wright that Jesus is the fulfilment of Israel’s story really helpful, but it does not provide a full explanation. An important question is left hanging. The big question is this. Why did God choose to work through Israel, if he knew it was going to fail to fulfil its calling, and that he would have to send his son to get the job done anyway.

The problem the gospels are resolving is the authority one. Who is in charge on earth. The Gospel message is that God will be back in charge again. Once we understand that the issue is authority on earth it becomes much clearer why the history of Israel is so important for the gospels.

I would couch the problem that the Gospels are resolving this way. When God created the earth, he delegated authority over it to humans, without recourse. When humans sinned, they handed authority over the earth to the forces of evil. We underestimate the significance of this authority shift. God was outlawed from his own world, by the people he created and empowered. He could only intervene in the world, if humans gave him permission, and not many did, because they were captivated by evil.

God chose Abraham and Israel, because he needed a people to give him authority to act on earth, and to provide him with a place where he could launch his plans to redeem the world, without the constant risk of being squeezed out, before he was finished. Abraham and his descendants provided him (intermittently) with the authority he needed. Israel provided a place from which he could expand out his work of restoration.

God needed a place where he could operate a bit more freely than he usually can. Israel was not ideal, but it provides something that he could work with (This is explained more fully at Gods Big Strategy). When Jesus came to earth as a baby, he came to a place where God had permission to intervene to support his life and ministry. Israel made the incarnation possible.

The church now gives God authority to operate on earth. I will explain the implications for Israel in the next post.