Saturday, February 28, 2009

God will Provide

Christians have another unreality. They glibly say,

God will provide,
but very few think about what this really means. God actually provides in four ways.
  1. Creative Miracles - Jesus feed the five thousand in this way. The ravens fed Elijah during a crisis. However, creative miracles of this kind a relatively rare. When looking to God for provision, we should not expect gold coins to rain from the sky.
  2. Blessed by the World – The Egyptians gave the children their jewellery when they fled Egypt. These situations are quire rare too.
  3. Reaping what we have Sown – God has given us earth in which to grow feed. If we plant a few vegetable seeds in the earth, God blesses the growth and provides us with feed. Forget about spiritual seed and plant vegetable seeds, if you really want God’s provision.
  4. Other Christians – People in need will often be given gifts by other Christians. This is the most common way that God provides.
Most of God’s provision for his people comes through other Christians. This has an interesting consequence. God’s provision involves two Christians: one to receive and one to provide. For everyone who is blessed by God’s provision, there must be another who gives as the Spirit leads.

So if God is going to provide, we will not all be receiving. For God to provide, some of us will have to be on the giving end. If we not prepared to be givers, God will find it hard to provide.

We should prepare by getting together with other Christians who now how to share and give.

For more this topic see Christians and Money.

Friday, February 27, 2009

Phony Depression

The problem with the current “phony depression” is that real preparation for tough times is being put on hold; before it even starts. Christians should be getting ready for life in a different world. They should be getting into strong relationships with other Christians, so they can walk together through any crisis and still be strong. We should be learning how to live simpler by sharing and supporting others that we trust. Preparation is urgent.

We probably have less than a year to learn how to do this stuff, but all the negative talk has produced a false complacency. Too much “crying wolf” has made people unrealistic about what is required. Downsizing from a daily latte bowl to a flat white is not living simpler. Buying a few “less treats for the kids” is not serious preparation. People say they are cutting back, but most are just kidding themselves. The chatter about crisis has created a sense of unreality. Many are thinking:

If this is a depression,
I can cope.
Things are tight,
but I am alright.
Our complacency held back God’s ability to shape our nation and now it is preventing us from preparing the future. Complacency is dangerous, because it makes people unreal about the future.
Two young boys were playing beside a lake.
A few metres out from the edge was a small flat island,
an interesting place to play.
The water surface looked smooth,
so the boy decided to wade out to the island.
I warned them to be careful,
but the water looked calm,
so they plunged ahead,
but were soon up to their waists in mud.
They managed to struggle on to the island,
but they were shocked and bedraggled.
We are like those children. When warned of danger, we ignore the warnings and plunge ahead confidently, because things look good on the surface. Only when we are up to our waists in mess will we realise that something is wrong.

We are watching people in other nations struggle, but not thinking about the causes of their problems, and what they should be doing to prepare
A crowd was standing around watching a woman
staggering around and trying to stand up.
Only when those watching put their arms around her to hold her up,
did someone remember that she is a diabetic,
and get something sweet for her to drink.
The time for goofing around is over. New Zealand has less than a year to prepare.

Bruce Shepherd has some good advice. He is probably overstating the immediate risks, but what he said about communities is important. When someone from the ultra individualistic world of finance starts talking about building community, we should sit up and take notice.

Thursday, February 26, 2009

Pause Ending

New Zealand has forgotten God.
As a nation we once knew him;
not very well,
but we tried to serve him,
we tried to obey him,
we tried to worship him
and he blessed us.

But now New Zealand has abandoned God
most people have rejected his love,
many have forgotten who he is,
some of our leaders oppose him,
and others really hate him.
Given that we have forgotten God,
we should have lost our blessing
we should have lost it long ago.
But God is merciful
and has held back the judgement
He has held back the trouble and sorrow,
He has held back the pain,
and allowed his blessing to remain
although we had forgotten him

Now the long pause,
between forgetfulness and consequence
between sowing and reaping
is coming to an end.
Within a year
of a bright light being snuffed out
the economy will start to shake.
Just when people are saying,
The doomsayers were wrong.
We have avoided the hard landing,
a strident shudder will strike.

Wednesday, February 25, 2009

Economic Situation in New Zealand

Despite all the talk about crisis, depression has not come to New Zealand. Despite the chatter about crisis overseas, the economic reality is currently quite different in this country. The decline in GDP has been very small (mostly the result of a drought that is over).

Wages are under pressure, but very few people have lost their jobs. Those who do lose their jobs get generous benefits. Business is tough, but that is to be expected after ten years when business was easy. Profits are down, but very few businesses have failed. Adjustments to consumer spending are so marginal, that they hardly show up in the aggregate.

We are not experiencing anything like what happened in the 1930s. Life is still a breeze compared to those times. For the majority of New Zealanders, life just goes on as normal. People are still walking their dogs, not eating them.

The reason is that New Zealand went into the current world crisis in far better shape than most countries.

  • We were the first country in the world to go into this recession (GDP went negative during the first two quarters of 2008), but the cause was a drought, not financial jarring. That drought has ended.

  • Unemployment has been at a record low.

  • Real estate agents and car dealers are suffering, but they have creamed it over the last few years.

  • Most New Zealand businesses are in good shape (apart from excessive debt). We do not have any economic cripples like the US auto industry. The weak players here were shaken out during the early nineties.

  • Government debt levels were much lower than in comparable nations.

  • The New Zealand banking system is relatively sound. Most of the dodgy lending was done by the finance companies. These passed from the scene last year without causing too much pain.

  • The decline in petrol prices is helping everyone.

  • Homeowners and businesses have been assisted by a sharp decline in interest rates.

  • Tax cuts have put extra money in most pockets.

  • The devaluation of the New Zealand dollar is compensating exporters for declining commodity prices.

  • Food production for export markets is our main industry. The people of the world who can no longer afford to buy SUVs still need to eat.

  • Although Bama and Brown’s bailouts are morally flawed, they are keeping their flawed banking systems going.

When the economy appears to be recovering, and politicians are saying that the doomsayers were wrong, and economists are talking about a soft landing, and forecasters are talking up the recovery, but they could be wrong. Just as fear is turning into hope, the economy will probably turn to custard.

Tuesday, February 24, 2009

David Pawsons Burden for New Zealand (5)

Twenty-three years after David Pawson visited, another David brought a similar message to New Zealand. David Wilkerson also carried a real burden from God when he spoke to Christian leaders in Auckland. The following is a summary of his message.

David Wilkerson had a strong sense that calamity will affect a big percentage of our population, even up to one million people. The collapse of our real estate boom will hit New Zealand like a whirlwind. If God has to touch every pocket book, he will do it because He loves this country.

The Lord knows what He is doing and everything is in His divine order. Many people are putting together money in the bank to see them through the storm they intuitively see ahead. They are putting their energy into a nest egg, rather than trusting in God, caring for the poor, the widows, etc.

He quoted Ezekiel 16:46-56 that lists the
following sins:
fullness of bread
abundance of idleness
did not strengthen the hand of the poor and needy
There is no greater sin than apathy, because apathy is a by-product of covetousness. We have bought into the idea that happiness only happens when we have nice things, a house, a job, etc. Apathy demands judgement before any other sin. He asked God to smite our apathy.
Long Delay
An interesting question is why David Pawson’s burden has been brought up again, after such a long delay. The reason for the delay is that God was giving his people time to get ready. If he had allowed an economic disaster to strike New Zealand at that time, many of his people would have been ruined.

Many Christians would have been swept away,
because they were not prepared.
If the economy had collapsed,
most people would have been shaken
and many would have fallen.
God needed his people standing together,
so they could minister
to those who were shaken.

Our complacency has held back God’s ability to shape our nation. This was dangerous, because while God withheld his hand to protect his wayward people, evil continued to increase. Evil has now been unrestrained for thirty years and has penetrated so deep into our culture that he cannot hold back any more.

New Zealand has forgotten God.
As a nation we once knew him;
not very well,
but we tried to serve him,
we tried to obey him,
we tried to worship him
and he blessed us.
But now New Zealand has abandoned God
most people have rejected his love,
many have forgotten who he is,
some of our leaders oppose him,
and others really hate him.
Given that we have forgotten God,
we should have lost our blessing
we should have lost it long ago.
But God is merciful
and has held back the judgement
He has held back the trouble and sorrow,
He has held back the pain,
and allowed his blessing to remain
although we have forgotten him.

But the season of patience has now come to an end. God must deal with evil, even though his people are not prepared. God wanted to reach New Zealand before hearts became too hard. If his people had been prepared, he could have turned the nation back with one quick shake (possibly in 1987). He offered the church a quick painless victory, but we refused to get ready, so the opportunity passed, a painful economic crisis inevitable.

Monday, February 23, 2009

David Pawsons Burden for New Zealand (4)

God’s challenge to New Zealand was received in the 1980s, but it has not been acted on. People focussed on the economic crash, but missed the warning to be prepared. Many asked, "Is the crash coming now?" but few asked "What must I do to be part of the commando army?" People did not get ready, so God hand was restrained.

The economic crash could have been the 1987 share market crash, but it was not because God’s people were not ready, so he had to defer. The economic crash could have been triggered by the Asian financial crisis in 1997, but God’s people were not ready. The economic crash could have been triggered by the 2007 credit crunch, but it was not because God’s people were still not ready so he has deferred again.

The Lord seems to start an implement his strategy every 10 years, but because his people are not ready, he has been unable to bring his plans to fulfilment.

David Pawson shared his burden,
he also told us how to get ready.
People listened, but they did not hear
Crash, Crash, Amen, Amen! they said,
but no one got ready.
So God could do nothing,
he could not fulfil his word.
A word that is not heard,
cannot be fulfilled.
The church has had thirty years to prepare, but has done very little. Most Christians are still not a place where they could cope with a real economic crisis. Very few could be strong during a time of disaster.

Despite the advance warnings, we are not ready.

Pivotal Times
Very few Christians understand the critical times that we are living in. Most are looking around and see things falling apart. They are not worried, because they believe that Jesus is returning soon to rescue his people. They look forward to an economic crash, because that brings the second coming closer. They are not worried about difficult times, because they have blind faith that God will take care of them.

Rather than pondering signs and events and waiting for the second coming, Christians should be getting prepared to complete the task that God has called us to do. By warning his church that an economic crash is coming, God was giving us an enormous opportunity. Unfortunately we are not ready to take that opportunity. We are living in pivotal times, but the pivot is missing.

Sunday, February 22, 2009

David Pawsons Burden for New Zealand (3)

The members of a commando army must be totally committed to their task. They are totally focused on their objective and will not let anything distract them. They will do what has to be done, even if it costs their lives.

Each member of the team will be extremely fit, mentally alert and totally prepared for their part in any operation. Each commando will have a task to do. They will have trained for that task until they can do it with ease. Any challenge that comes their way will be handled effectively.

Each member of the commando team will be equipped with a different weapon. One will carry a machinegun, another will be expert with explosives and others will be skilled with small arms. Each one will be trained in the use of their weapons and backing each other up. If one member of the team takes an injury, another will quickly step into his place.

The commandos will have melded together into a team. Their strength comes from the way that they support each other. Each one can go into action, knowing that the rest of the team will back them and do their bit.

These commandos can operate with very limited back up and support. They carry all the equipment in the packs on their backs. Commandos are able to live off the land, so they can operate for long period of time in hostile conditions without support.

The commandos understand the strengths and weaknesses of their enemy. They know how to strike where the enemy is vulnerable and they are strong.

Here are some of the things that I believe Christians must do to become spiritual commandos.

  • Get out of debt.
  • Learn to live simply.
  • Share possessions.
  • Reduce dependence on motor vehicles for fellowship and work.
  • Make the spiritual gifts normal.
  • Take hold of Christian healing.
  • Learn to function as part of a team.
  • Build real relationships with other Christians.
  • Reduce dependence on a few powerful leaders.
  • Learn to follow the voice of the Holy Spirit.
  • Understand spiritual protection.
  • Total dedication to Jesus.
  • Learn to do God’s work in pairs.
  • Start doing the One Another stuff.
  • Get a vision for the Kingdom of God.
  • Get out of debt.

Saturday, February 21, 2009

David Pawsons Burden for New Zealand (2)

During his visit to New Zealand, David Pawson was handed a vision about a Commando Army that had been received five years earlier. This vision confirmed his burden and explained how an economic crisis would bring revival. This vision described an economic crash that is not just another judgment on the world, but a key element in God’s strategy for accomplishing his purposes for this nation. This vision contained several keys to understanding God’s strategy.

  • Most Christians would be shattered by an economic crisis. They have been blinded by wealth and drawn into a materialistic lifestyle. In an economic crash these people would be totally crushed.
  • Christians have taken a worldly attitude into the church and starting running it like a business, paying their fees and leaving the professionals to do the work. Churches that are dependent on this money machine will grind to a halt during an economic crisis.
  • The world forces will also be shattered. Satan has used the lure of money and material wealth to hold the people captive, so the crash will break his hold over many people.
  • In difficult times, power flows to those who are prepared. The commando units are Christians who have prepared by learning to live simply without the trappings of the world. Their only motivation is love for Jesus and love for each other. They will have committed to serving each other and will know how to support each other through times of pressure. These Christians will know how to move in the power of God and will be able to minister to all people in all situations.
  • The commando units will not be touched by the crisis. They would not be surprised by climactic events, so they will be strong at a time when everyone else is shattered and confused. Their powerful proclamation of the gospel will be welcomed by people looking for hope and peace in a sea of trouble.
  • People of the world who gained meaning through wealth and consumer goods will be looking for a new meaning to life and will be ready to receive the gospel. The result will be a mighty victory for God.
God’s strategy is to economic crisis to shake up the worldly and loosen Satan’s hold on the nation. The problem is that he cannot shake the world system without also seriously shaking his church. His strategy will only work, if some Christians get into a place where they will not be touched by the economic crisis. The plan would succeed, if significant groups of Christians get prepared.

Timing is Critical
God did not send the flood until the ark was completed. If he had sent the flood sooner, Noah and all the animals would have been wiped out. This meant that the timing of the flood was partly in Noah’s hands. If he spent time preaching when he should have been building the ark he may have actually deferred the flood. In the same way, God could not send the economic crash until the commando armies were prepared. If he were to send a crash before they were ready, it would do too much harm to both the church and the world. The timing of this crash is not determined by economic events, but by what happens in the church.
When this commando army is ready God will drop the bomb.
God could not send this economic crash until his commando army ready.

Micke Bickles Dream

I find that the person receiving a prophetic dream is often not the best person to interpret it. Gene Redlin drew my attention to a dream by Mike Bickle that illustrates this problem.

Mike’s presentation of the dream makes another common mistake. He mixes his interpretation into his description of the dream. This is unwise as it minimises the communication impact of the dream. Prophetic dreams should be allowed to speak.

In the version of Mike Bickles dream below, I have cut out all the interpretative comments and just left the works that describe what he saw. Reading it this way the message is much clearer.

A. I was speaking at a conference in a baseball park inside a large fairground. About 40,000 people were present—many leaders from different “charismatic” streams, and people from all these groups. I saw one particular leader who was representative of other leaders in the Body of Christ who seek to walk in God’s power and who have an excellent spirit. We were enjoying warm fellowship together.

B. I preached on prayer, God’s power and end-time judgment. I spoke at two afternoon sessions. In the break between the sessions, people were debating what I was preaching. Some IHOP-KC people debated each other, while others were speaking to believers from different ministry streams. They were discussing God's power and His end-time judgment in a friendly way; there was no hostility, only sincere dialogue with humility and love. It was enjoyable and intellectually stimulating but none of the different points of view stirred up real faith or revelation.

C. Immediately as I finished the second session at 5 PM, I saw (some) large snakes (over 100 yards long and 50 feet thick), each having a huge head that looked like a dragon, and many of them were coming from the sky down to the earth.

E. Everyone at the conference was filled with panic; most were terrified. No one had understanding or faith that was mature enough to respond in the power or confidence that I had just preached on, myself included. I ran as I felt the terror of the event. The leaders and their people were terrified; everyone wanted to get out of the fairground quickly. Most people were in confusion, including those from IHOP-KC.

F. These snakes were filled with rage against the people. They were angry and even humiliated about being confined to the earth.

G. Soot like wet, muddy, thick ash was raining down from the sky. It darkened the sky as it fell on the people who were running. I ran out of the vast fairground to the park offices at the entrance. Wet ash was all over me as I ran. Many did not get out; they were bitten by the large snakes.

H. There were evil policeman at the entrance. They told me, “You have to go back into the fairground or we will put you in jail.” They were callous about the danger I would face if I went back into the fairground. I was in a dilemma. I thought, “I just escaped from the most intense danger imaginable and now I have to go back in!”
One thing stands out really clearly. These people were keeping up to date with the latest teaching and the current moves of God. They had just listened to an afternoon of teaching by the “best” end-time teacher in America. Yet when evil appeared in their midst, they were totally unprepared for it. They were “filled with panic”, “most were terrified”, “no one had understanding”, “their leaders were terrified”, “people were in confusion” and “everyone wanted to get out”.

There is a serious disconnect here. People listening to “prophetic teaching”, but totally unprepared for what happens to them next. Something is seriously wrong.

The core message of this dream is that end-time teaching is not preparing people for the evil that lies ahead.

Most of the snakes came down from the sky. This suggests that some were already their in the stadium. This is very disturbing. God’s people are so busy discussing the power of God and the latest end-time teaching that they are blind to the evil that is already emerging in their midst.

Heads represents political power (Rev 17:9). Large heads represent excessive political power. End-time teaching blinds Christians to the idols of state power economic power and military power that are already at work in America, and will suddenly manifest themselves in a terrible way in the future.

All the different “charismatic streams” were present at the stadium. Many of the leaders who “see to walk in God’s power” were there too. This means that the problem being exposed by the dream affects all these Christian streams.

Mike Bickle does not mention the soot in his interpretation, but it is clearly important. Soot represents shame. The dream is warning that fear and confusion will eventually turn to shame, when people realise how they have been side-tracked by misleading teaching. Shame is dangerous, because it makes people want to get out. Many will be so ashamed of their foolishness that they want to give up being Christian. This would be a disaster if it was allowed to happen.

The policemen at the entrance made Mike Bickle go back. I was really touched by a prophetic word that Mike Bickle received many years ago.
I will change the understanding and expression of Christianity in the earth in one generation.
I was also really encouraged by his efforts to assist in restoring the prophetic ministry to the church. In recent years, Mike seems to have morphed into an end-times teacher. I sense that the Spirit is telling him to go back to that early calling: transforming Christianity to something totally different and restoring a vibrant prophetic ministry. His end-time teaching is producing confusion and distracting Christians from the important stuff. If continues with that he will end up where he could end up constrained and shut down.

PS: In his interpretation, Mike Bickle refers to Revelation 12. This passage does not describe a future event. It was fulfilled at Jesus ascension into heaven.

Friday, February 20, 2009

David Pawsons Burden for New Zealand (1)

To understand the current economic situation in New Zealand, we must go back to a clear word that the English evangelist and bible teacher David Pawson delivered more than thirty years ago. Although he has never been called a prophet, he carried two burdens from God when he visited our nation in 1982.

One burden was as follows:

God wants New Zealand back.
He wants New Zealand back as
a nation that will be a model to the nations
of a people who are living under the government of God.
God intends New Zealand to be one of those nations
where he demonstrates his Kingdom.
God wants New Zealand back.
He is wanting his people to reign with him.
Don’t wait for eternity to begin to reign with him
He is looking for a queen to reign with him now,
because New Zealand has a king an his name is King Jesus.
This country needs a change of government.
New Zealand is a nation that could be brought
under the government of God
and be a light to the nations.
This burden was not understood; his second burden was very simple:
God wants to bring revival to New Zealand for the first time.
God will bring revival through economic ruin.
Who is willing to pray for economic ruin,
to make revival possible.
David Pawson was well known in New Zealand through the circulation of his Bible teaching tapes, so his authority was widely acknowledged. He took this message of “revival through economic ruin” around New Zealand, but it has mostly been misunderstood or forgotten. This is sad, because God was providing a wonderful strategy by which he could bring about a great victory. He was challenging and warning his people, so they could prepare in advance.

The burden of David Pawson contained four important points.
  • God will establish his kingdom of God in New Zealand
  • This will be a model that other nations can follow
  • A great revival will advance the kingdom of God rapidly
  • The revival will come through economic ruin.
Read these four bullet points slowly and let them sink in. This was one of the most awesome prophetic messages that a nation has received in recent years.

Thursday, February 19, 2009

Advice to Prophetic People

The following comments are part of the advice, I wrote to a young person seeking to serve the Lord.

  1. Prophetic people should avoid saying, “I am a Prophet”, as it makes them sound arrogant. If you are a prophet, God will authenticate your ministry by fulfilling your words, as he did with Samuel. It is better to wait and let the people say, “He is a prophet”, because they see your words are witnessed and fulfilled by the Holy Spirit.
  2. You should not share the words confirming your calling that the Lord has given to you, except with those who are close to your and will understand them. The Lord gave them to encourage you, not to authenticate your ministry.
  3. Receiving a word from the Lord is the easy part of prophetic ministry. The hardest par is learning how to communicate the word once it has been received. The OT prophets communicated in a variety of ways. Many more communication tools are available to us today. You need to learn how and when to use them in obedience to the Lord. The truth is that if you can receive a word from the Lord, you are capable of receiving guidance about how it should be communicated.
  4. Be careful about using expressions like “The Tribulation Period”. This expression is not used in the scriptures. Tribulation is normal for Christians in every age, so there is not just one such period. I see the current tribulation teaching as part of the traditions of man, so I would be careful before speaking about it. Stick to what is in the scriptures.
  5. Most teaching on the prophetic ministry emphasises the isolated aspect of the role too much. You really need to get a group of strong Christians around you who can encourage you and support you. You also need some one close who will challenge you when you make mistakes. Make sure you are surrounded by honest, trustworthy Christian friends.

Economic Wisdom

From time to time, I have posted quotes from amusing or sound articles on the economic situation. To avoid clutter, I am no longer putting them on this page. In future, they will be found on a page called Economic Wisdom. The latest quote posted will appear under the heading of More Economic Wisdom on the side bar of this page.

The Prophets Missed It

The people who call themselves prophets mostly missed the economic crisis. Several prophecies warned about an economic crisis in America, but these were quite vague. Few were specific with regard to timing. There is very little spiritual understanding of the reasons for the credit crunch. Few understand what God is trying to do.

Even when they warned of economic troubles, most prophets assure God’s people that they would be kept safe. They promised that the wealth of Christians will not be touched. These promises are dangerous. They are probably true for those Christians who are totally dedicated to the Lord. However, Christians with one foot in the world and another foot in the church should not count on them. Christians who want to walk in the Spirit and drive in an SUV should not assume that their substance will be kept safe.

Warnings of the dangers of debt were rare. The idolatry of buying bigger and better houses was ignored.

None of the American prophets are asking what is wrong with their nation that so many Christians could be sucked into a housing bubble and then bow before the state when things went wrong. Worst of all, none of the prophets have understood why God has allowed the credit crunch. They do not understand that it is being used to change the nation and bring in the beast.

The problem is that most American prophets are court prophets. They are cheer leaders for the American system who love their country as much as they love God. They will argue vehemently in support of their favourite political candidates, but they cannot see through the American system to understand what it has become. Most are looking for a transfer of wealth from the world to the church. These blinds spots prevent them from understanding what is happening to their nation.

Wednesday, February 18, 2009

Ethics and Democracy

When I suggest that democracy is anti-Christian, the response usually consists of two statements.

  • We need a government.
  • Democracy is the best form of government.
The first statement has a strange form. It is not a moral statement (normative) but a pragmatic or positive statement about the way things are, like,
  • Humans need water.
This statement can be proved by observation as many people have died of thirst in the desert. However I cannot see how the claim that we need government cannot be proven by observation or experiment.

If I turn the statement into a moral statement:
  • Government is good.
it looks less certain. If I turn the moral statement into a universal one,
  • All government is good,
it starts to look quite shaky. We can all think of governments that are not good. If I qualify it to the following statement:
  • Some governments are good,
It loses all meaning, and begs several questions. Which governments are good? What are the correct criteria for identifying a government that is good?

This leads to the second leg of the double, above:
  • Democracy is the best form of government.
This is a moral statement. It does not just imply that,
  • Democracy is good.
It is a superlative. Democracy is better than all other forms of government. This takes us back to the first statement. What are the criteria for deciding the best form of government? It also begs another question. What is the list of government types that democracy has been tested against?

The truth is that those who use the two statements above never think about these issues. They just assume that the two statements are true. The problem is that they assuming what you are trying to prove is not very sound logic.

Prophetic Crunch

The impact of the credit crunch in America will very different from other countries.

America is in the process of grouching toward being the Beast. The home of market capitalism and the bastion of independence is becoming the breeding ground for state power. Faith in the state has been growing rapidly in the United States over the last few decades. The state has now made a huge series of interventions in the economy and most Americans are cheering. People who would not accept telephone number that includes the digits 666 are glad that the state is bailing out the banks. They will never be able to resist the creeping power of the state again.

The credit crunch will not destroy American power. The productive base of the American economy is still strong, so after a brief hiccup, America will keep on growing as the world empire. The only impact of the credit crunch will be a sharp shift from freedom and independence towards state subservience and control. This radical change will have happened without even a whimper of protest.

Tuesday, February 17, 2009

Crisis and Revival

Many Christians assume that the economic crisis will turn people back to God, but this is not inevitable. The escapades of the Christian Right have turned many Americans off the church, so they will be more like to turn to alternative religions in time of need. Many people are now so secularised, that God does not even cross their minds when troubles come. Church is not even on the radar. Troubled times might benefit the religions more.

Modern people look to the state when things go wrong. If Obama can kickstart the economy, that faith will be further boosted. A worse crisis will just turn people to the state. People in Africa and South America know that government leaders are crooks, who will look after their mates, so their only hope is in something supernatural. Americans have gone the other way. They see the church as crooks, looking after their mates. They will look to the state when troubles come.

To experience a harvest in times of trouble, the church will have to demonstrate a life that is viable, while all others are failing. In an economic collapse, pastor-centric, building-centric churches will be too busy worrying about their overdrafts and mortgages to be able to reap the harvest. Their members will be to busy struggling with their own hire purchase payments and credit card debt to reap a harvest. Non Christians who are struggling with debt will not take seriously churches and Christians who are stuck in the same sinking boat.

To reap a harvest during economic troubles, you will need a model of church that can bring life and hope to where people live. The point of the Commando Vision is that an economic crisis cannot produce a harvest, unless radical Christians get ready to function through tumult. The reason is that most modern churches will be wiped out by the crisis and will not be in a position to help others. I expect that the American church has too many F16 Christians and not enough commando Christians to bring in a harvest in troubled times. Therefore, I doubt that the Lord will put his church through a real economic crisis, because the risk of disaster is just too great.

Monday, February 16, 2009

Coercion or Consensus

If the state has power of coercion, and that seems to be its primary characteristic, then a state that takes actions that are not supported by a broad consensus has slipped into tyranny. It will be forcing people to do things against their will, without a moral basis for doing so.

This means that state action must be limited to things that most people support, regardless of whether they make their decision about these things on the basis of reason, emotion religion or just following the crowd. Unless that state stays within the lowest common denominator that everyone accepts, it becomes a tyrant. This is true whether the state is totally secular or listens to religious voices.

There are very few state actions that everyone will agree on, so the role of the state must be very limited.

The only question in Politics is this: When is force justified
(Lew Rockwell - The Left, the Right and the State)?

Sunday, February 15, 2009

Crossing the Chasm

Last Saturday I read iMonk’s article called the Coming Evangelical Collapse. I also read several articles but the financial crisis. I spent much of the day pondering what God is doing and how long the current economic crisis will last. That night, I had the following dream.

I was walking beside a river with a companion. The sky was blue and the river was flowing steadily. The sides of the river were shaped evenly almost like a canal. People were sailing and rowing boats in both directions. Everything was lovely and the river stretched on for ever.

My dream jumped forward and I was trying to cross a ravine that ran down to the river. A huge structure made of framing timber had been built across the ravine in quite a haphazard manner. I was cling to a couple of the vertical planks on the side of the structure. I noticed the the distance across the ravine was really short. I looked down and was amazed at the depth of the ravine. It seemed to go down thousands of feet.

I was holding on to the vertical planks with on hand and holding a bag containing some of my possessions with the other. I quickly realised that I would not survive a fall and that if I kept going I would certainly fall. I carefully got back off onto the bank of the ravine where I started.

My companion pointed across the structure showing me that it went right across the ravine. My first thought was that I could use the bridge to cross the ravine. I then noticed that there were no planks on top of the structure, so I do not know if it was possible. I woke up before I attempted to go cross.

When I awoke, the following interpretation seemed obvious. The river represented the world economy over the last decade. Everything seemed lovely and people thought it would go on like that forever. The narrow, deep ravine which came upon me suddenly is the current economic crisis. If left to work its course, it would be very deep but very short.

The wooden jerry-built structure represents the bailout packages adopted by various governments. They have put in place in a very haphazard way. People clinging to their property will fall into disaster, if they trust in government bailouts.

A problem that should be deep, but short, may have been made impassable by shonky government programmes.

Saturday, February 14, 2009

Employment for a Calling

Knowing your calling is really important. Too many Christians have only ever looked for paid employment and just assume that their employment is their calling. They are frustrated, because they are not fulfilling their calling.

If your calling does not pay, finding paid employment can be quite liberating. Some Christians leave their calling on hold while dreaming of a rich benefactor who will fund them to exercise their calling. This is a vain hope. No one will understand the value of calling as much as the person called. If they get paid employment, they can be the benefactor for their own calling. They are freed from dependence on trite promises that God will provide.

Understanding that your employment frees you to fulfil your calling will quell the frustration at what can sometimes seem to be pointless effort. Hard work flies by, if you know that it will support you to do something of value. Stitching stinking skins into tents can be fun if you are discussing peoples to reach and churches to plant.

Sometimes our employment will quite different from the calling. Making tents has very little to do with apostleship. Some people with more intellectual callings may need to do physical work to support themselves.

Christians should choose employment that will give their freedom to do their calling. Paul could have earned more money working as a lawyer for the Roman Empire, but it would have limited his freedom to be an apostle. Academia my provide employment for those with intellectual callings, but it can also limit their freedom to follow their dreams. I chose not to get employment as an economist with a secular institution, as that would compromise or confuse my freedom to publicise a Christian view of economics.

Friday, February 13, 2009

Calling and Employment

Many Christians do not understand the difference between a calling and paid employment. A calling is what God created you to do. It is what will make a permanent difference in the world. Paid employment is what you do to support yourself and your family.

A few Christians are able to get paid employment doing their calling, but that is not normal. People called to be pastors can often get paid employment doing pastoral work (many are actually doing management or administration). A person called to be a prophet is unlikely to get paid employment doing their calling. That is why so many become pastors, which is a pain for everyone.

Paul was called to be a apostle, but that did not pay well, so he often took paid employment as a tentmaker. This will be the situation for most Christians. They will not be able to get someone to pay them to do their calling, so they will need paid employment in field where they have skills to earn a living to support themselves while carrying out their calling. They should seek paid employment in a role where the can earn enough to live on as quickly as possible. This task may not be fulfilling and it may not have much eternal significance (all Paul’s tents have rotted away), but that does not matter, if it leaves lots of time for the real calling.

I am called to Christian economics. I have never seen a job advert for a "Christian economist", so I cannot support my family doing my calling. My solution has been to find employment in a role that has very little eternal significance, but allows me to earn a living in three days a week and gives me plenty of time to fulfil my calling.

DANG (25) - Conclusion

The boundary around the role of government is simple.

If the issue is not theft, violence, murder, false witness or fraud, then government should not be involved.

Thursday, February 12, 2009

Mistrust (3)

Increased regulation is not the answer. Regulation cannot make dishonest people honest and greedy people generous. Regulators cannot eliminate temptation and they cannot eliminate the risk of default. Regulations make the situation worse, because they encourage people to trust regulated activities, when it would be better for them to mistrust them.

The only solution is to go back to mistrust. Lenders must recognise that some borrowers will be unwilling or unable to repay their loans. Banks need to get back to doing all the things that they did in the past when dealing with borrowers that are not completely trusted. Credit checks, guarantees, collateral mortgages allow savers to lend to people they mistrust, by managing the risk of default.

When savers go back to mistrusting banks, they will start monitoring their activities and looking for banks that are running less risk. Savers should follow the example of the people who queued outside Northern Rock, because they had heard that the managers of the bank had been engaging in risky practices. We need more of this behaviour.

If I have ten gold coins, who would I trust to look after them. I would trust my wife, my adult children, a few of my friends, some of the members of my church, but that is about it. Gold coins can be melted, so proving ownership is very difficult. If I am going to give them to anyone else to look after, I would be wise to approach them with an attitude of mistrust. Only a fool would lend would blindly pass their coins on to anyone else to look after without putting in place a process to ensure that they will get them back. We should approach banks in the same way.

People who mistrust banks will look for banks which will look after their money without shifting it onto the banks balance sheet and treating the depositors money as if it was their own. More mistrust is the key to a more stable financial system.


There is nothing concealed that will not be disclosed, or hidden that will not be made known (Luke 12:2).
But it takes time. Bill Bonner explains why.
For the time being, we are still in the process of ‘price discovery.’ Last year, investors suddenly realized that debtors couldn’t pay their bills…that assets weren’t worth what people paid for them…that collateral was declining in price, making many erstwhile valuable credits worthless…and that revenue streams were not sufficient to maintain whole sectors of industry and commerce. They panicked. That is why these episodes were called “panics” in the 19th century. Nobody knows which assets are good…and which are bad…. or who’s solvent and who’s not…or which businesses can survive and which can’t. Everyone tries to hold onto to what he’s got…trusting no one and nothing…until the market has time to discover proper prices for things in the new post-bubble era.

In the 19th century…up to the Panic of 1921…this all happened fairly quickly. And then the economy got up off the ground, dusted itself off, and went on its way. But since the Hoover Administration, the meddlers have intervened. Now, they try to stop the process of price discovery…by keeping zombie businesses alive…by loaning money to brain-damaged industries…and nursing the cadavers and corpses with trillions in taxpayers’ money.

DANG (24) - Beneficiaries

Two groups benefit from the activities of government.

  • Many people benefit from their largesse. These are the people who keep them in power.
  • The administrative elite who are employed by the government also benefit. They are the ones who benefit most.

Wednesday, February 11, 2009

Mistrust (2)

During the last decade these practices broke down and were replaced by blind trust. Many financial innovations widened the gap between lenders and borrowers to the extent the final lender knew nothing about the trustworthiness of the borrower. They had no reason for not mistrusting them, but they chose to trust.

  • Mortgage brokers stopped scrutinising potential borrows and started trusting anyone who asked for a housing loan.
  • Credit ratings agencies stopped scrutinising financial institutions and starting taking payments for helping them to cook up their crazy financial concoctions.
  • Banks lent money without knowing whether the borrower was creditable and with no certainty about the collateral.
  • Hedge funds and pension funds purchased securitised mortgages without any idea whether they would be repaid or not. The just trusted the investment banks that issued the securities.
  • Many of these securities have proved to be unworthy of trust, which is just what you expect.
The credit crisis emerged because mistrust disappeared and was replaced with blind faith and stupidity.

DANG (23) - Foreign Aid

The state should not become a conduit for compulsory donations to people in other nations.

Foreign Aid is the process by which poor people in rich countries give money to rich people in poor countries (Peter Bauer).
The problem with government aid is that it is usually channelled through government agencies in the recipient country. Politicians are expert at wasting other people's money, so it is a mistake to give politicians in even more money to control (and waste).

If people want to help people in poor countries, they should give through individuals or organizations that are accountable for the money they handle.

Tuesday, February 10, 2009

Mistrust (1)

A common saying is that the financial system is based on trust. Many economists suggest that trust disappeared at the end of 2007 and the system ground to a halt. For example, depositors queued outside Northern Rock to withdraw their deposits, because they no longer trusted the bank.

The view that the finance system is based on trust is wrong. A sound financial system should be based on mistrust. We know that some people are dishonest, some are greedy and anyone can be tempted if the right opportunity arises. We also not that people can get into financial difficulty, despite there best intentions. These factors mean that lending money to another person can be very risky.

Originally people would only lend to people they trusted because they knew them really well. That is the original meaning of the word credit. A person would be given credit, because their character was known to be creditworthy.

Limiting lending to family and friends can be quite restricting for the development of an economy, so investors started looking for ways to expand the scope of lending. The banking system emerged as a way of reducing or managing the risks of lending to people who would not normally be trusted, because they were not well known.

A whole range of practices were introduced to prevent borrowers from defaulting or absconding without repaying their loans: letters of credit, documentation, credit checks, sets of accounts, guarantees, collected, liens, mortgages and repayment insurance. These institutions have two purposes. They identify people who should not be trusted and so lenders do not make loans to them. They also ensure that if a borrower defaults on a loan, the lender has sufficient security to get back most of what they lent.

This system works well when banks do their job. The bank’s role is to identify potential borrowers who can afford to repay their loans and who will be willing to repay when any loan when its term is complete. The bank will also endeavour to hold sufficient security to ensure that that they can recover the loan, if the borrower defaults.

The bank’s role is based on the principle that borrowers cannot always be trusted, so processes are put in place to ensure that borrowers are unable to abscond without repaying their loans. They act as intermediaries to assist savers to lend to people they would not usually trust.

DANG (22) - Car Safety

Car owners are forced to get a mechanical check on their car twice a year. The check required is specified by the state. As usual, the state sets the standard, but takes no accountability for consequences. The result is that car owners focus on the test and do the minimum maintenance necessary to pass the test.

If the state got out of car maintenance, people would take more responsibility for their safety. People who harm others through failure to maintain their cars would be liable for the full financial consequences. This would force most people into maintaining their cars well.

Owners of roads may require a standard of fitness to protect their other clients from being harmed by people who do not maintain them.

Monday, February 09, 2009

War does not Work (5) - Afghanistan

I recently watched a television documentary made by Ross Kemp while he worked as an embedded reporter with British troops serving in Afghanistan. The troops were initially based at Camp Bastian, a town in the middle of a desert made from thousands of air conditioned tents.

Intelligence reported that Taliban had been scene in a village 90 miles to the north. The company of British soldiers got into their Scorpion tracked armed personnel vehicle and spent two days travelling into the area. They convoy of Scorpions made such a noise and kicked up such a cloud of dust that everyone in the region could see them were coming. On the way, one scorpion drove over and IED and a couple of soldiers were killed.

When they arrived at the village, the Taliban were ensconced in a commanding position. The infantry had to get out of the APVs and try and draw the enemy out. They moved into a compound of mud bricks, blew a hole in the wall of one so they could fire out (I presume this was someone’s home).

After exchanging small arms fire for a couple of hours, they withdrew back to their armoured vehicles. Someone reported seeing some people hiding in a cave on the other side of the valley, so they called in the artillery and turned the cave into a heap of rubble. The commanding officer reported that only a few goats had survived. It did not seem to occur to him that the goats belonged to someone who would most likely have been with them.

Another platoon found ten men that looked a bit suspicious. They put them in a Scorpion and took them out of the area so they could be interrogated. A week later they decided that the men were not Taliban, so they gave them money for compensation and dropped them back at their village. If they were Taliban, they would be laughing. If they were not Taliban, they would be more like to go over.
Before the soldiers left the village, Ross Kemp interviewed a village leader and asked if he appreciated what the British were doing for them. He seemed genuinely surprised at the hostility of the response. The man replied that all the British did was breeze in occasionally, smash some of their buildings, fire off their weapons and then disappear again. They had not provided the teacher that the village they wanted.

The British infantry then got into their scorpions with a great roar and cloud of dust travelled back to their air conditioned tents at Camp Bastion. They whole thing seemed totally pointless. They might have killed a few people, but they had not endeared themselves towards the villagers they were supposed to be protecting.

On their last sortie before returning to the United Kingdom, they engaged with a Taliban force for most of a day. They eventually withdrew after running out of ammunition. The commanding officer declared this sortie a success, because the Taliban were engaged, but no troops were lost.

If this documentary describes how the Western armies are going to rescue Afghanistan, I am not holding by breathe.

Cover the Countryside with Concrete?

The Japanese experience does not make Bill Bonner enthusistic about stimulus programs.

In this morning’s paper is a front-page article describing how Japan “wasted trillions” on its various stimulus programs.
Japan’s rural areas have been paved over and filled in with roads, dams, and other big infrastructure projects, the legacy of trillions of dollars spent to lift the economy from a severe downturn caused by the bursting of a real estate bubble in the late 1980s (The International Herald Tribune).
Public spending was so aggressive, it boosted Japan’s government debt to 180% of GDP – more than two times the current U.S. level. But did all that cement buy Japan out of its slump?

You be the judge. Housing prices in Japan are now back down to where they were in 1975 – nearly 90% below the late-’80s peak. And stocks? The Nikkei index is back down to where it was a quarter century ago. Stocks sell for half their book value – and they’re still considered too expensive for beaten-down, hyper-fearful Japanese investors. The downturn began in 1990. Over the following 19 years, it did more property damage than the Great Tokyo Fire of ’23 and the Enola Gay combined, wiping out wealth equal to three times the country’s GDP. This was despite interest rates at zero...and a heroic effort at Keynesian stimulation.

If America were to follow Japan’s example, it would have to leave its interest rates near zero for the next decade...and add about $10 TRILLION to its public debt. And if it got the same results, you’ll be able to sell your house in 2026 for the same price you paid in 1992.
In a nutshell,Japan’s experience suggests that infrastructure spending, while a blunt instrument, can help revive a developed economy, say many economists (The International Herald Tribune).
Are these, perhaps, the same economists who thought America’s super-consumption, eternal-debt economy would never fail? The same economists who thought the bankers were providing a public service, by offering so many people so much credit...and then planting their debt bombs all over the planet? The same economists who forecast rising stock prices in 2008?

DANG (21) - Building Code

The modern government establishes a Building Code that sets the standard for all buildings. There are four reasons why building codes do not work.

  1. The government does not know enough to set a code that will cover materials in all situations. New Zealand has thousands of “leaky homes” that complied with the building code when they were built. The building code has been modified to prevent this problem occurring. This has dramatically increased cost of complying, but it will not prevent the next problem from occurring.
  2. Builders, engineers and architects focus on complying with the code and stop thinking about quality the buildings they construct. They are the ones who determine the quality of a building, so the owner really wants them to be thinking about quality, and not just doing the minimum to comply with the building code.
  3. Manufactures of building materials can void warranty on new materials once they get approval by the building code. They focus on complying with the code, rather than taking responsibility for the quality of their products.
  4. The owner of a building is given a false sense of security. They will end up being liable for most problems with a building, despite the building code. If they were more aware of this responsibility, they would be more careful about buying or constructing a building. They would protect themselves by paying an expert to check out the building before taking on a liability. They would make sure they have good documentation about the quality of the building for when they want to sell it.
In most aspects of life, liability and authority go together. The building code splits these apart. The government takes authority and tells people what they must do, but it refuses to pay if things go wrong. Building owners are liable for any problems, so they should be given authority to make decisions about the quality of their buildings.

This full series can be found at Dang.

Sunday, February 08, 2009

The Interpreter

Edward Zuwane a character in the film the Interpreter said,

The gunfire around us makes it hard to hear. But the human voice is different from other sounds. It can be heard over other sound. It can be hear over other noises that bury everything else. Even if it is just a whisper. Even the lowest whisper can be heard over armies…. when it is telling the truth.

DANG (20) - Rubbish Collection

Most residents have no control over the standard of services provided to their streets. They just have to accept what the politicians decide to provide. Residents have no control over what rubbish collection services they receive, because they are a political issue. When the government gets involved, freedom to pay for a chosen level of service goes out the window. Governments always work on principle of one size fits all.

Saturday, February 07, 2009

Epochal Season

Kevin Rudd the Prime Minister of Australia began an article about the Global Financial Crisis in The Monthly with these words.

From time to time in human history there occur events of a truly seismic significance, events that mark a turning point between one epoch and the next, when one orthodoxy is overthrown and another takes its place. The significance of these events is rarely apparent as they unfold: it becomes clear only in retrospect, when observed from the commanding heights of history. By such time it is often too late to act to shape the course of such events and their effects on the day-to-day working lives of men and women and the families they support. There is a sense that we are now living through just such a time.
Although the rest of the article loses the plot, these words are correct. We are living in through a season that marks a turning point between one epoch and another. We are moving into a new era and most people do not understand what is happening.

We are moving into an era of enhanced state power. After many years of suspicion of the state, we are moving into a season when faith in the state will rise to a peak not seen before. The main impact of the global financial crisis will be the emergence of the all powerful state. This is already happening. Those with their eyes open will see this trend unfold over the next few years.

Waitangi (3) - Sovereignty

In the second clause of the Maori version of the Treaty of Waitangi, the crown agreed to protect the tino rangatiratanga (sovereignty) of the chiefs and hapu (subtribes) and all the people of New Zealand over “their lands, villages and all their treasures”. The English version expands the latter expression to include “lands and estates, forests, fisheries and other properties”. This clause is really important as it places significant limits on the authority of the state. It cannot interfere in the lives of the people or their possessions unless a crime occurs.

The first point, which is seldom noticed, is that it applies to “all the people of New Zealand” nga tangata katoa o Nu Tirani). The second clause is for all people, and not just to Maori.

Secondly, the treaty recognises that ‘sovereignty” belongs to individuals, families and tribes and not to the Crown. The treaty does not create this sovereignty, but recognises that people already have it. The right to control legally acquired property is given by God (Exodus 20:15). It is not given by the State. It cannot interfere with a person’s property unless it is acquired by illegal activity or a crime occurs within it. Thus the treaty provides a protection for everyone against an imperialist and totalitarian state.

The only problem with the Treaty of Waitangi from this point of view is that it does not explicitly acknowledge God. However, as I understand it, tino rangatiratanga is not absolute sovereignty, but includes a whole of responsibilities and limitations. Sovereignty is balanced by a requirement that its exercise should always be “tika”, true and correct. The leaves room for the sovereignty of God.

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Keynes and the Triumph of Hope over Economics

Benn Steil writing in the Financial Times has an interesting comment on the current exuberance for Keynsian solutions to the economic crisis.

This is a glorious moment to be an economist. In good times, we are mostly marginalised by the cheerful churnings of the market. But in those rare times when it all goes to hell, we are truly in our element. Now the politicians really need us. Who else can tell them how to reverse a recession by borrowing a trillion dollars? Henry Kissinger? Madeleine Albright? Yeah, right. What were their theses on?

And indeed, we as a profession are making our voices heard in a way we never get the chance to do when the credit is flowing, businesses are investing and consumers buying what business wants to sell. Then, we make arguments based on data, otherwise known as “facts”, processed through regression analysis and logical rigour, which few humans read. (I know, I am an economics journal editor.) Now, on the other hand, we call for trillion dollar stimulus plans on the basis of little more than citing John Maynard Keynes – and politicians revere us.

Citing Keynes gives us special licence to talk economics without using any. To paraphrase the lawyers’ dictum, when the facts are on our side, we pound the facts; when theory is on our side, we pound theory; and when neither the facts nor theory are on our side, we pound Keynes – and to great effect......

When markets fail us, we turn to Keynes. His famous quip that "in the long run we are all dead" is a profoundly satisfying justification for borrowing a trillion dollars right now, never mind that it contradicts an essential insight of our discipline: in the words of Frederic Bastitat from 1848: “The bad economist confines himself to the visible effect: the good economist takes into account both the effect that can be seen and those effects that must be foreseen” – in other words, the long run.

DANG (19) - Roads and Highways

Some people believe that we need the government to build roads and highways.

We tend to forget that most new streets in a city are built by property developers, as they open up new subdivisions. These new streets are handed over to the care of local government. The new streets are generally well built, but the quality of maintenance by city councils is variable.

Most new roads and highways are built by private contractors. The government maintains roads that have been built by others. Roads are often not maintained as well as they were built, so this does not inspire confidence in government.

Some argue that we need to government to pay for roads. The problems with government funded roading are evident in every large city. Whenever the price of a good or service is set to zero, demand escalates. People have to queue to get the good or service. In the Soviet Union the price of bread was set too low, so there was not enough bread available to supply needs. Queues for bread were common.

In most large cities, the price for travelling on many highways has been set to zero. The result is that many people are queuing to use the highway. We call this traffic congestion, but it is really just a queue for a government-provided service for which the price has been set to low. The economic phenomenon is no different to the bread queue in the Soviet Union.

Highways can be built for by private companies and paid for by tolls. Private companies have to build the roads that will be used, before they can collect any tolls. Governments collect the money before they build any roads and then often do not build them at all. Paying for a service before it is delivered is not a good practice.

Friday, February 06, 2009

Stimulation Projects

“Stimulate the Economy” is the mantra of modern governments and economists. They see thousands of people unemployed and think that getting them working would increase production, making everyone better off. An endless range of programmes are developed for building roads, painting schools and storing medical records on computer files.

These stimulation projects have several problems.

  1. The people who are unemployed often do not have the skills needed by the stimulation projects. Creating jobs for road builders is pointless if the unemployed are burger flippers.
  2. Some labourers will be needed for many stimulation projects, but the success of the project will depend on managers and skilled staff that are not available among the unemployed. Competing for these may create problems for other viable businesses.
  3. Stimulation projects need capital equipment as well as labour. If the government purchases the capital equipment needed, other more efficient users of that capital might be squeezed out.
  4. Stimulation projects tend to channel resources to the more inefficient operations. The most efficient businesses are two busy to be worried about chasing after government projects. The ones that have the time to scream for government aid will generally be the more efficient businesses. Government stimulation projects often prop up the weaker parts of the economy.

Waitangi (2) - Governorship

The Maori Version of the Treaty of Waitangi provides a good statement of the basis for limited government in New Zealand, by placing significant limits on the power of the civil government. The first clause of the treaty gave the crown “kawanatanga” (a transliteration of governorship) over New Zealand. This is a lesser authority than sovereignty.

The civil government does not have absolute sovereignty. God created the earth so he has absolute sovereignty over the earth. Civil government has limited authority delegated to it by God. It is just one among a number of spheres which have authority. God has also delegated limited authority to churches, families and business corporations.

The authority of the civil government is limited to defence and punishment of crime (especially theft). The civil government does not have authority to create law, but is required to implement the law of God. If it takes authority that has been delegated to another sphere or that goes beyond what God has assigned, it loses its legitimacy (Psalm 2).

The Maori version of the treaty recognises the limited authority of the state, by limiting its role to governorship. In the third clause, this role is expanded further as “protecting all the ordinary people of New Zealand”. This is the role of the civil government. When it goes beyond protection, it becomes dangerous. Therefore, governorship is a better word than sovereignty for the role of the civil government.

DANG (18) - Statistics

Enough said

The New Underclass

Ross Clark writes about the immorality of the bank bailouts in an article called Savers are Britain’s new Underclass. His article published in the Specator is worth a read.

Thursday, February 05, 2009

Sticky Wages

A common view among economists is that wage stickiness is one of the reasons for the high levels of unemployment during the great depression. In most markets, excess supply pushes prices down which increase demand until the market is cleared. They argue that this cannot happen in the labour market, because unions prevent wages from falling. Unemployment, which is excess supply of labour, becomes a problem because high wages prevent the labour market from clearing. These economists argue that unemployment would not have been a problem during the great depression, if wages had been allowed to fall.

There are two problems with this view. Firstly, all wages do not need to fall to clear the market. If all wages were forced down, the capacity of employees to consume is severely restrained, which harms the economy. Fortunately, prices only have to fall at the margin to clear a market.. The price only has to fall for those goods currently on offer for sale, not for all those that have been sold previously.

Wages only have to fall at the margin for unemployment to be cleared and this happens anyway. People who lose their jobs usually have to take lower-paying work to get another position. When a business replaces people, it can usually take on less experienced people who are not paid so much. These two effects mean that wages do tend to fall at the margin during times of unemployment.

The second problem is that business declined so rapidly during the Great Depression that the marginal wage would have had to fall to zero to clear the market. The collapse of the banking sector and the collapse of commodity prices killed off many businesses. These were the problems that had to be resolved, before the labour market could return to normal. An overall decline in wages was not the solution.

The crisis in the 1930s was caused by problems in the capital markets and not in the labour market. The depression was the consequence of a distortion of the capital markets. Wages could not adjust enough to resolve a problem in the capital market.

Waitangi (1)

Tomorrow is Waitangi day in New Zealand. We look back to the time when a covenant or treaty was agreed between the indigenous Maori people and the British Crown. This treaty was meant to allow the two peoples to live together in harmony, but the treaty was broken.

The ninth commandment is really important.

You shall not bear false witness against your neighbor (Exodus 20:16).
Bearing false witness includes lying to a court, slander of character, fraud, ignoring a contract and breaking a covenant. Our failure to honour the Treaty of Waitangi was disobedience to the nineth commandment and has put our nation under a curse. Fortunately, our govenment has set up a Waitangi Tribunal to put this situation right.

For more on this issue see Treaty of Waitangi, where I explain how Joshua and Saul's experience with the Gibeonites provides principles for understanding and resolving treaties.

Ahab and Jez is relevant too.

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DANG (17) - Broadcasting

Governments have no need to be in the business of radio and television broadcasting. Private groups already provide these services, so there is no need to use taxpayer’s money for entertainment. Public broadcasting can easily be used for manipulation and state propaganda.

Wednesday, February 04, 2009

Actions have Consequences

Some actions have consequences that are unavoidable. Attempts to avoid the consequences only make them worse.

A person who goes out on the town and gets sloshed will have a headache the next day. Aspirin might ease the pain slightly, but cannot cure it. The only way to avoid the pain of a hangover is to avoid the drinking binge. Once the binge is binged the clock cannot be rolled back.

That is where we are in the world economy. We had years of binging on consumption laced with debt. The party was a good one, but now it is over and the hangover is here. Wishing we had not gone so hard, is futile.

The hungout person may be tempted to go another binge to drown their sorrows, but that it just putting off the evil day. In the same way, governments should be careful that their policies for dealing with recession do not make the crisis last longer. That happened during the 1930s.

DANG (16) - Taxation

The modern state has an immense and complicated apparatus for collection and spending funds taken from citizens. If the state were to cease providing salvation, tax collection would be unnecessary. Contributions to the cost of justice and defence should be by Voluntary Taxation

Tuesday, February 03, 2009

Leverage and Inflation

Banks, hedge funds, private equity firms and other businesses throughout the world have balance sheet problems. The market value of the financial instruments on the asset side of their balance sheets has plummeted. In many cases, their value cannot be determined, because there is no longer a market for them. The purchase of these assets was often leveraged by borrowing the credit that used to be so readily available.

The problem is that the value of the debt on the liabilities side of the balance sheet does not decline in value. The debt still has to be repaid in full when it fall due. This means that the decline in value on the assets side is a hit on the owners equity. In many cases the value of debt is greater than the value of the assets, so the owners equity has gone negative and the business is inherently worthless.

The solution to this fiasco that is preferred by the clever people is two or three years of inflation at a rate of 20% to 30%. During inflation, the market value of the assets on the assets side of the balance sheet increases, while the nominal value of the debt on the liabilities side remains fixed. This will increase the owner’s equity and restores the viability of the business.

This inflation should be opposed. Inflation wipes out the value of the savings of the people who have been responsible and rewards those who have used debt and leverage to speculate on property and other financial assets. A better solution would let those who have used debt and leverage reap what they have sown, and protect those who have been prudent.

DANG (15) - Central Banking

Many people believe that someone in authority must control the supply of money. Governments usually believe that they are the ones with the necessary wisdom. They believe they should manage the money supply through the operations of a central bank.

Most governments now realise that they cannot control the supply of money, and the best that they can do is set interest rates. But even this is too much for them. Interest rates reflect the value that people place on the future. A central banker can never know the future, so we should not trust then to set its price. The chances of a political appointee getting the price of the future right is even less, given that only God knows the future. Governments generally set the interest rate too high or too low.

Central banks did not exist before the beginning of the twentieth century, and economies functioned just as well as they do now. This role is rooted in a false understanding of the way that money works. All that is required to prevent the manipulation of the money supply is punishment of fraud and theft.

Monday, February 02, 2009

Disappearing Assets

The balance sheet of an investment bank or hedge funds looks this.

- Loans
- Owners Equity
Total Liabilities

- Assets
Total Assets

The two sides of the balance sheet must balance. If the value of the assets increases in value, the value of loans is unchanged, so the Owner’s Eequity must increase. This has been happening over last few years as the prices of financial assets and property have increased in rapidly. The property boom has led to huge increases in the value of assets.

These increases show up first on the profit and loss statement in an increase in profit. A substantial part of this profit was paid out to employees in huge bonuses. What was left of the profit came through to the balance sheet as an increase in Owner’s Equity. Increased equity was often paid out to the shareholders in large dividends or share buy back schemes, but to keep the balance sheet in balance, some assets would be sold or loans would be increased.

In the past year, asset prices have fallen dramatically. The value of the assets must be written down, so a change must be made on the liabilities column to keep the balance sheet balanced. The value of loans does not change, so the owner’s equity takes the hit. If the business is fully leveraged, a small decline in assets can wipe out all the owners equity. This is especially true of the previous increase in equity have been paid out to the shareholders.

If the decline in the value of assets is greater than the owners equity, then the business is insolvent and in danger of defaulting on its loans. If the business is a bank and the loans are actually deposits make by clients of the bank, those deposits are at risk. In the current crisis, many financial companies and banks are now in a position where the owners equity has been wiped out and their loans are greater than the value of their assets.

The interesting thing is that previous increase in assets is gone. It has been paid out in bonuses and dividends. The recipients have used their bonuses and dividends to buy new BMWs and holiday homes in Spain. They have no liability to the business that paid them. Once bonuses are paid, the employer cannot ask for them back. The increase in the value of assets has gone, so it not available to compensate for the decline in value that often follows.

Governments are wading in to rescue struggling banks and other financial institutions. By providing capital, they are taking equity that is not there. They are hoping that at some time in the future the assets will increase in value against, restoring their equity in the business. If this does not happen, taxpayers will carry the cost.

Heavy Lifting

I get a lot of referrals from Jim Fedako at Anti-Postitivist.
Thanks for your kind words, Jim.

DANG (14) - Running the Economy

A common answer is that we need the government to run the economy.

Even if the economy does need running (and that is not proved), the evidence that governments can run an economy successfully is fairly sparse. There are plenty of counter examples of government stuffing things up. Those in power usually end up lining their pockets at the expense of their people.

According to the book of Deuteronomy the state of the economy fluctuates according to the righteousness of the people. A decline in the economy is a warning to turn back to God. By attempting to prevent economic downturns, the state is attempting to hold back the tide of sin. In the end it will fail.

Rather than relying on the government to boost the economy is unnecessary. It is easier and more effective to love God.

Sunday, February 01, 2009

Houses and Money

Modern people live with an assumption that house prices will always rise. This is a false view. The intrinsic value of a house declines over time as it deteriorates and become old fashioned. What actually happens is the money loses its value over time, as central banks and governments manipulate their country’s currency. People confuse a decline in the value of money with an increase in the value of their houses. That latter is an illusion (unless captured by leverage).

DANG (13) - Immigration

Modern governments control entry to their country. The biblical approach is different. Anyone is free to enter the country and refugees are welcomed. However, migrants can only enter a country, if they can find a community that is willing to receive them. People who do not love Jesus will generally want to live among Christian communities.