Saturday, August 31, 2013

Wealth and Revival

The key to the fullness of the spirit is Christians Connecting with each other, loving one another as Jesus has loved us. He will only put his new wine in wineskin that is made of love.

The greatest barrier to Christians connecting is our wealth. In a traditional society, people were bound together by mutual obligation. I helped you with your harvest, and you helped me with mine. If a woman was sick, the other women came to care for her family. Most exchanges of goods and services took place through giving and sharing out of mutual obligation.

Most of these transactions have now been monetised. If I need someone to help with the harvest, I pay someone to help. If a woman gets sick, she pays someone to provide childcare and do the housework. Very little giving and haring takes place outside of immediate families.

Our wealth makes this possible. Most goods and services are now paid for with money. Wealth has contaminated our relationships. People form relationships with the people they work with or for recreation, but they have limited interaction with the people in their communities.

Christian relationships have been casualised in a similar way. We go to church on Sunday to receive services from the ministry team and pay for them with tithes. We have only casual relationships with other Christians.

God may have to take away our wealth to get us back into connection with each other. May be this the key to the evangelist David Pawson’s question to New Zealand. He asked.

Who is willing to pray for economic ruin to make revival possible.
This is a hard prayer to pray. I am not sure if I am up for it.

Thursday, August 29, 2013

FM on Money (7) Equity

Felix Martin says that money is a social technology which depends on people. This is a good insight, but I have a problem with his view that money is debt. He argues that and notes are a circulated IOU and that money was originally created by the sovereign going into debt and issuing paper debt instruments. People were will to accept these notes as a settlement if debts, because the assume that the sovereign is creditworthy and that others will trust them to back their debt.

The argument that money is created by a debtor issuing debt gets things the wrong way round. Money is not created by a debtor. Money is validated by a person selling something in a half completed transaction. They have given up something, but have not received anything back yet. They are willing to accept the money (whether cash or bank record) because they trust the people in the community that they live in to honour it.

The person accepting money gives the community credit. They believe that someone in the community will give them goods or serviced in exchange for their money. Money is created by a community respecting money claims.

If I sell something for $10.00, I do accept it because I trust the bank, or think that the government will give me something. I trust my community to honour it.

Taking money as payment gives the person holding it equity in the output of the community. They can’t guarantee what they will get, but they will get a share of what is available in the immediate future. I have an equity in the goods that will be made available by them in the next period of time. I explains this in Trade.

Sovereigns do not decide the value of money. Businesses decide the value of money when they set the prices of goods and services offered for sale. The community decides the value of money when they agree to buy goods and services. The government does not decide the value of money.

Wednesday, August 28, 2013

FM on Money (6) State

The problem I have with Felix Martin is that he assumes a role for the state in money.

What matters is only that there are issuers whom the public considers creditworthy, and a wide belief that their obligations will accepted by third parties.
He claims that the sovereign is the only viable issuer of money, because only the sovereign can be trusted to always meet its obligations.
The sovereign’s credit worthiness rests on the strength of its authority and on the sovereign’s willingness to deploy it to accumulate credit from its subjects via taxation. More than its dominant size in the market, it is the sovereign’s dominant power outside the market that makes its IOUs effective as money. So long as the state is held to be legitimate, its money enjoys the trust no only on command or legal ground, but on ideological and even spiritual grounds (p.74).
This is a bit odd. We trust the money issued by a sovereign, because he has the power to tax us to back up his money if it fails.

The problem with this view is that the sovereign was not creditworthy. Kings were always fighting wars that they could not afford. They were always running up huge debts to fight stupid wars. When their debts got unbearable, they would default on them and the people who trusted them would lose out. Sovereigns were well known for defaulting on their debt, so it is unlikely that their debts would be trusted.

Tuesday, August 27, 2013

FM on Money (5) Origins

Felix Martin gets into a debate about the origins of money. The original idea that is expounded by economists is that money was originally a commodity. God or silver were the most common, because they were portable and divisible into coins. The first banknotes were receipts from bullion warehouses for gold and silver in storage. It was often easier to exchange the paper receipt than to exchange the gold or silver. According to this theory, proper money got under way when governments took over this role by holding gold and silver and issuing bank notes.

The other theory is that money began as debt issued by kings. When the king borrowed from his citizens, the person making the loan would get a written IOU from the King. These began to circulate as paper money.

Felix Martin prefers the latter explanation. He argues that the commodity money theory held back the development of monetary policy. He blames John Locke for this development.

I don’t think it matters too much which explanation is correct. I suspect that both occurred, and it is not clear which came first. It probably does not matter.

The debt theory is interesting because it shows that money is a social phenomenon.

At the centre of this alternative view of money- its primary concept, if you like – is credit. Money is not a commodity medium of exchange, but a social technology composed of three fundamental elements. The fist is an abstract unit of value in which money is denominated. The second is a system of accounts, which keeps track of individuals’, or the institutions’ credit or debt balances as they engage in trade with one another. The third is the possibility that the original creditor in a relationship can transfer their debtor’s obligation to a third party in settlement of some unrelated debt.

The third element is vital. Whiles all money is credit, not all credit is money and it is the possibility of transfer that makes the difference. An IOU which remains for ever a contract between two parties is nothing more than a loan. It is credit, but it is not money. It is when that IOU can be passed on to a third parry, when it is able to be “negotiated” or “endorsed”, in the financial jargon – that credit comes to life and starts to serve as money. Money, in other words is not just credit – but transferable credit.
This is good stuff. I have described a system of money that can meet these elements that does not need gold and silver or the intervention of the sovereign in Bank Deposits and Loans.

Saturday, August 24, 2013

FM on Money (4) Banks on Strike

Felix Martin tells the story of a strike by the bank officials union that shut down Irish banks for more than six months.

Business carried on without too much disruption, while the banks were closed. Most bigger payments were made by cheques, although it was impossible to clear them at a bank. It seems that the owners of pubs and shops knew the people whose credit could be trusted. Businesses knew which business, they trusted, and accepted their cheques. Businesses would buy cash from large retailers, to make up their payrolls.

When the banks finally opened, it took them three months to clear all the cheques.

While they Irish banks were closed, the Irish made their own money.

Friday, August 23, 2013

FM on Money (3) Tally Sticks

Felix Martin records some interesting stories about the history of money to support his theory that the conventional view of money is wrong. The Exchequer tally sticks were an interesting portable means for recording receipts and payments.

For more than six hundred years, from the twelfth to the late eighteenth century, the operation of the public finances of England rested on a simple ingenious piece of accounting technology: The Exchequer tally. A tally was a wooden stick – usually harvested from the willows that grew along the Thames near the palace of Westminster. On the stick were inscribed, always with notches in the wood and sometimes in writing, details of payments made to or from the Exchequer. Some were receipts for tax payments made by landowners to the Crown. Others referred to transactions in the opposite direction, recording the sums due on loans by the sovereign to prominent subjects. Even bribes seem to have been recorded on Exchequer tallies.

Once the details of the payment had been recorded on the tally stick, it was split down the middle from end to end so that each party to the transaction could keep a record. The creditors half was called the stock and the debtors the foil, hence the English use of the term “stocks” for Treasury bonds, which survives to this day. The unique grain of the willow wood meant that a convincing forgery was virtually impossible, while the record of the account was portable, rather than just inscribed in the Treasury account books at Westminster. Exchequer credits could be passed from the original holder to a third payment in payment of some unrelated debt. Tallies were what are called: bearer securities” in the modern jargon.

Historians agree that the vast majority of fiscal operations in medieval England must have been carried out using tally sticks; and they suppose that a great deal of monetary exchange was transacted using them as well.

Although millions of tallies must have been manufactured over the centuries, and we know for sure that many thousand survived in the Exchequer archives up until the early nineteenth century, only a handful specimens exist today. The ultimate culprit for this unfortunate situation is the famous zeal of England’s nineteenth century advocates of administrative reform.

By late eighteenth century if was felt that it was time to dispense with it. An Act of Parliament of 1782 officially abolished tally sticks as the main means of account keeping at the Exchequer , though because certain sinecures still operated on the old systems, the Act had to wait for another half-century, until 1826, to come into effect. However, in 1834, the ancient institution of the Receipt of Exchequer was finally abolished, and the last exchequer stick was replaced by a paper note.
The irony is that when the redundant tally sticks were being burnt in a stove in the House of Lords during 1834, the intense heat set wood panelling alight and the houses of Parliaments were burned to the ground and had to be rebuilt.

Thursday, August 22, 2013

Felix Martin on Money (2) Liquidity Transformation

According to the theory, at least, banks achieve "liquidity transformation"; they transform their liquid, short-term deposit liabilities into illiquid, long-term loans. But the notion of liquidity transform is quite literally a euphemism. Nothing is actually transformed at all. Bank’s liabilities remain short-term and of fixed nominal value, and their assets remain long-term and of uncertain nominal value, and never the twain shall meet. Instead, banks give the impression of achieving a transform by artfully synchronising the payments in out of their balance sheets. No matter how artfully this is done, though, there is always the possibility that people will lose confidence in a bank’s ability to do it (p. 258).
Felix notes that this is a “problem that plagues” every banking system.

He is correct. I have suggest matched loans as the only practicable solution to this problem in Money.

Tuesday, August 20, 2013

Felix Martin on Money (1)

I have just finished reading Money: The Unauthorised Biography by Felix Martin. He has an interesting comment about the disconnect between the disciplines of economics and finance.

From the moneyless economics of the classical school, there evolved modern orthodox macroeconomics: the science of monetary society taught in universities and deployed by central banks.

From the practitioner’s economics of Bagehot, meanwhile there evolved the academic discipline of finance, the tools of the trade taught in business schools, used by bankers and bond traders.

One was an intellectual framework for understanding the economy without money, banks, and finance. The other was a framework for understanding money, without the rest of the economy. The result of this intellectual apartheid was that when in 2008, a crisis in the financial sector caused the biggest macro-economic crash in history, and when the economy failed to recover afterwards, because the banking sector was broken, neither modern macroeconomics nor modern finance could make head nor tail of it.

The answer to the Queen’s question - why did no one of the economist see it coming - is simple. Their framework for understanding the macro economy did not include money.

And by the same token, the question that many were keen to put to the bankers and their regulators – why didn’t they realise that what they were doing was so risky – also turned out to be simple. These frameworks for understanding finance did not include the macro economy.

It would have been comical, had it not ended in such a cataclysmic disaster (pp.225-256).

Monday, August 12, 2013

A World Without Debt

Edward Hadas has written a good article on the problems of debt. He says that he dreams of a world without debt. Here are his reasons.

Loans and bonds are poorly designed for their primary economic purpose – investment. This observation may sound shocking. Interest-bearing debt is considered totally normal. Financial theory unquestioningly treats risk-free debt as the standard instrument. Savers usually compare all investments to a similar standard: safe bank accounts which pay a steady interest rate.

But a little reflection on the real economy shows that the typical debt arrangement is an unfortunate holdover from a more primitive age. Loans are unnecessarily distant from economic reality. If we were starting now, we would never rely on such rigid instruments to fund investments.

To start, loans carry a maturity mismatch, because temporary debt funds permanent investments. Depositors can take money out of banks, banks can pull lines of credit and loans are supposed to be repaid or refinanced at maturity. But the factories the credit finances cannot then be unbuilt. The research cannot be undone and the people cannot be untrained.
The way that interest rates are usually fixed in advance is another problem. Unless both sides agree on floating rates, loans are bets on future inflation rates. Sometimes borrowers gain, sometimes lenders do, but either way a totally unnecessary risk is created.

The most important problem with debt is the so-called economic mismatch: the interest payments on loans vary much less than borrowers’ cashflows. Temporary difficulties can lead basically sound companies to skimp on economically valuable investments, or to default.

Banks are supposed to be able to absorb the losses from defaults. They charge riskier borrowers higher interest rates, a burden which makes default more likely. They also have a hierarchy for taking losses. Shareholders lose out first, followed by holders of subordinated debt. In most countries, the government comes to the rescue when losses get really large.

The arrangements are complicated and uncertain – thus the debate over how much capital banks need. The problem, though, is largely created by the duality of loans: either good or bad. If borrowers’ payments were more flexible – lower and higher depending on economic conditions – banks could have financial structures which were both simpler and sounder.

What is needed? Financial instruments which have no maturity, which are protected from inflation and which have variable payments. There’s nothing fantastic about that wish list. Common shares tick all the boxes (Full article at a Imagine a World Without Debt.
The biblical economic model is hostile to debt and interest. Loans for longer than seven years are prohibited, because that is a long as people who do not know the future can commit. The borrower becomes the slave of the lender, and God’s people should be free. Loans to the poor must be interest free. So as the gospel advances the use of debt should decline dramatically, and be replaced with greater use of equity, which is more equitable anyway. Edward’s comments provide economic reasoning to support this view.

Saturday, August 10, 2013

Whose Standard?

When I read the following word I smile, and wonder if Paul chuckled to himself, as he wrote them.

As the church submits to Christ, so also wives should submit to their husbands in everything (Eph 5:24).
Most church leaders would say that Paul is setting a high standard for women. They must do everything that their husbands command.

When teaching on this passage, they seldom comment on how well the church obeys Jesus. The answer would be “sporadically”. Most churches do their own thing. They follow the distinctives and beliefs of their denomination. They seek Jesus guidance when things go wrong, but most the time, the leaders know what needs to be done.

So if wives were to submit to their husbands like the church submits to Jesus, they would obey him occasionally, but most of the time they would do their own thing.

The standard is much higher for husbands, as Jesus gave his life for his church, yet allows it do what it likes most of the time.

Friday, August 09, 2013

Which is Easier?

Jesus said that it is easier to heal the sick than to forgive sins.

Which is easier: to say, ‘Your sins are forgiven,’ or to say, ‘Get up and walk’? But I want you to know that the Son of Man has authority on earth to forgive sins.” So he said to the paralyzed man, “Get up, take your mat and go home.” Then the man got up and went home (Matt 9:5-7).
When we preach the gospel, we expect our hearers to accept on trust that God can forgive sins. Jesus proved to his listeners that God could forgive sins by healing the sick.

We have turned the message round the other way. We preach that forgiving sins is easy, but healing the sick is hard. That is a problem. If we do not have faith for something that Jesus said is easy, how can we expect people to believe something Jesus said was harder.

Thursday, August 08, 2013


Earlier this year, I published book called Healing: Insights for Christian Elders. I realised at the time that the church is not ready for it. I tend to see things far ahead, so what I describe in the book is a way ahead of where we are at now. But the time is getting close, when the Spirit will move in real power and this stuff will be normal. The next wave of evangelism that will sweep the world will be powered by the gift of healing.

This book is for those who are out front. If you want to be ready for the next big move of God should read it.

If you can only believe what you see, save your pennies.

Monday, August 05, 2013

Directed Evolution

Many Christians have accepted the scientific view of human origins. One approach adopted is Directed Evolution. It assumes that God intervened in an evolution process to bring about his plans. These interventions are not detectable by scientific methods.

This approach gets things the wrong way round, as it ignores the intervention of the spiritual forces of wickedness in the world. God did not intervene in the evolutionary process. He created a good world. Following the fall, the forces of evil intervened to mess it up. Their intervention is not detectable by scientific methods. The scriptures do not have a complete record of what they did, just hints. The consequence is that the scientific method can investigate the world to determine how it operates now (it cannot understand evil) but it cannot determine how it existed or functioned prior to the massive discontinuities caused by the spiritual intervention into the world at the time of the fall.

Christians should be modest too. We do not no know how God created the earth, whether he built it up layer by layer, or whether he did it in instant. We cannot look the earth for evidence to support particular views of creation either.

Saturday, August 03, 2013

Continuity and Discontinuity

Scientists claim that they have proved that the earth is 4.5 billion years old and that all life evolved over millions of years. Their conclusion is based on two critical assumptions.

  1. Materialism
    This is the assumption that the physical world is all that there is. It follows that all explanations of reality must be based on material things, what can be observed.

  2. Uniformity
    This does not mean that thing have always been the same. They have not. It assumes that the physical world operated in the same way as it always has. Things change now in the same way as they always have. If you look at things today, and see how they change, you can work out how they were yesterday. This uniformity assumption allows scientists to roll history back to measure how the earth has changed and discover how life has evolved. (The 4.5 billion years is derived by measuring change that would take that long, if change was occurring throughout that time at the same rate as it changes now).
Both assumptions are inconsistent with the Christian faith.
  1. Spiritual Continuity
    A spiritual world operates in continuity with the physical/natural world that scientists observe. We live in a multi-dimensional universe in which the spiritual dimensions exist in parallel to the three-dimensional physical world. Angels and evil spirits can move between the spiritual and physical dimensions, but humans only see the physical side of existence. Events in the physical world are shaped by activities in the spiritual realm. If we just look at the physical world in isolation, we miss much of what has happened.

  2. Physical Discontinuity
    The uniformity assumption is broken by the huge discontinuity that occurred at the fall, following a massive intervention from the spiritual realm. Even Christians have underestimated the extent of this discontinuity.

    When Adam and Eve sinned, they put themselves and the earth that God had entrusted to them under a curse. The curse removed God’s spiritual protection from the earth. The millions of angels, who had rebelled against God, probably before the fall, were given a free hand to work their mischief and evil on earth. They were more united than they have been since, because they were still loyal to their leader called Lucifer. The ones who would be shut up following the flood were still free (1 Peter 3:19; 2 Pet 2:4-5). The spiritual forces of evil were at the height of their powers and there were not many people, so they were able to concentrate their attack on animals, plants, and the physical world.

    It did not happen instantaneously, but the spiritual forces wrought terrible change on earth.
    • The earth, which was created good, began to groan under stress (Rom 8:22).
    • A benign safe world was turned into a dangerous place.
    • Plants were modified to become harmful to humans
    • Vegetarian animals became carnivorous (Is 65:25).
    • New bad species may have been formed.
    • The food chain changed dramatically.
    • Weather patterns changed, so that storms, hurricanes, and tornadoes became frequent.
    • The earth was changed so that earthquakes and volcanoes became normal.
    The last two were partly the result of the flood, which was caused by the collapse of the firmament and the breaking up of the springs of the earth (Gen 7:11). (The flood was also a discontinuity, but not on the scale of the fall).

    The curse on the earth following the fall allowed the spiritual forces of darkness to work massive evil and disruption on earth. The world was totally changed and everything that was previously good was messed up. This is why the cross is much more than personal salvation. The cross dealt with the cosmic effects of sin, and the earth is waiting and groaning for the children of the cross to understand its fullness.
The huge discontinuity of the fall destroys the uniformity assumption. It means that scientists cannot look back from what exists now to what happened before the discontinuity. Looking at what exists now will give a distorted and confusing view of what existed before the fall. The intervention of the spiritual into the physical world following the fall means that scientists cannot discover the origins of the earth by looking at what exists now.