Inflation

Economists tend to worry about spiralling inflation when wages and prices ratchet up against each other, but even when this does not happen, a serious one-off inflation is just as insidious.

In most Western countries, consumer prices have increased by close to 10 percent over the last year. This makes us all worse off because we can't buy as much with the same amount of money as last year.

Economists usually focus on the annual increase in the CPI, but we need to be careful about that because even if price inflation slows next year to 2-3 percent, the effect of the 10 percent inflation we experienced this year does not go away. The recent increase in prices will be there forever (unless prices fall dramatically, which rarely happens), so we will continue to be close to 10 percent worst off than before, unless we can earn or negotiate a compensating increase in our income.

To understand the real effect of price inflation, we need to look at the change in the CPI over several years. The New Zealand measure of consumer price inflation has increased by more than 50 percent. This cumulative increase has slowly, but severely, eaten away at the value of fixed incomes.

More in God's Economy.

Interest Rates and Debt

The US Federal Reserve is raising interest rates to control inflation. This creates a problem for the US government, which needs to borrow about a trillion dollars every year to cover its budget deficit. Since the US has begun freezing the reserves of its enemies, selling this debt to the Chinese and Saudi Arabia is getting harder. The only alternative is to sell this debt to the Federal Reserve, but as part of their efforts to reduce inflation, they are reducing their asset purchases.

The US currently has debt worth more than $30 trillion, so higher interest rates will be painful. If interest rates increase to the level of the inflation rate, the annual interest bill would be more than $3 trillion dollars. This is more than the government collects in income tax. I presume that the only option is to kick the can down the road by borrowing more to pay the interest.

Inflation

J.W. Mason is an Associate Professor of Economics at City University of New York. He has an interesting comment on the efforts of the US Federal Reserve to control in inflation by raising interest rates.

Today’s macroeconomic orthodoxy puts economic management in the hands of the central bank, which relies mainly on a single instrument, the overnight interest rate between banks. This arrangement is based on a certain model of the economy. In this model, the supply side—the productive capacity of a country’s labor and businesses—grows at a stable pace. Spending, meanwhile, may run ahead or fall behind, depending mainly on developments in the financial system. Asset bubbles may raise desired spending beyond what the economy is able to produce, as businesses take advantage of cheap financing and households of their paper wealth. Bank failures may cut off credit, pushing spending below potential.

If these assumptions hold, then it makes sense that the institution that sits at the apex of the financial system is also the one that manages macroeconomic imbalances like inflation or unemployment.

But the assumptions may not hold. Macroeconomic disturbances may come from the supply side rather than the demand side. Demand may fluctuate for reasons unrelated to finance. Supply and demand may not be independent of each other. Depressed demand can discourage capacity-boosting investment, while strong demand can encourage it.

In these cases, the Fed’s power over the financial system may not be enough to stabilize the economy. Efforts to offset supply disruptions by adjusting the flow of credit somewhere else may fail to address the underlying problems, or even make them worse.

Exchange Rates

In countries that allow free flows of capital and a floating exchange rate, interest rates and the exchange rate are tightly linked. If interest rates are relatively high, capital will flow into the country, which strengthens the exchange rates, making imports cheaper and exporting harder. When interest rates are low, the opposite happens.

In the past, many developing countries have kept their interest rates low, to weaken the value of their currency in order to strengthen their exporting sector.

In the current economic climate, most nations are worried about inflation. If their currency devalues, the cost of imported good and services will increase, feeding into rising prices. This is a problem when they are fighting inflation, so most nations are keeping their interest rates relatively high in order to keep their currency strong.

Of course, this policy is self-defeating if every nation does it.

Monetary Policy

Monetary policy is a powerful tool, but it is a very blunt instrument, so the central bankers who use it have almost no control over the direction it will hit. They have very little control of what sector of the economy it will it affect. This is a serious weakness with the tool.

Over the last decade, central banks have kept interest rates low to prevent the pandemic from doing too much harm to the world economy. Their policy may have helped, but most of the effect of this weak monetary policy fed into share markets and housing markets, producing serious house price inflation and booming equity prices. This mostly benefit people who are better off.

Now that inflation has become a problem, central bankers are tightening monetary policy by pushing up interest rates. The problem is that the tightening on the way down does not always go in the same direction as the loosening on the way up.

Tight money policy might bring down share prices and house prices causing pain for the relatively well off, but it might affect the productive economy far more than it did on the way up. In attempting to bring the inflation that they deliberately created back under control, central banks might do terrible harm to the productive capacity of the economy that the poorer people of the world depend on.

Central banks are serious about tightening money policy, but they done really know how it will feed through the economy and which sectors will be affected most.

Excess Deaths

Eugippius has an interesting article on the pattern of Covid deaths. The pattern he discovered is fascinating. I have always considered that “excess deaths” are the best statistical tool for measuring the impact of a pandemic.

In New Zealand, we have had only had one prolonged peak (earlier this year), due to the country being locked down from the rest of the world for a couple of years. It will be interesting to see if our experience is similar to other contries in the late-outbreak group, which only had one peak.

Evangelism

In my previous post, I asked about methods of evangelism that readers had confidence in. The most common response suggested building relationships with people. One reader said, “at least in our culture, people are longing for truthful relationships”.

I agree that this will work well in the modern world. However, relationships take time, so this is not a quick option.

I nearly said “relationship evangelism”, but I remembered a friend who hates that term. He said that if Christians are making friends with people just so they can share the gospel with them, it is not true friendship. Especially if they drop the friend if they have not received the gospel within an appropriate time.

We should make friends with unbelievers because they are children of God made in his image, not with any other agenda. If we are demonstrating the love of Jesus, we should be prepared to continue being a friend of the person, even if they never choose to follow Jesus. And if they do choose to follow him, we should continue the friendship, rather than neglecting them to pursue another victim. Friendship must be a way of life, not a method of evangelism.

Evangelistic Methods

Turning the spiritual tide in New Zealand will require serious sharing of the gospel of Jesus. A revival of faith will need a catalyst of evangelism. However, I have to wonder if the church has the effective methods of evangelism that will be effective in the modern world.

Jesus used to main methods of evangelism.

• Healing a sick person and preaching the good news with the crowd that gathered to watch.

• Sending a pair of disciples into a village to share the good news with the people living there.

These methods see to have gone out of favour.

The methods of evangelism that used to be effective for the church no longer seem to work.

• Large evangelistic rallies like those conducted by Billy Graham. It is hard to see this method being successful in the NZ culture.

• Door-to-door evangelism used to be popular, but it is no longer used, because it is difficult to find people at home. Even travelling sales people have given up.

• Having an altar call at the end of a sermon at church service still works, but it will only reach that segment of the population that is willing to go to a church meeting.

• The Alpha Course works for some churches, but it only seems to be effective for some types of people.

• Some pastors are pushing work-place evangelism, but this is not always practical, because managers or owners have control over what happens on their premises. People are not always free to talk about religion at the end.

This list does not inspire confidence for the future. What have I missed? If you have a method of evangelism that is effective for you in the modern world, please describe it in a comment below.

Hit Harm and Run Tactic

We need to understand the tricks of the spiritual powers of evil. They like us to think that they mostly work by an evil spirit possessing a person and controlling them, but that tactic is relatively rare. The reality that there is a finite number of evil spirits. With the human population of the earth growing into the billions, possession of a single individual is an inefficient tactic. The spiritual powers of evil no longer have the numbers to allow a legion of spirits to control one man. Consequently, evil spirits engage far more with a Hit, Harm and Run tactic.

Imagine a young girl who is bullied and beaten by her father. Every time he strikes her, an evil spirit says to the girl, “You deserve this treatment because you are a bad person of no value to anyone.” We hear words clearly when we are fearful, so the words penetrate deeply into her memory. Once the evil spirit has said this half a dozen times, the words have stained her heart and gained a stronghold in her memory.

The evil spirit can then move onto harass another person, leaving its harm behind to keep on dragging her down. Every time she is abused by her father, the door to her memory that was opened by the trauma opens up and she hears the words again, even though the evil spirit is moved on.

When she has grown and escaped her father’s control, every time she faces distress or trauma, she still hears the lies of the evil spirit coming up from her memory. “You are no good. Bad stuff will happen to you because you deserve it. You are of no value”. She is scarred for life.

This is how the Hit, Harm, and Run tactic most commonly used by evil spirits works. They are the cause of the problem, but there is no point in casting the evil spirit out, because it left years ago. She needs the Holy Spirit to rip out the lies that have become part of who she is and replace them with the truth as God sees her.

The Hit, Harm and Run tactic also causes physical attacks. An evil spirit was able to attack a woman’s spine and leave her physically crippled. Jesus laid his hands on her to heal her rather than casting out the evil spirit because it had probably already gone when it had done enough harm to cripple her (Luke 13:11-13).

An evil spirit can attack a few cells in a person's body and set off a cancerous growth. The evil spirit does not need to continue attacking the person, because the cancer continues growing on its own accord. Casting out an evil spirit does not cure the cancer, because the evil spirit has already moved on. The person needs someone carrying the gift of healing to pray for their body to be restored.

Evil Spirits can just as easily attack a person's brain and destroy neural pathways that should be joined and those incorrectly join those that should be separated. These little twists often cause people to see the world and themselves in a negative light that destroys their relationships with others and causes them to harm themselves.

Again, casting out the evil spirit is pointless, because it moved on long ago. What the person needs is for the Holy Spirit or his angels to remove the junk that the evil spirit has left behind and restore the brain to working in the way that God designed it to function. We need to learn how to help him to do this work by prayer.

Dry Bones

Ezekiel saw a valley full of dry bones (Ezek 37). After he prophesied, they were joined and raised to become a mighty army. Ezekiel’s vision is frequently quoted as a picture of the revival, but we often miss the key point.

When Ezekiel prophesied, the bones came together and tendons and flesh appeared. The bones were joined together and skin covered them. The breath of the Spirit could not come until the bones had to come together, bone to bone in a body. When Ezekiel prophesied again, the breath came into the bones and they stood up and became a mighty army.

A body is not built by throwing some bones in a basket. To become a mighty body empowered by the Spirit, the bones must be joined together. Each bone must be joined to at least two others by muscles and tendons. The correct bones must be joined in the right place. A body becomes dysfunctional and dry, if just one bone is missing, or is joined to the wrong bone.

Being Church Where We Live p.24.