Two Crises for the Price of One

The world is facing two economic crises at the same time.

1. Financial Crisis
The first crisis is a financial one that has been going on for a long time. It probably began with the Tech Wreck back at the beginning of the new century when the Dotcom bubble popped and the Federal Reserve reduced interest rates and poured out credit to pump markets up again.

This easy money eventually created a housing bubble. This collapsed in 2008 when markets woke up and realised that many of the loans made to people to buy houses at inflated prices would never be repaid. Because the finance sector had sliced and diced house mortgages into various mortgage-backed securities and related financial derivatives and sold them on to other players in the finance sector, the entire edifice was in danger of collapsing.

Central banks and governments came to the rescue again by reducing interest rates and spending money hand over fist to rescue most of the big players in the finance sector. A few of the worst failed, like Lehman Brother, but the rest were propped up with easy credit and other government bailouts and never really took the lessons on board. Fortunately, apart from the many households left with mortgages greater than the value of their house, most of the real economy was not too badly affected. But the recovery was slow, and the world economy took many years to get back to where it had been.

Unfortunately, the easy money fed into a new bubble, this time in the share market and related activities. Big business borrowed money to pay for share-buy backs, which pumped up their share price. This left the top executives and shareholders better off, but their companies were vulnerable because they had few financial reserves to cover any downturn in activity.

Share markets reached record prices, but the bubble was popped by the emergence of Covid19. This collapse of value affects the entire financial sector, as when the collateral offered as security for loans declines in value, the borrower must stump up more collateral or pay back some of their loans. Big businesses that rely on short-term loans to fund their business have struggled to roll over their debt as the market for corporate bonds dried up.

Over the last few decades, the finance sector has grown massively, far outpacing the rest of the world economy. Banks and other businesses in the finance sector have worked together to create a huge infrastructure of debt that sits on the top of the real economy. This monster adds very little of real value for ordinary people and businesses, but it has made those who work within in the finance system fantastically rich.

Of course, central banks and governments are using every weapon that they have to fight this financial crisis and keep the unruly monster of the finance system from collapsing. Governments are making grants to businesses. Central banks have reduced interest rates to zero and made credit available to the usual culprits. They are buying up a wide variety of government and business securities in order to prop up the price of collateral.

I presume that these desperate policies will succeed in papering over the cracks in the finance system, but this will not resolve the underlying problems that make the modern financial system unstable in the first place. The worst consequence will be an enormous increase in government and business debt that will be a deadweight on the real economy as it tries to deal with the second economic crisis that we are facing at this time.

2. Covid19 Economy
The second economic crisis that the world has to deal with is the collapse of economic activity as a result of measures put in place to prevent the spread of Covid19. This is both a supply shock and a demand shock.

As a result of the collapse of tourism, travel and the hospitality industries, many people will be out of work. With their incomes dramatically reduced, they will stop spending in the way that they did in the past. People who still have jobs will be unsettled by the situation and cut back their spending as a precaution against uncertainty. All types of businesses will be careful about their spending until the long-term consequences of the shutdowns become clear. People who are heading towards retirement will have seen their superannuation funds shrink, so they will need to save more seriously.

This collapse in demand for goods and services will make it difficult for all businesses to recover. As they attempt to get going again, they might find they cannot return quickly to previous levels of activity and may need to cut back on the numbers of staff that they employ, which makes the situation worse.

Attempts to confine Covid19 are also a supply shock to the real economy. Many non-essential businesses have to shut down their production. That lost production might not be recovered. If the lost is production is an input into the production of another business, that business will be constrained until its suppliers can get going again.

In the modern world, many businesses have developed very long supply chains. The longer the supply chain, the more likely it is that there will be a break in the chain where businesses have stopped production, meaning that the required inputs are not available. I suspect that during the next year, many businesses will find that things they need to operate efficiently are not available due to shutdowns in other businesses and other nations.

The state of the Chinese economy is uncertain. We do not know if it really has defeated the virus, or how quickly production will return to previous levels. Companies that rely on parts and equipment that are supplied from China might find that it will take longer to get their production back to normal levels.

Unfortunately, the supply shock and the demand shock work against each other. Businesses that still have good supplies and can keep production going might find there is no demand for their production. Others that face strong demand might find that they do not have the supplies that they need to increase production to meet demand.

Unmeasurable
Economics is an imprecise discipline. It can describe the links that influence the working of the world economy, but it is hopeless at estimating the size of the effects it identifies. I have seen enough of economists’ forecasts to know that they need to be taken with a grain of salt. Therefore, it is uncertain how serious this crisis will become. The economy might recover quickly, or the collapse of activity might drag on a long time.

One thing is clear; the problem is made worse by the reality that we are facing two crises at the same time. Central banks will prop up the finance sector so it can create another bubble in a few years’ time, but the increased debt will be a drag on the real economy where the people who manage real businesses that produce things that people actually need are struggling to keep them going.

The situation distressing, but we should remember that economic uncertainty is normal for most people in the third world, and has been normal for most people throughout history. Maybe we are just returning to the old normal.

Coronavirus hits a Weak World Economy

A couple of weeks ago, I posted an article called Coronavirus hits a Weak World Economy. I listed nine things that have contributed to this weakness. Today, I added the following three points to that article.

• Many large businesses have weak balance sheets. Since the GFC, they have used cheap loans to finance share buybacks. These have pushed up the share prices for the benefit of shareholders, and particularly senior executives who are paid in shares or share options. Unfortunately, this practice leaves the business without financial reserves to tide them through a difficult time. For example, aerospace analyst Dhierin Bechai reports that:
  

  Boeing spent roughly $60B in buybacks ($40.6B) and dividends ($19.4B) in the past years while it generated roughly $55B in cash flows. Boeing returns all of its cash flow from operations to shareholders... Excluding 2019, we found that Boeing returns 92 percent of its operating cash flow and 113 percent of its free cash flow to shareholders.

  Coincidentally, or not, the $60 billion returned to shareholders is the exact amount Boeing requested in federal support for the aerospace industry.

  Jesse Fedler explains that the total net asset value of the McDonalds, Caterpillar, Boeing and 3M has fallen 90% from $70 billion just a few years ago to about $7 billion today. On average, these companies each spent $200 million per year on issuance of options to top management. Those very same managers were the ones who decided it was a good idea to leverage the balance sheet to buy back stock. This was done at the long-term expense of the resilience of their balance sheets.

• The problem with the current economic crisis and mounting job losses is the vast majority of workers are woefully unprepared for any type of disruption to their income going into recession. This will be a problem all over the world.

• The Chinese economy is weaker than it was in 2008/9 when it led the world out of the GFC.

Restarting the Economy

Shutting down the economy for a few months will have serious consequences. The production that is lost is gone forever. It will never be recovered. Of course, shutting down activities that have no benefit, such as casinos and creating financial derivatives, does not matter. But the production that has value will be lost for good.

There is no obvious way that the current economic crisis will end. If the virus is still active when the current four-week lockdown introduced by the New Zealand government is finished, it will have to be extended, or the cost of the initial shutdown will be wasted.

The problem is that political leaders are driving blind. They do not have a set of criteria for determining when the shutdown can be safely ended and when borders can be reopened. If the restrictions are ended too soon, greater reinfection and fear will ensue.

People are hoping that an effective vaccine will be developed quickly. This is not as easy as if often assume. A vaccine that works in the laboratory is not always easy to get into the field. The flu vaccine is happy being carried in egg yoke, but other vaccines might not be so easy to deliver. We should not assume that a vaccine can be developed, as there are many viruses for which no vaccine has possible. For example, there is no effective vaccine for the common cold.

Even when the virus is defeated here in New Zealand, it will still be active in other parts of the world. The spread will continue much longer in Africa and the refugee camps and war zones created by the US wars in the Middle East. This means that the government will have to be very careful about reopening the borders. There may be very strict controls over international travel for quite a long time.

Some businesses will gear up again quickly. After the shutdown finishes half the country will feel like they need a haircut, so hairdressers and others providing personal services will be busy. People will desperate to go shopping, so malls should open quickly, even if some shops are gone (if malls do not give rent holidays). The uncertainty will make many people nervous about spending, some demand for appliances might be quite slow for some time.

Manufacturing might be more difficult. Some manufacturers will find their customers are shut down and do not want to buy more stock. Others will find that suppliers cannot provide the inputs they need.

Companies providing business service might find they are discretionary until their clients get back onto a stronger footing.

The future of the construction industry will depend on how the demand for houses is affected by the shutdown. The uncertainty caused by the virus and the shutdown might make people and businesses reluctant to commit to big contracts until the economic recovery is more certain. By then some construction businesses might be gone.

The hospitality sector will struggle. People will be reluctant to travel and eat out until it is clear that all risk is gone. They will be keen to get out for a meal again, but will continue to be fearful for a while, and tourists will be gone, so the hospitality sector could struggle for a while. Some that have closed will probably find it too difficult to get started again if customers are scarce. If there are regions that are still shutdown because there are clusters in which the virus is still spreading, people will be very careful about travelling for many months and perhaps years.

Savings will likely increase. People who are getting up toward retirement age will have seen their value of their superannuation funds decline sharply. When they start saving seriously, they will have less spare money to spend on goods and services. Many other people will be saving hard to deal with the uncertainty that they are facing.

Strict limitations on international travel will have to be kept in place for quite some time. International visitors might need to be quarantined to reduce the risks. This means that it will be many years where the tourism business gets back to the level it was at before the virus. The government might decide that tourism is too risky for it to be a significant industry in our nation.

If the world shuts down for a couple months, it will not recover quickly and return to normal. Businesses will not restart in an orderly, logical way. Instead, the start-up will be discordant. Some business who restart will find that their supplies have not started. Others will find that the businesses that they supply have not restarted. Many businesses will find gaps in their supply chain because businesses have shut down and cannot afford to reopen.

The greatest problem is that the coronavirus shutdowns come at a time when the world economy was already weak. I have explained in a previous post, the economic vulnerabilities that will be a drag on the restoration of the economy.

New Zealand is a trading nation. Exporters could find that demand for their goods and services is weaker while the world economy is slack.

In a modern economy everything is linked. Some other linked directly, by buying an selling, but others will be affected indirectly. If one part of the economy suffers, all parts suffer to a greater or lesser degree. For example, homeowners who are using Air BNB to supplement their income will find that with tourism gone will find they have less money to spend. The businesses that supply their coffee will suffer. Although some of these effects are small, some businesses will face many of these small negative effects which together become a big effect. Many small cuts can quickly become a large wound.

Government Support

Governments and central banks think that the current economic problems can be resolved by making money available to businesses and people. Unfortunately, money is usually the symptom of a problem. not the underlying cause.

You cannot eat money.

Money is a means of exchange. It is useful, because it allows people to buy things that they need. But to get money, people have to sell things, or work in paid employment. Money only has value if there are things being produced that people want to buy.

Businesses and economists often assume that economic activity is demand-driven, so giving people extra money to spend will keep the economy going. Economies actually work the other way around. Supply creates demand. When people supply labour or produce something they can sell because they do not need it for themselves, they get income that enables them to buy things produced by others. If nothing is produced, people with money cannot buy anything, even if they have some spare money. Therefore, giving people extra money as a grant or loan does not help the economy, if nothing extra is produced.

When all businesses are expanding, it is easy for each business to expand. When many businesses are decline, most business will get caught in the downturn.

In the long term, a nation can keep only buying things, if it keeps on producing things that other people and nations want to buy.

New Zealand is a small nation that needs imports of good from overseas to support our daily lives. Although we are a food-producing nation, much of the processed food that we eat each day is imported.

This dependence on imports means that we need to be exporting goods and services overseas to pay for the imports. Fortunately, most of our export industries the export season is well through, so we will receive most of the overseas income for goods that were exported. For example, the dairy season is well through. This is important, because dairy products are a major part of our exports. Likewise, the tourism season was well through when the restrictions on travel were put in place. The concern is kiwifruit and other horticultural exports, for which the export season is only just beginning.

Governments will spend like crazy in a desperate attempt to keep their economy going, as if it had not stopped. They will keep some businesses from going under, but at a serious cost. Every dollar that the government spends on supporting business will have to be borrowed. Government debt, which is already high everywhere will blow out to unprecedented levels. Fortunately, the New Zealand government is not starting with high levels of debt, but if the crisis goes on too long, the build-up in debt could be massive.

Expanded Government debt will be a deadweight on economic recovery. This will make it much more difficult to deal with any economic crisis that occurs in the next few years.

Rather than focussing on when they will be able to restart their church services, pastors should be thinking about how they can organise their churches to support and care for people who fall through the cracks of government support. The government will not do it all.

Shutting Down the Economy

The New Zealand government has put the people of the nation under a lock-down. People cannot leave home, except for exercise, going to a pharmacy or supermarket and essential work. All non-essential businesses have been shut down. We are now nearly a week into a four-week shutdown. However, there is no guarantee that the shutdown will end when the four weeks are complete.

Although unavoidable, I suspect that the harm done by the economic shutdown could be more serious than the health crisis brought about by coronavirus.

Many small businesses are already struggling due to the collapse of the markets into which they were selling. Some are only just keeping ahead of their expenses on a week by week base. The worst-hit are tourism and hospitality-related businesses. These businesses are operating in a very competitive sector with very little to come and go on.

While businesses are closed and earning no income, they will still incur costs. They will have to pay the rent on their buildings and the costs of many of the services that they buy regularly, such as electricity, communication and IT services. Hire purchase payments for vehicles will have to be made. Interest on any debt will have to be paid. Some of these expenses might be deferred, but they will have to be paid eventually out of future earnings that could be significantly reduced.

Like governments all around the world, the New Zealand government will try to keep things going with additional support payments and the central bank will make credit available to banks so that they can lend to businesses. Unfortunately, additional credit will not be enough to keep some businesses to keep going. Most will already have significant debt, so providing them with an additional loan is not really a solution. More debt will just add to the burden that will make it difficult for them to get going again. What they need is more paying customers, but that will not happen in the short-term.

The wage subsidies will help some businesses, but others will struggle to make up the difference between the subsidy and the normal wages, if they are unable to operate. Unless the virus is stamped out quickly, the shutdown might have to go on much longer than expected.

The economic decline could drag on for much longer than many people expect. Many businesses that have had to shut down will not be restarted. Some small business owners will not have the emotional energy to take on more financial commitments to get started again in an uncertain economy. They will choose to get out before their situation gets worst.

Many big businesses also have very tight cashflows. Those who do will struggle, because many of their outgoings and expenses will continue, while no money is coming in. Those operating on very tight margins may find it is too hard to keep going, especially if the shutdown goes longer than initially expected. Many will try to shorten their supply chains, but this will make their inputs more expensive, as specialisation declines, which could reduce their profitability.

Gifts of Healing

Paul urges followers of Jesus to zealously seek the gifts of the Spirit. At this time, when we are shut away from many of the things that keep us busy, we should be taking time to seek the presence and anointing of the Holy Spirit.

This is a time when we should be zealously seeking the gift of healing. The safest place to be during a pandemic is within a body of believers who are confident with moving in the gifts of healing and the gift of faith. Word of knowledge and gifts of discernment will be important too.

So, Christians might be wise to use some of their free time to learn more about Jesus’ victory over sickness on the cross, and the gift of healing that the Holy Spirit loves to release (he is not stingy).

I have put everything that I have learnt about the gift of healing in a book called Healing. But the same information is available for free here.

Ventilators or Warships

Ten years ago, the New Zealand government bought frigates costing about $300 million each to defend the nation from mostly imaginary enemies. They are now spending another $300 millions of dollars upgrading them with the latest technology. Military spending is always popular, because it provides toys for the boys and girls of the navy.

Epidemiologists have been saying for years that another serious pandemic was inevitable. If the government had recognised that that threat as a serious enemy, they would have spent a few million dollars on several thousand ventilators, heart monitors and personal protection equipment and stored them in a large warehouse in preparation for the pandemic.

If the government had made this preparation, the risk of the health system being overwhelmed would have been mitigated, and we would probably not have needed to enforce an extremely disruptive and costly shutdown. It would have been far cheaper than another frigate, and probably not so quickly redundant, but far more effective in keeping people safe.

Not God

The best way to understand God’ character is too look at Jesus. Like father, like son. Jesus is the best revelation of God that there has ever been.

Jesus went about healing the sick. He was moved with compassion when a leper asked him for help. He wept when his friend died. Healing was probably the most dominant part of his ministry. In light of this revelation of his Father, we can be sure that God is not the cause of the coronavirus.

The other important aspect of our reality is that we are engaged in a spiritual battle; and war is rough. Humans gave the spiritual powers of evil authority to be active on the earth. As people turn away from Jesus in many parts of the modern world, God is being squeezed out of the world that he created and gave to his children, so the powers of evil are flexing their muscles.

The spiritual powers of evil love to kill and destroy. The coronavirus could be an accidental occurrence, but given the death and pain that it has produced, it is more likely to be the work of evil spiritual powers. They assisted God with the creation of the world, before the fall, so they understand how DNA functions.

I explained in a previous post that coronavirus is probably a Warning Event, in which the spiritual powers of evil are trying out something that they would like to more of to see how effective it would be. It might not be the worst that they can do.

If the coronavirus is the work of the spiritual powers of evil, and they have been able to release it because humans have given them authority on the earth, God cannot just snap his fingers and remove it. Before that can happen, the authority situation on earth must change.

In this situation, the best thing to do is to pray that the gospel would go out in the power of the Spirit, so that the spiritual powers of evil are squeezed out of the strongholds they have gained. That will take longer than we would prefer, but it might be more effective than asking God for quick solutions.

Doing Church During a Crisis

The shutdown for coronavirus protection has exposed the inadequacy of the modern way of doing church.

Pastors are talking about virtual church, digital worship and online services, as if they were something revolutionary. The reality is that these methods are far from the “body of Jesus” that Paul described.

Just as a body, though one, has many parts, but all its many parts form one body, so it is with Christ. For we were all baptized by one Spirit so as to form one body… Even so the body is not made up of one part but of many. But in fact God has placed the parts in the body, every one of them, just as he wanted them to be. As it is, there are many parts, but one body (1 Cor 12:12-14, 18, 20).

Paul was not describing a virtual church or digital body.

An online service is a good way for a pastor to speak to all his/her people at the same time, but the body of Jesus is more than a weekly sermon. If the people of the church need to hear from their pastor to know what to do in a new situation, something is seriously wrong. If they have been taught how to hear the Holy Spirit speak, he will tell them what to do. And if people start listening to sermons online, they will soon discover there is far better teaching available online that they can get from their pastor.

Online services enable people to listen to the pastor praying and agree with the prayers, but it is far more important that they pray under the leading of the Holy Spirit themselves.

If people like to worship while listening to Christian music, there is plenty available online. They don’t need their church worship team making their selection for them. They would be better following the leading of the Holy Spirit, who knows what will inspire and encourage them.

The internet can be used to communicate words and music, but it does not channel the Holy Spirit. He lives in the hearts of God’s people, and that is where he works.

The stuff that strengthens the body of Jesus cannot be done in an online church service.

• The gifts of the Holy Spirit cannot flow.
• Sharing with people in need cannot take place.
• Discernment of spirits cannot take place
• Healing and deliverance cannot occur.
• The one another stuff is not possible.
• Discipleship cannot be done.

A digital church service is a very sub-optimal way for the body of Christ to function. Virtual church is not real church.

Paul used the technology that was available in his time to communicate with the churches he had established. He made extensive use of letters to connect with his friends and churches, but he understood the limitations of written communication. He wrote that he longed to be with the Romans so that he could impart a spiritual gift to them.

I long to see you so that I may impart to you some spiritual gift to make you strong (Rom 1:11).

Paul understood the limits of written communication. If he had lived in the internet age, Paul would have used it, but he would not have seen it as a substitute for meeting with people. He understood that the Holy Spirit prefers to move in the midst of a few followers of Jesus who love each other and have gathered to serve Jesus.

The church should be glad that it has had a trial run of a crisis. The current lock-down will end after a few months, but I can think of several circumstances that would cripple the church in a similar way.

• A prolonged period of persecution by the state in which church buildings are locked and pastors are arrested.
• A war that prevents people from moving far from their homes.
• An economic crisis that means people cannot afford to drive their cars to church.
• Economic sanctions that limit people’s ability to travel.
• Weekend and evening curfews following a military coup.
• A fuel shortage that limits the use of motor vehicles.
• A serious epidemic that prevents all travel and movement
• Marauding thieving gangs that make all travel far from home dangerous.

The church has experienced these types of events frequently throughout its history, so they are not abnormal.

The coronavirus shutdown has demonstrated that the operating model of the modern church is only viable in good-times. The irony is that most Christians believe that there could be hard times ahead, but they have opted for a good-times church.

I hope that when the current shutdown comes to an end, pastors and church leaders will not just go back to their good-times way of operating. I hope that they will think and pray about discovering a way of being church that would remain viable through both good times and hard times.

One way that God is using the current bad situation for good is giving the church a trial run of hard times (without being life-threatening for most people). I hope that pastors and church leaders will take the opportunity to learn from the experience. If your pastors are not thinking seriously about this issue, then I suggest that you challenge them to do so.

Here is a truth that we cannot afford to ignore. A church that can only meet by people driving to a church building once a week will not be viable in hard times.

I presume that most church leaders are hoping that the crisis will soon be over so that things will go back to normal. If so, they are missing what God is saying to the church in this season. Getting back to normal is not getting back to good times. The bible teaches that tribulation is normal for the church. Jesus said,

In the world you have tribulation (John 16:33).

If Jesus said we will have tribulations, why would be happy with a way of doing church that is only viable in good times?

The current crisis is a fairly-mild, temporary trial, but it is a clear warning that a good-times model of doing church is really rather fragile. We urgently need a way of being church that can cope with good times, hard times and tribulations. We would be foolish to ignore the warning and carry on as normal.

Weather (9) Balance

We need a balanced approach to prayer for protection in times of trouble. God has promised to protect the lives of his people. However, he usually does not take us out of the world we live in when the situation is turning sour. Whatever the reason for the troubles that have come to the region where we live, we will usually have to go through the troubles that our neighbours are going through. If they have brought trouble on our region by rejecting God and pursuing evil, we will share some of the consequences.

In this situation, we should ask God to bless us, so that we can bless our neighbours in trouble around us. We should ask God to show us how to prepare. We should not just prepare for ourselves, but prepare to bless others who have not prepared.

We should ask God how we should live. He will show us ways to cope with the troubles that have come to our region. Others will probably copy what we are doing when they see the wisdom of God. And we should never stop sharing the gospel.

God has not promised to lead us away from the valley of the shadow of death. Rather he promises to go through that valley with us and keep us strong (Psalm 23:4). We cannot bless the people in our region by escaping from it during a time of trouble. God usually wants us to stay and prepare to survive and live strongly through the hard season. The enemy can rob us of our wealth and in the worst case, he can kill our bodies, but he cannot destroy the life that we have in Jesus.

This full series can be found at Praying for the Weather..

If you think I have missed something, or got something wrong, please leave a comment.

Scattered Sheep

In my planned reading through the Old Testament this morning, I came to Jeremiah 23. I was struck by the first verse in John Goldingay’s translation.

Hey, shepherds who led astray and scattered my flock.

This season is exposing the reality that the shepherds of God’s flock have allowed them to be scattered. They have taught their sheep that they can live anywhere they like, provided they come together for two hours on a Sunday. In hindsight, this appears to have been a mistake.

Sheep need to be together. Sheep live together. Shepherds do not let their sheep wander where they like, and bring them back together once a week. That would be far too dangerous, because the sheep could get lost, or be taken by wolves, or other predators. The is true of God’s flock. They need to be together.

All the believers were together (Acts 2:44).

Sheep that are scattered are vulnerable when trouble strikes.

Allowing God’s sheep to be scattered was a serious mistake, which is now being exposed. In my book Being Church Where We Live, I explain how followers of Jesus can come together with others to serve him in the power of the Holy Spirit. This is important, now more than ever, because God does not want his sheep to be scattered.

Weather (8) God Protects

God has promised to protect his people from the troubles that come against the people that they live amongst.

You have been a refuge for the poor,
a refuge for the needy in their distress,
a shelter from the storm
and a shade from the heat (Is 25:4).

Sometimes, God protects his people by controlling the direction of the storm and rain during a time of drought. He can control the direction that the weather moves.

He made a decree for the rain
and a path for the thunderstorm (Job 28:26)

God can determine the path of a storm. He can send rain in one place and allow another place to remain dry.

I also withheld rain from you
when the harvest was still three months away.
I sent rain on one town,
but withheld it from another.
One field had rain;
another had none and dried up (Amos 4:7).

God has promised to protect his people during a time of trouble if they call on his name.

Corporate Socialism

A few weeks after the American electorate rejected Bernie Sanders’ policies of “peoples socialism”, Republicans and the Democrats are now pushing “corporate socialism” hard.

David Stockman warns that the Crony Capitalist Thieves Are Back.

The US airline industry has spent a decade shoving itself into harm’s way by strip-mining their balance sheets to fund share buybacks and goose top executive stock options.

For crying out loud – the reckless irresponsibility of it is mind-boggling. That’s because for decades upon decades this has been a highly cyclical industry – vulnerable to global dislocations caused by recessions, storms, wars, terror and more. Accordingly, airline companies absolutely need deep equity balance sheets and ample standby liquidity, even at the expense of short-term earnings.

Needless to say, the Big Four US airlines – Delta, United, American, and Southwest – were having none of financial rationality, prudence and common sense. As Wolf Richter properly pointed out:

“These stocks are now getting crushed because they may run out of cash in a few months, yet they would be the primary recipients of that $50 billion bailout, well, after they wasted, blew, and incinerated willfully and recklessly together $43.7 billion in cash on share buybacks since 2012 for the sole purpose of enriching the very shareholders that will now be bailed out by the taxpayer.”

We say nothing doing!

If the Big Four Airlines can’t raise enough cash in the high-cost long term debt markets or by issuing highly dilutive preferred stock or equity, there is only one solution – and that is chapter 11. Holy moly, that’s why we have this legal protection procedure.

The airlines will have precious little business for the duration of the great COVID spring break anyway. So let the court-appointed trustees operate with the same skeleton crews that the airlines will be running even if they get the bailout. The level of customer service and employment will be essentially the same in either case.

More importantly, let the gamblers and so-called investors who piled into these stocks get their just deserts. That is, a 100% loss on their gambling stakes because that’s all it ever was when the Big Four’s combined market cap hit $130 billion compared to just $43 billion now.

Of course, the airlines are only the poster boy for this long-overdue moment of truth. The problem is universal because today’s rotten regime of Keynesian central banking has caused the entire financial system and main street economy to become riddled with rank speculation and reckless disregard for financial discipline and prudence.

The problem begins in the Federal Reserve

Left to their own devices on the free market, households save and provide for rainy days, regardless of income level or social status.

Likewise, in a world not poisoned by cheap debt and falsified costs of capital, businesses nurture their balance sheets and provide for cash flow interruptions either by buying insurance or setting aside liquid reserves and equity capital based shock absorbers.

Corporate Debt is worse Problem than Coronavirus

Over the last few decades, governments and central banks have encouraged businesses to build up debt by keeping interest rates artificially low. Excessive corporate debt was a huge problem during the GFC, but businesses did not learn the lesson. They have continued to gorge on debt, and now they are vulnerable.

Jonathan Tepper explains that Covid-19 has exposed serious financial fragility.

The coronavirus won’t kill companies. But it will expose their bloated, overleveraged balance sheets. Corporate debt in companies has never been higher and has now reached a record 47% of GDP.

Rather than encouraging moderation, central bankers and policy makers have been reloading the all you can eat buffet and persuading everyone to come back for third and fourth plates. The European Central Bank and the Bank of Japan have been buying corporate bonds, and central banks have kept funding at zero rates, which has encouraged a massive increase in indebtedness over the past decade.

Central bankers have long promoted high corporate leverage because they see it as a way to stimulate demand. Even now, many economists see no problems on the horizon. In the New York Times, Nicolas Veron, a senior fellow at the Peterson Institute for International Economics in Washington, was openly mocking anyone advocating prudence, “The prophets of doom who thought that more debt was more risk have generally been wrong for the last 12 years.” Like most central bankers for the past decade, he argued, “More debt has enabled more growth, and even if you have a bit more volatility, it’s still net positive for the economy.”

But while debt has encouraged growth, it has also introduced much greater financial fragility, and so the growth is fundamentally unsound. We are now finding out that less debt, rather than lower rates is better for financial stability.

According to FactSet, 17% of the world’s 45,000 public companies haven’t generated enough cash to cover interest costs for at least the past three years. Debt has been used to finance more debt in a Ponzi fashion. The Bank for International Settlements looked at similar economic measures globally and found that the proportion of zombie companies — companies that earn too little even to make interest payments on their debt, and survive only by issuing new debt — is now higher than 12%, up from 4% in the mid 1990s.

According to the IMF, a downturn only half as bad as 2008 would put $19 trillion of debt—nearly 40% of the corporate borrowing in major countries—at risk of default. The economic consequences would be horrific.

Corporate debt has doubled in the decade since the financial crisis, non-financial companies now owe a record $9.6 trillion in the United States. Globally, companies have issued $13 trillion in bonds.

The average family is encouraged to save money for a rainy day, in case they are fired, or they face hardship. Saving some money is considered prudent. It’s quite different for business. Companies pocket the profits in the good years and ask Uncle Sam to bail them out in the bad years. Heads shareholders win, tails the taxpayer loses.

Industry can’t be blamed for not expecting an act of God or force majeure, but in the past 30 years we have seen two Gulf Wars, 9/11, SARS, MERS, Swine Flu, the Great Financial Crisis, etc. Saving for a rainy day should only be expected in cyclically sensitive industries.

But rather than do that, companies have been engaging in a rather more reckless strategy: borrowing to buyback shares. This may boost their Return on Equity (ROE), but it is not remotely prudent and makes their companies highly vulnerable. Borrowing to prop up their own shares means they have less on hand when hard times come.

Weather (7) Sharing in Troubles

If we are living in a nation that has rejected God, we will not escape the consequences that come upon it. If drought or storms become more prevalent, that will affect people who are faithful Jesus living within the nation, too. Although he will give guidance about how to deal with the tough situation, and strengthen us to cope with tough times, but he will not always protect us from everything that is happening.

Your Father in heaven. He causes his sun to rise on the evil and the good, and sends rain on the righteous and the unrighteous (Matt 5:45).

I remember a different version from my childhood, but the message is the same.

God sends the rain on the just and the unjust fella.
But more upon the just than the unjust,
because the unjust stole the unjust umbrella.

We share in the consequences that are experienced by our nation. (The church is partly responsible for the state of an evil nation, because it has shared the gospel inadequately). Christians cannot remain separate from the troubles that unfaithfulness bring on their nation.

So, praying for rain during a drought that has come on a nation, because it has deserted God might not be effective. Praying for wisdom to deal with the situation might get a more powerful response.

Pray about when to cut the hay or when to begin the harvest. Of course, a farmer only has limited control over timing, because when hay is ready, it needs to be cut. Crops have to be harvested when they are ripe. Farmers may need to pray about the type of crops that they should be growing given any change in the climate.

God might lead his people to move from one place to another for protection during a season of drought. Ruth and Naomi moved back from Moab to Israel during a famine. Jacob and his family moved to Egypt for security during a time of drought. Joseph took Jesus to Egypt as a child to keep him safe from persecution in Israel.

Weather (6) Dealing with Drought

During a drought, farmers should pray and ask God why it has come. There are a variety of possible answers to this question. Their response to the drought should depend on the answer.

• The drought is the outcome of the working normal weather patterns. In this situation, it is legitimate to pray that God will send rain.

• The drought might be the consequence of squeezing God out of the nation and giving freedom to the spiritual powers of evil to work evil upon it. There is no point in praying against the drought, if God has allowed it to happen as a matter of justice. The farmer should ask God how they need to change their farming practices, so that they can cope with the troubles that their nation is going through. Asking that God will stir up Christians to share the gospel might be the most effective prayer in this situation.

• The drought might be the consequence of long-term climate change due to the working of climate systems. In this situation, it is legitimate to ask God to change the climate. There will need to be enough people with authority in the land praying for prayers to be effective.

• If the long term-climate change is the consequence of the people of that part of the world deserting God, then there may be no point in praying against it. Farmers might need to ask God how they should adapt their farming practices, so that they can farm effectively, despite the changed climate. In some extreme cases, the farmer might need to move to a different place to live, even if the cost of doing so is significant.

• We need to be careful about praying for the weather, as humans have conflicting interests. For example, during the summer, city people might be praying for fine weather for their holidays, while Christian farmers might be praying for rain for the dry land. One group of farmers might be praying for rain on their land, while other farmers are praying for fine weather for their hay-making or harvest. Selfish prayers will not be heard.

Weather (5) Nations

The influence of the spiritual powers of evil changes depending on the spiritual state of the nation. If a big percentage of the population of a nation serves Jesus, the spiritual powers of evil will be squeezed out, and their influence will decline. They will find it difficult to cause harm by changing weather systems. If the faith declines and evil is rampant, the spiritual powers of evil have greater freedom to work in the nation. The result will be more weather catastrophes in terms of drought and storm. I have explained how this works in Prophetic Events.

This is also described in Deuteronomy 28. The link is more direct for a covenanted nation, but for ordinary nations where many people follow Jesus, blessings will flow.

The LORD will open the heavens, the storehouse of his bounty, to send rain on your land in season and to bless all the work of your hands (Deut 28:12).

The Lord will bless farming.

On the other hand, if Jesus is rejected throughout a nation, the spiritual powers of evil will have greater access, so troubles will flow.

The LORD will strike you... with scorching heat and drought, with blight and mildew, which will plague you until you perish. The sky over your head will be bronze, the ground beneath you iron. The LORD will turn the rain of your country into dust and powder; it will come down from the skies until you are destroyed (Deut 28:22-24).

When the people of a nation reject God, the blessings on agriculture disappear.

Being Church Where We Live

With government bans on inside meetings of large groups of people, many churches will not be able to hold their meetings over the next few weeks, or months. Some will be conducting their meetings with only a few people present and broadcasting over the internet so people can listen to the sermon at home alone. This seems to be a poor substitute for the fellowship of the Spirit.

Others church leaders are getting their people to meet together in homes with other members who live near them. Perhaps God is using the coronavirus to get people back to where he wants them to be. Perhaps he is getting them to be the church where they live.

If you are thinking about meeting with other followers of Jesus in your home, be encouraged, because Jesus has promised to be there with you. The Holy Spirit loves to work amongst small groups of people seeking to serve him together. If you want to know more about how you can be the church where you live, you should read my book called Being Church Where You Live. It explains how small groups of people can be a mighty witness for Jesus by serving the people who live around them.

More at Being Church Where We Live.

Weather (4) Prayer

Prayer can change the weather.

Elijah prayed for a drought in Israel as a sign that the people had deserted God.

Now Elijah the Tishbite, from Tishbe in Gilead, said to Ahab, “As the LORD, the God of Israel, lives, whom I serve, there will be neither dew nor rain in the next few years except at my word: (1 Kings 17:1).

Elijah was a human being, even as we are. He prayed earnestly that it would not rain, and it did not rain on the land for three and a half years. Again he prayed, and the heavens gave rain, and the earth produced its crops (James 5:17-18).

I am not sure whether God stopped the rain in response to Elijah’s prayer, or if his prayer released the spiritual powers of evil to bring a drought, but his prayer definitely changed the weather.

Moses prophesied a storm over Egypt.

Tomorrow I will send the worst hailstorm that has ever fallen on Egypt, from the day it was founded till now… When Moses stretched out his staff toward the sky, the LORD sent thunder and hail, and lightning flashed down to the ground. So the LORD rained hail on the land of Egypt (Ex 9:18,23).

Samuel prophesied thunder and rain during the harvest.

Is it not wheat harvest now? I will call on the LORD to send thunder and rain. And you will realize what an evil thing you did in the eyes of the LORD when you asked for a king. Then Samuel called on the LORD, and that same day the LORD sent thunder and rain. So all the people stood in awe of the LORD and of Samuel (1 Sam 12:17-18).

In these examples, God changed the weather in response to the prayers of his prophets, during a season when the people had rejected God. They were warning judgements.

I called for a drought on the fields and the mountains, on the grain, the new wine, the olive oil and everything else the ground produces, on people and livestock, and on all the labour of your hands (Haggai 1:11).

The opposite is also possible. Prayer can bring good weather when the season of judgement is complete.

When the heavens are shut up and there is no rain because your people have sinned against you, and when they pray toward this place and give praise to your name and turn from their sin because you have afflicted them, then hear from heaven and forgive the sin of your servants, your people Israel. Teach them the right way to live, and send rain on the land you gave your people for an inheritance. (1 Kings 8:35-36).

Financial Markets

All over the world, financial markets have tanked. The main US share price indexes have fallen by a third in the last week. The falls have been similar in other markets and other countries. This represents a massive loss of wealth for people who own shares and other financial instruments directly, or indirectly through their superannuation funds and insurance companies.

But there is another consequence, which is even more serious. Over the last few decades, the finance sector has grown massively, far outpacing the rest of the world economy. Banks and other businesses in the finance sector have worked together to create a huge infrastructure of debt that sits on the top of the real economy. Most of these debts have some form of collateral attached to them for the security of the lender. This collateral often consists of shares and other financial instruments.

The big fall in the financial markets significantly reduces the value of the collateral that has been posted for security. This leaves the borrower with two choices. They can either post more collateral as security (if they have it) or pay down some of their loan until it matches their collateral. Both these options can be difficult in uncertain times, but the alternative is to default on the debt, which would have a snowball effect, weakening other financial institutions that are connected to the one that fails.

A significant portion of the debt is denominated in US dollars, often using foreign exchange swaps (partly because US interest rates have been so low). The need to beef up collateral against debt may be one reason why the US dollar has strengthened so much against other currencies. It is not a sign that the US economy is strong, but that the financial system is weak.

The central banks will try to paper over the cracks in the system by creating money and making loans, but this will not resolve the underlying problems that make the modern financial system unstable in the first place.

Weather (3) Evil

If large numbers of evil spirits work together, they can influence the weather. This probably does not happen very often, but when they get their act together, it can be nasty. An example is when Jesus was crossing the lake in a boat. When they were in the middle of the lake, a terrible storm struck. This was not an ordinary storm. Mark describes it as a "great storm of wind" (Mark 4:37). Matthew says a great shaking (seismos) occurred in the sea. (Matt 8:24). The men in the boat were experienced sailors, but they were filled with terror because they realised they could be destroyed.

This was not just another storm. Most storms are caused by a strong wind. This was caused by something stirring the sea. The forces of darkness understood that Jesus was a risk to them. Now he had started his ministry the risk was becoming clear. He was casting out demons, and they were powerless. He was healing the people they had inflicted with sickness. They knew that they had to deal with him, before he really got going. So they stirred up the sea and the wind in an effort to kill Jesus.

When the disciples woke Jesus, he understood what was happening. He rebuked wind in the same way as he rebuked evil spirits that he was casting out. He spoke to the said to the waves, "Quiet! Be still" (Mark 4:39)! Speaking to an "act of nature" is a pointless waste of time, but Jesus knew the storm was demonic. He seemed to be speaking to the wind and the waves, but he was actually speaking to the evil spirits who were at work in both.

The disciples just saw a storm. Jesus realised that in the spiritual realms, a host of evil spirits had stirred up the wind and the sea in an effort to destroy him. There were other boats on the Sea of Galilee that night (Mk 4:36), but the spirits focussed the attack on his boat. Jesus understood his authority, so he rebuked the evil spirits. I presume that when he spoke, a host of powerful angels forced the evil spirits off the lake. That is why the wind and the waves instantly calmed.

Unlike a natural storm, this storm came without warning and ended suddenly. Much is made of the unpredictability of storms on the Galilee, but Jesus disciples knew how to read the weather signs (Luke 12:54) and would not have gone out if a storm was brewing. This storm ended as quickly as it started, because its source was demonic.

The storm that nearly destroyed the ship on which Paul was travelling to Rome was probably an attempt by the powers of evil to destroy him and his ministry. Paul got a revelation from God and declared to the sailor that no one would die. This declaration of faith undermined the power of the evil spirits stirring the storm.

When droughts and storms arise, it could be because we have opened ourselves up to the spiritual powers of evil. They love to kill and destroy. They sometimes use the weather to wreak destruction on earth. If that is the case, we should seek the deliverance of God. In these circumstances, prayer against the works of the powers of evil is essential for the victory of God’s people.

Weather (2) God

God gave humans authority of the earth. This authority translates into authority over land. We have authority to control and shape the land. However, God has not given authority over the atmosphere and the weather. We are not able to control the weather. This means that God does not need our authority to intervene in the weather and change weather patterns.

The scriptures explain that God has a strong influence on the weather.

He provides rain for the earth; he sends water on the countryside (Job 5:10).

Praise the LORD from the earth, lightning and hail, snow and clouds, stormy winds that do his bidding (Psalm 148:7-8).

He covers the sky with clouds; he supplies the earth with rain and makes grass grow on the hills (Psalm 147:8).

The LORD our God gives autumn and spring rains in season, who assures us of the regular weeks of harvest (Jer 5:24).

God has a powerful influence on the weather. So, if the climate changes, the first thing we should do is ask what God is doing. If the climate is deteriorating, it might because God has been aggrieved and has withdrawn his blessing. So instead of assuming that climate change is caused by humans, we should seek God and find out what he is saying about the situation.

Faith and Risk

Many prophetic voices are declaring that a spirit of fear is spreading around the world faster than the coronavirus. That is probably true, as fear is one of the enemy’s favourite weapons. However, we must not forget that complacency is another of his favourite weapons.

The best antidote to fear is trust in Jesus and walking his Spirit while living in a body of believers who love each other and are committed to supporting each other. Ps 91 is not a magic spell. Nor is it a guarantee to individual believers. It is a promise to a body of believers who love each other and walk in the spirit together, who make God their dwelling place (Ps 91:9).

The second-best antidote to fear is a clear understanding of the risk. Many people who contract the disease will have very mild symptoms. For most people, the risks of being killed by coronavirus are quite small, and most will get better.

The world we live in is full of risks, such as being knocked down by a car, but most of them are insignificantly small, so we can choose to ignore them. Many people, especially those who are young, have happily engaged in adventure tourism events, driven dangerously in motor vehicles, or done things under the influence of alcohol that exposed them to far greater risk than coronavirus does. We should not panic about risks that are relatively small.

However, for elderly people and others with pre-existing respiratory problems, the risks from coronavirus are much higher. We do not help them by trivialising the risks they face. They might need a group of faithful Christians supporting them in prayer, and some will possibly need a gift of healing to get through.

Although they are well trained, and have protective equipment, the nurses who will care for seriously-ill people hour by hour will feel like they are being exposed to greater risk than usual. They will need faithful prayer support and strong spiritual protection while they are caring for people in need.

As I noted in a previous post, the economic risks from coronavirus are probably much greater than the health risks, and they are already being felt. The slowdown of production in China is affecting production in factories all over the world. The controls on international travel introduced at the weekend will have a much greater effect. The tourism industry will be particularly hard hit, but in the inter-connected world that we live in, the pain will ripple thought the entire economy. I explain some of the reasons in Trade and Specialisation.

When life is uncertain, people stop spending, especially on goods and services that are not essential. This downturn will affect industries and businesses far beyond those that are directly affected. The large number of workers on casual contracts or on short-term freelance contracts will exacerbate the situation.

We had breakfast with friends in the restaurant of a tourist hotel on Saturday morning. The restaurant was quite empty, so I asked the waitress serving us about the impact of coronavirus. She said there had been a big decline in guests at the hotel. She said many of the staff had been put on reduced hours. She was worried about one of her colleagues who had just taken out a mortgage to buy a house. No doubt the situation people employed by this business got worse on Sunday when the government announced big restrictions on international travel.

Trivialising the economic risks is not helpful. Many people will face reduced hours, and some will lose their jobs. Most of the employment in the tourism sector are in low-wage jobs, so they will have much to come and go on. Many businesses will struggle, and some will fail. The restrictions on international travel could be in place for some time, which will increase the economic pain for the business and people affected.

Governments will introduce support packages to help the people and businesses affected, but they will not be able to restore everyone who is affected. Many will miss out, because they do not fit the criteria. Even if they do get help, they will not be fully compensated for their losses.
Unfortunately, because governments all over the world have mismanaged their economies in the last couple of decades, the world economy is not as robust as it should be. I describe these risks in Thoughts on the Economy.

People who are struggling economically will need assistance from the body of Christ. They will need people of faith to strengthen them and people of generosity to sustain them during their time of need. I explained how this could be done in Preparing for Economic Crisis. Unfortunately, the church in the western world is not well prepared for dealing with a season like this, as most of its income is committed to salaries and mortgage payments for buildings.

Praying for the Weather (1)

Weather systems are extremely complicated. Most of the time the weather is the consequence of the normal working of these systems, without any spiritual intervention.

Climate changes over time, as a consequence of even more complicated interactions between the earth, the sun and the atmosphere.

However, God can intervene in the weather for particular purposes. The spiritual powers of evil can also interfere with the weather, but I presume they have to band together to have much impact. That probably does not have very often.

Authority over the Weather
Before we can fully understand praying for the weather, we need to answer the question: who controls the atmosphere.

God gave humans authority over the earth. Unfortunately, humans gave their authority over the earth to the spiritual powers of evil.

The owners of land do not have authority over the atmosphere above the land they own.

The land does influence the atmosphere above it. For example, land can cause the atmosphere to heat or cool. Hills can provide shelter from wind, or cause rain to fall.

The land influences the atmosphere, but the owners of the land do not have authority over the atmosphere above it. This means that the owners of land do not have authority over the weather that transpire above their land. If they have given authority over their land to the spiritual powers of evil, then they do not get authority over the weather above it, either.

The weather in a region is determined by three influences.

• The natural working of weather systems.
• God.
• The spiritual powers of evil.

God does not have to get permission from the humans who control the land in an area before he can influence the weather, because they do not have control over the atmosphere above it. God gave authority over the earth/land to humans, but he did not give up authority to intervene in the weather on earth. God can influence the weather without getting permission from the people who control the earth.

Likewise, the spiritual powers of evil do not have to get permission from the people with authority over the land to influence the weather. Their main challenge is their limited power.

The authority situation with regard to the weather is different from what applies to other things on earth.

The weather has a significant effect on the earth. Rain helps seeds and plants to grow. Drought stops them from growing. If people are praying for changes to the weather that will affect the earth, then the authority of the people controlling the land might become more important.

Season Change

Dark clouds are rolling in from the sea and over the land.
The season of favour and privilege has come to an end.
A season of hostility, hatred, harm and harassment is beginning.

A sword of persecution will come against preachers
who go hard against sin with salvation by law.
When church leaders campaign hard
against abortion, euthanasia, genderism and homosexuality,
the world will react with hostility.
They will be accused of stirring up hatred and hostility
towards those who are hurting and helpless.
They will be labelled as lacking in love and compassion.
If fear, anger and hatred squeeze out of love and compassion,
the world will react with hostility.

When leaders use the sword of the state against sinners
and forget that sin carries its own punishment,
they will find that sword turned back against them.

A sword of persecution will come against preachers
who go hard against sin with salvation by law.
A sharp division will come between political leaders and church leaders.
Hostility will rise up between them and feed into hatred and harm.
Some facilities that have been publicly-funded will be shut down
to silence the voices that are speaking loudly against sin.
Some leaders will be hounded from their places of power
or silenced by dodgy legal and financial means.

Preachers who proclaim an exclusive gospel and eternal consequences for rejecting the gospel
will face terrible hostility.
The pastors who preach at their sheep from the front of their building
will be silenced and shut out.
Those who attempt to replace them will be silenced too.

A sword of persecution will come against
who have allowed themselves to be put on a pedestal,
who have taken the place of Jesus.
When they do not know who to follow,
their sheep will be scattered across the city.

After an explosion of anger and hostile threats,
some Christians will be afraid to come together in crowds.
When pastors fall,
their sheep will be scattered across the city,
afraid to return to big meetings.

When the sheep hide together in their houses
something amazing will happen.
The Holy Spirit will make his home amongst them.
He will heal those who are sick and broken
and many people will choose to follow Jesus.
God will raise up helpers from within their homes
to watch over them
to teach them the way of Jesus
and to bond them into his body.
They will gather to love and support each other in their homes.
Elders with balanced giftings will arise from within their midst
to watch over them.

......

The date for the NZ general election in September has been set. Most New Zealanders seem to be a bit bored by it, but Christians are rally stirred up about it. They see it as an opportunity to push back on the Big Four Social issues. A couple of them will be the subject of a referendum in parallel with the election. The big four social issues are:

• Abortion
• Euthanasia
• Marijuana
• LGBTQ issues

Focus on these issues is a mistake and a distraction.

• Changing the law to outlaw behaviours that we do not like is salvation by law. We know that salvation by war does not work, and we do not believe in it, so it does not make sense that they are trying to use political power to bring social change. Advocating salvation by law is wasted effort.

• The church has an amazing gospel and the Holy Spirit. These together are far more effective for bringing social church. The gospel can transform human lives and society. The gospel and the spirit are our weapons for changing lives.

• The reason that evil is spreading in the world is that sin has become so widespread. The reason that sin is widespread is that we have not shared the gospel of Jesus effectively. For example, abortion is morally wrong, but we must not put the blame on the young women who feel their only option is to abort their babies. We must not put the blame on the politicians, who are watching which way the wind is blowing and give the nations the law that it wants. Changes to abortion laws are the consequence of the church's failure to share the gospel. We must not blame the world for our failure.

• If the majority of the NZ population is not Christian, we should not expect them to elect Christian MPs. If the majority of MPS are not Christian, we should not be surprised if they change laws in a way that Christians do not like. Forcing them to apply Christian principles is not the solution. The answer is to change the heart of the population by proclaiming the gospel in the power of the Spirit.

• The horse has bolted in New Zealand. Society has already decided where it wants to go, and is going the other way. Most people are glad that the shackles of religious constraints have been thrown off. They do not want to go back to the old world of religious condemnation and shame.

• The four big social issues are suckering the church into supporting right-wing political parties. They will use these wedge issues to entice voters to gain power, but will give very little back. Political power is a trap and disappointment for the church.
  God does not care about these social issues as much as we do. He is sad when people reject his love, but he is not surprised when they sin. The wedge issues that concern Christians so much are normal in societies that have turned away from God. The solution is proclaiming the gospel in the power of the Spirit.

In the New Testament, Jesus did not challenge the religious and political powers to bring in laws to eliminate abortion, euthanasia and crucifixion. Instead, he went around proclaiming the good news and demonstrating God's love by healing the sick and casting out demons. Paul explained to the Roman Christians that increasing sexual immorality is the normal consequence in a society that has rejected God's presence (Rom 1:23-27). He did not tell the Romans to agitate for the Roman senate to pass laws that would stop these distasteful practices. Instead of advocating changes to the law, Paul urged the Romans to preach the gospel of Jesus, so that people's lives and their society would be transformed.

Jesus was far more concerned about different sins. He was particularly concerned about the sins of religious people and religious leaders than the sins of the world. When challenging sin, Jesus focussed on:

• Unrighteous wealth (Luke 6:24-25; 16:13).
• Religious leaders colluding with political power (Mark 3:6; Luke 23:2: John 19:12).
• Imposing legal burdens on people to solve problems without doing anything about the underlying causes (Matt 23:2-4).

If the church persists in agitating on the big four social issues, there will be a harsh and hostile reaction. This will happen quicker than expected.

If pastors push hard on these issues in the lead up to the election, there will be a backlash from the media and activists that see them as a threat to their agenda. They have political support, so the fight could get really nasty. The social activists who have pushed these causes are tired of being pushed around and put in their place by the church. They feel like they have escaped that pressure in recent years, and they will do anything to avoid losing the ground that they have gained.

The experience of Isaac Folau is a warning. What the pastors in New Zealand churches are teaching is not much different from what he was teaching. Many are secretly saying, "He is right". The only difference is that he is better known, but if the pastors and leading Christians in New Zealand stand up on the parapet during the election, they will face the same vicious onslaught from the media and other social activists.

Family (4) Alternative

Brooks claims that the solution is the emergence of broader social groups that can provide an alternative to extended families.

In the beginning was the band. For tens of thousands of years, people commonly lived in small bands of, say, 25 people, which linked up with perhaps 20 other bands to form a tribe. People in the band went out foraging for food and brought it back to share. They hunted together, fought wars together, made clothing for one another, looked after one another’s kids. In every realm of life, they relied on their extended family and wider kin.

Except they didn’t define kin the way we do today. We think of kin as those biologically related to us. But throughout most of human history, kinship was something you could create.

In other words, for vast stretches of human history people lived in extended families consisting of not just people they were related to but people they chose to cooperate with.

Americans are hungering to live in extended and forged families, in ways that are new and ancient at the same time. This is a significant opportunity, a chance to thicken and broaden family relationships, a chance to allow more adults and children to live and grow under the loving gaze of a dozen pairs of eyes, and be caught, when they fall, by a dozen pairs of arms. For decades we have been eating at smaller and smaller tables, with fewer and fewer kin. It’s time to find ways to bring back the big tables.

Brooks describes a number of social institutions that are emerging as an alternative to the nuclear family.

Because Christians are supposed to be experts on “loving one another”, we should be leading these efforts. In an article called Tens, Hundreds and Thousands, I explain how God wants to re-create society from the bottom up, starting with extended families at the bottom, and then connecting them together to establish stronger groups.

God wanted the Israelites who left Egypt to be organised this way. With the gospel and the outpouring of the Spirit, this approach became even more effective and powerful. The Tens and Hundreds that Moses described, and expanded in the gospels and Acts are the equivalent of the bands that David Brooks described, but more effective, because they are united by love and empowered by the Holy Spirit. They will provide a safe place for families to shelter.

Trade, Specialisation and Coronavirus

The biggest issue in the current economic crisis is globalisation. Internet communication and container shipping have allowed the business world to massively increase specialisation in production.

In a traditional society, people often lived by subsistence. They did not depend on any other people for survival, because they grew or produced everything that they consumed. If they could not grow or make it themselves, they did not have it. Living on subsistence allowed the people to be self-sufficient, but this was quite limiting, because they spent so much of their lives producing food and shelter, they did not have time to develop and make other products that they may want.

The development of trade changes everything, because it allows people to specialise. Each one does what they are most skilled in doing. By focusing on one task, each person could increase their skills and find ways to do a task more efficiently. The person who specialises can produce more than they need to survive. They can trade their surplus production with others to get all the things they want. Trade improves the situation of almost everyone.

The industrial revolution gave the world new technology, but many of its benefits came from specialisation that made the production of goods and services more efficient. Over the last fifty years, a massive increase in specialisation and trade has occurred. This trade and specialisation makes most people better off, it has linked different parts of the world much closer together.

The production of goods has been split up into its different tasks and shifted to countries that can do them most efficiently. Engineering design for a product might be done by a services company in the United States. The marketing might be organised from France. Manufacturing tasks have been shifted to countries in Asia, where labour is much cheaper. This specialisation often produces greater efficiency, which results in cheaper good.

The components that are used in a product will be manufactured by different companies in different countries. By specialising in one type of component and supplying them to numerous producers for various similar products, they can become more efficient in what they do. The companies that assemble products have specialised in developing efficient production lines.

This division of labour enhances life in cities. Without the benefits of specialisation and trade and specialisation, life in a modern city would be impossible, even for those who live simply. No modern city or country has the capital equipment and the range of skills needed to manufacture the full range of products that people need and want. The only way that it can maintain modern lifestyles is to specialise in a limited range of activities, sell the surplus produced, and use the income to pay for the other goods and services that are needed. These will often be imported from other countries, so some of the surplus production will have to be exported to pay for it.

Risk
The risk of specialisation is that it makes people and business dependent on other people and businesses. That is a good thing.

With the highly globalised specialisation of the modern economy, this dependency extends across the world to many other nations. The supply chains of many large producers extend to businesses in countries all over the world. This specialisation has allowed increased efficiency and reduced costs, but the risk of dependency has also been vastly increased.

The risk has been exposed by the emergence of coronavirus in China and Europe and government actions to slow its spread. The quarantining and closure of businesses in China has disrupted the supply chains of businesses all over the world, contributing to the current economic downturn. Quarantines in other countries will exacerbate this situation.

This risk of depending on producers on producers on other sides of the world was always obvious, but it was probably downplayed for the sake of profits.

Many businesses are now saying that they want to pull back from globalisation and rely only on local suppliers. People are saying that they want to be self-sufficient. Reducing the risks of globalisation may be sensible, but we need to be careful how far we take this.

A significant reduction in specialisation and trade will reduce the efficiency of production, which will contribute to a sharp increase in costs and the prices that consumers have to pay. No business or nation has the capacity to produce everything needed to sustain the modern lifestyle. This makes full specialisation impossible. If a phone manufacturer tried to make all the components needed, the cost of production would be much greater. Most businesses would not be capable of efficiently producing all the components need.

Even the United States does not have sufficient capital and skills to produce the full range of goods and services needed to sustain life in an American city. If America attempted to be self-sufficient, living standards would suffer as the benefits of the division of labour and specialisation disappeared.

Moving all production back to the United States is probably not practical. The much smaller market would not support the level of specialisation that has produced the cheap consumer goods that we now take for granted. If businesses had to produce all components of their products internally, they would be much less efficient. Skilled people will have to engage in a broader range of activities, so they will become less efficient at doing some of them.

The other problem is that the skills needed for making some components of consumer goods no longer exist in the United States. Even if people could be trained up to do them, US employees will not do these for the wage rates for which they are done in Asia and Africa.

Global specialisation is beneficial, but it is also risky, because it is vulnerable to epidemic diseases, wars and political interference. However, full self-sufficiency is not practical either, because it would be too costly. We need a balance between the risks and benefits.

In the short term, government efforts to slow the spread of coronavirus will cause a massive contraction of the globalised activities, causing shortages of components needed for production and some consumer goods. Efforts to short circuit specialisation and globalisation will push up the cost of production.

In the longer term, following the coronavirus experience, that balance might shift toward more self-sufficiency, but some degree of specialisation and dependence on global trade will always be unavoidable.

Family (3) Collapse and Confusion

The collapse of marriage has created social problems.

When you put everything together, we’re likely living through the most rapid change in family structure in human history. The causes are economic, cultural, and institutional all at once. People who grow up in a nuclear family tend to have a more individualistic mind-set than people who grow up in a multigenerational extended clan. People with an individualistic mind-set tend to be less willing to sacrifice self for the sake of the family, and the result is more family disruption. People who grow up in disrupted families have more trouble getting the education they need to have prosperous careers. People who don’t have prosperous careers have trouble building stable families, because of financial challenges and other stressors. The children in those families become more isolated and more traumatized.

Many people growing up in this era have no secure base from which to launch themselves and no well-defined pathway to adulthood. For those who have the human capital to explore, fall down, and have their fall cushioned, that means great freedom and opportunity—and for those who lack those resources, it tends to mean great confusion, drift, and pain.

Brooks explains that there is no way back. Both conservatives and progressives are confused about where to go.

As the social structures that support the family have decayed, the debate about it has taken on a mythical quality.

Social conservatives insist that we can bring the nuclear family back. But the conditions that made for stable nuclear families in the 1950s are never returning. Conservatives have nothing to say to the kid whose dad has split, whose mom has had three other kids with different dads; “go live in a nuclear family” is really not relevant advice. If only a minority of households are traditional nuclear families, that means the majority are something else: single parents, never-married parents, blended families, grandparent-headed families, serial partnerships, and so on. Conservative ideas have not caught up with this reality.

Progressives, meanwhile, still talk like self-expressive individualists of the 1970s: People should have the freedom to pick whatever family form works for them. And, of course, they should. But many of the new family forms do not work well for most people—and while progressive elites say that all family structures are fine, their own behavior suggests that they believe otherwise...

In other words, while social conservatives have a philosophy of family life they can’t operationalize, because it no longer is relevant, progressives have no philosophy of family life at all, because they don’t want to seem judgmental. The sexual revolution has come and gone, and it’s left us with no governing norms of family life, no guiding values, no articulated ideals. On this most central issue, our shared culture often has nothing relevant to say—and so for decades things have been falling apart.

Thoughts about the Economy

Although it has now been declared a pandemic by the WHO, it is hard to know how serious the coronavirus pandemic will become. Whatever the outcome, it is likely that the economic consequences will be more serious than the health effects.

It seems that the best way to prevent the disease from spreading so fast that it overwhelms hospital systems is to quarantine people from infected areas. The speed of the spread can be slowed by creating social distance and reducing human contact by action such as limiting travel and preventing attendance at large sports and entertainment events. Unfortunately, government actions to reduce the spread of the disease have a significant economic cost. Spreading the advance of the disease out over several months means that the changes introduced by the government will have to stay in place for much longer. And the more serious the disease, the longer that it will take for people to revert back to their normal behaviour.

Governments will have to choose between health outcomes and economic outcomes. I presume that will most will put people’s health ahead of the economy.

Even before the coronavirus struck, the world economy seemed to be turning down, although the consequences were not fully clear. Therefore, although the coronavirus was a catalyst for the recession that had already begun, the outcome will be determined by the other factors that were already in play.

• Europe has been struggling for some time. The uncertainty of Brexit makes it hard to know how this will play out.

• The US trade war with China has had an effect on the economic performance of both countries by reducing trade and increasing costs. US agriculture has bee seriously impacted.

• The recovery from the 2008 Global Financial Crisis has been sluggish at. Part of the problem is that the government solutions, which saved badly managed financial institutions from disaster, left a dead-weight hanging over the rest of the economy. Lax monetary policy helped the banks created artificial conditions that enhanced the underlying problems that were never resolved.

• Share markets have fallen sharply all over the world. Concern about the impact of the coronavirus triggered the fall, but most shares were probably already seriously overpriced with price/earnings ratios well above the long-term average. Loose monetary policy had fed the boom by encouraging share buy-back schemes, which make shareholders wealthy, but do nothing for the real economy. Low-interest rates also encouraged excessive margin buying. Given that share markets had got out of touch with the performance of the real economy, a serious correction was well overdue, before the coronavirus arrived. All that was needed was a trigger.

• Declining oil prices have contributed to the decline in share prices. However, the oil market was already suffering from excess production prior to the coronavirus emerging, so a fall in price was inevitable. The virus was just the trigger of the inevitable collapse.

  US shale-oil production had contributed to the excess production of oil. This production was usually funded by low-interest debt, so it was not really sustainable. Once oil prices fell a collapse of the fracking sector was unavoidable.

• Current economic problems are exacerbated by the high levels of debt, due to the low-interest-rate policies of central banks. Household debt has soared again. The greatest risks are student debts and auto loans. Corporate debt has grown rapidly too, and some of this debt is very poor quality. At the same time, government debt has grown all over the world. This high level of debt leaves household and businesses vulnerable to economic troubles.

• The finance sector in most developed countries has grown enormously in recent decades, but adds very little of value to the real economy. The sector claims that it mediates between lenders and borrowers, but in reality, it does very little of that. A vastly shrunk finance sector could carry out the financial intermediation need to support an economy.

  What the sector has really done is to create a vast range of financial products and derivatives and then sold these on to other financial institutions, effectively betting against each other in a “giant financial casino”. They claim that these activities improve the transmission of information and reduce risk, but the experience during the GFC showed that the opposite was the case. The finance sector has become a massive dead-weight that sits on top of the real economy, weighing it down with additional costs, and massively increasing risk when things unravel. The only people that benefit from these activities is the highly paid staff and shareholders of the companies that dominate the sector.

• Monetary policy was over-used in the last financial crisis, so there is limited room for it to be used with the next, as low-interest rates cannot be pushed much lower before they go negative. This gives central banks very little room to move. Other monetary measures such as quantitative easing have not proven effective in dealing with serious economic problems.

• A modern economy has so many inter-dependencies that once it is slowed down, it will take time for it to get back up to speed again. Some businesses will have failed and will not start again. Many employees will have shifted to other work, and will not go back to doing what they were previously. Their skills will not be available for the restart of the economy. When people stop travelling, it might take along time to be confident to travel again. In a less globalised world, some industries might never become competitive again. Businesses that have found new suppliers might never go back to their old one.

• Many large businesses have weak balance sheets. Since the GFC, they have used cheap loans to finance share buybacks. These have pushed up the share prices for the benefit of shareholders, and particularly senior executives who are paid in shares or share options. Unfortunately, this practice leaves the business without financial reserves to tide them through a difficult time. For example, aerospace analyst Dhierin Bechai reports that:
  

  Boeing spent roughly $60B in buybacks ($40.6B) and dividends ($19.4B) in the past years while it generated roughly $55B in cash flows. Boeing returns all of its cash flow from operations to shareholders... Excluding 2019, we found that Boeing returns 92 percent of its operating cash flow and 113 percent of its free cash flow to shareholders.

  Coincidentally, or not, the $60 billion returned to shareholders is the exact amount Boeing requested in federal support for the aerospace industry.

  Jesse Fedler explains that the total net asset value of the McDonalds, Caterpillar, Boeing and 3M has fallen 90% from $70 billion just a few years ago to about $7 billion today. On average, these companies each spent $200 million per year on issuance of options to top management. Those very same managers were the ones who decided it was a good idea to leverage the balance sheet to buy back stock. This was done at the long-term expense of the resilience of their balance sheets.

• The problem with the current economic crisis and mounting job losses is the vast majority of workers are woefully unprepared for any type of disruption to their income going into recession. This will be a problem all over the world.

• The Chinese economy is weaker than it was in 2008/9 when it led the world out of the GFC.

The outcome is uncertain, but so many negatives are at play that the consequences are likely to be worse than governments expect.