beaten with brains

Foreclosing on the Home ATM

2009-06-08T15:13:00.002-05:00

Homeowners who treated their houses like cash machines, tapping the equity as home values rose, are among the most likely to end in foreclosure, even more than those who bought at housing’s peak, a new study finds.

Full Story

Myths of the Great Depression

2009-06-07T21:20:00.004-05:00

Jim Puplava of the Financial Sense Newshour had a good interview with Robert Murphy summarizing some of the big picture points described in his book The Politically Incorrect Guide to the Great Depression and the New Deal.

Far from getting us out of the depression, Roosevelt’s “new deal” made things much worse. In fact, his “deal” wasn’t even new. He campaigned against Hoover by calling him “the biggest spendthrift in history” (which, in terms of American political history, was true). Then after he was elected, he proceeded to enact a supercharged version of many of the same, failed Keynesian pump-priming measures that Hoover tried (along with a few new and even worse ideas). Giant deficit spending, public works, wage and price controls, attempts to hold up agricultural prices, and the list goes on and on. The myth that Hoover was anything like a free market sympathizer goes hand in hand with the myth that Roosevelt “got us out of the great depression.” Instead, both Hoover and Roosevelt turned a recession into a great depression with a slew of interventionist policies, many of which were precisely the opposite of what should have been done.

Those sympathetic to Roosevelt sometimes describe his methodology as throwing all kinds of things against the wall to see what sticks. This would be bad enough if it were true as it would show that Roosevelt had no idea what he was doing. But it was actually much worse than this as described in painstaking (and painful to learn) detail by John T. Flynn in 1948 in The Roosevelt Myth.

Anyway, useful interview with Murphy to cover some of the big picture basics.

How Science Becomes Common Knowledge

2009-05-22T11:48:00.003-05:00

From PhD Comics

You Can't Drink Yourself Sober

2009-05-15T07:57:00.001-05:00

"You can't drink yourself sober... You can't leverage your way out of excess leverage and you can't borrow your way out of too much debt."

Thugonomics

2009-05-15T07:52:00.003-05:00

http://zerohedge.blogspot.com/2009/05/foia-disclosure-busts-paulson-geithner.html

Judicial Watch, which lucked out majorly on a FOIA request to the Treasury, has received several hundred pages of stunning revelations, among which are that Hank Paulson essentially used the same tactics that he used on Ken Lewis on a group of nine bankers at the October 13 meeting which apportioned government investments to the various "critical" banking institutions. The major disclosure was captured in a memo called CEO Talking Points, which delineates the continuous use of strongarming tactics by not just Paulson, but by Tim Geithner, and Sheila Bair, who were also present at the meetings. According to one of the Talking Points:

“If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance. We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed.”

Opting out would also implicate the banks that didn't opt out as being in worse shape thus exposing them to possible runs (either the kind of "silent run" that hit Continental Illinois in 1984 or something more overt). Put all the banks in the same boat and you make it less likely that money will run from the bailout queens to the ones that opted out. Not exactly the kind of openness and disclosure we were promised.

Meanwhile…

http://finance.yahoo.com/tech-ticker/article/248205/%22That%27s-Not-the-American-Way%22-Chrysler%27s-Bailout-and-the-Road-to-Ruin

Chrysler's plan to close about 25% of its dealers is the natural outcome of a series of very unnatural events surrounding its bankruptcy, says Howard Davidowitz, chairman of Davidowitz & Associates.

Specifically, Davidowitz was speaking about how the Chrysler bankruptcy was "hijacked" by the Federal government, which allegedly threaten creditors "if they didn't go along with the fiasco of turning the company over to the unsecured lenders."

Barack Obama's plan is to "sustain the union" in an effort to secure future votes in five key Midwestern states, Davidowitz says, without hesitation. "We the taxpayers are bailing out the union [and] bailing out Chrysler, which is an inefficient company that shouldn't survive and can't survive in the long run, anyway."

[…]

By propping up inefficient companies and keeping zombie banks alive, Davidowitz says "we are exactly on the same path as Japan," which is now two decades into its economic malaise.

But there's one key difference between the U.S. and Japan: While they had about $16 trillion in savings and a 19% savings rate when their bubble burst in 1989, the U.S. savings rate was negative a year ago, a now a relatively meager 4.2%.

"You know what we need to fix it: pain! We need 12-13% unemployment… Then in two years you can start to recover. We're never going to recover because the debt doesn't go away."

Hussman on the Relaxing Stress Test

2009-05-14T07:37:00.002-05:00

Full article

Last week, financial stocks enjoyed a powerful advance and short squeeze on the announcement of the results of the “stress test” of major banks. It is important to begin by noting that this was not a regulatory procedure with teeth. It was initially a response to Congressional demands to introduce greater objectivity into the use of public capital for these bailouts, and gradually morphed into nothing more than a “confidence building” exercise. And keeping with the emphasis on keeping the numbers happy, as opposed to providing full and fair disclosure, the Wall Street Journal reported on Saturday, “The Federal Reserve significantly scaled back the size of the capital hole facing some of the nation's biggest banks shortly before concluding its stress tests, following two weeks of intense bargaining. In addition, according to bank and government officials, the Fed used a different measurement of bank-capital levels than analysts and investors had been expecting, resulting in much smaller capital deficits.”

To some extent, it is not possible to get full and fair disclosure using the method that regulators used in the first place, since it relied on banks' self-estimates of their potential losses in a further economic downturn. These of course being the same banks that made the bad loans, and have already proved themselves vastly incapable of loss estimation and risk management. Moreover, the Fed only asked for loss estimates for 2009 and 2010, not beyond – “Each participating firm was instructed to project potential losses on its loan, investment, and trading securities portfolios, including off-balance sheet commitments and contingent liabilities and exposures over the two-year horizon beginning with year-end 2008 financial statement data.” This period specifically excludes the window where we can expect the majority of “second wave” mortgage losses to be taken, as it does not capture any losses that will emerge as a result of mortgage resets from mid-2010, through 2011, and into 2012.

The “stress test” procedure also conveniently excludes any potential mark-to-market losses during 2009 and 2010, as banks “were instructed to estimate forward-looking, undiscounted credit losses, that is, losses due to failure to pay obligations (‘cash flow losses') rather than discounts related to mark-to-market values.”
Now, just think of this for a minute. Even if you assume that the “risk-weighted assets” of the banks are about two-thirds of their total assets (as the stress-test does), we're still looking at $7.8 trillion in total assets at risk in these banks, and despite being on the edge of insolvency only weeks ago, we are asked to believe that they will need less than 1% of this amount – $74.6 billion – of additional capital even in a worst case scenario. How do the stress tests arrive at this conclusion? 1) They underestimate potential losses by minimizing the horizon over which the losses would have to occur, excluding potential mark-to-market losses and restricting the loan losses to “cash flow” losses only; 2) They define capital well beyond tangible sources, to include about double what is available as Tier-1 common; 3) They include $362.9 billion in “resources other than capital” – essentially pre-provision net revenue expected to be earned by the banks over the coming two years to absorb potential losses; 4) They report the capital buffer that would be required after massive dilution in the common stock of these banks has already occurred.

As an example, Citigroup comes in with $119 billion in capital ($22 billion as Tier-1 common). Total assets are over $2.1 trillion, but the stress test assumes “risk weighted” assets of less than half that. Citi projects losses in 2009 and 2010 of $104.7 billion in a scenario where the unemployment rate reaches 10.3%. Citi assumes that it will earn $49 billion during that period which would partially absorb those losses, and that it will obtain $87 billion in Tier-1 from other capital sources, presumably including $33 billion of preferred that it would be willing to convert to common. Of course, Citi's entire market cap is only $22 billion, so the “$5.5 billion” that Citi is reported to need under the stress test is what it would require after a 5-to-1 dilution in its common stock (87+22/22). Essentially, we've got a company with a common equity buffer of just over 1% of total assets, that just 8 weeks ago was on the verge of receivership, and investors are urged to believe that there are enough voodoo dolls in the vault to make the company solvent even in a further weakened economy.

Taxpayers Getting Hosed Yet Again

2009-05-12T12:19:00.003-05:00

Fannie and Freddie will be money sink holes in 2010.

The Office of Management and Budget released a report yesterday on the budgets and proposed overhauls of Fannie Mae and Freddie Mac that included the possibility of liquidating their assets. But don't get your hopes up.

The two government run mortgage finance companies have been scandalously costly for tax-payers, costing Americans far more in bailout money than they ever saved in cheaper mortgages. The OMB says that the two companies will need at least $92.2 billion more in fiscal 2010. This is on top of the $78.2 billion in aid they've received since they were taken over by the government in September.

Meanwhile, the auto bailout is $83 billion and counting.

You are a Landfill

2009-04-24T07:17:00.004-05:00

This financial crisis is easy to understand. The irresponsible financial institutions dump their garbage on the Fed, and the Fed in turn dumps it on you.

Bear Stearns, AIG Dumped $74 Billion in Subprime, CDOs on Fed

April 24 (Bloomberg) -- The Federal Reserve took on more than $74 billion in subprime mortgages, depreciating commercial leases and other assets after Bear Stearns Cos. and American International Group Inc. collapsed.

In its biggest disclosure of the securities accepted to stabilize capital markets, the Fed said yesterday it had unrealized losses of $9.6 billion on the assets as of Dec. 31. The bonds, swaps and notes were taken in from Bear Stearns, once the fifth-biggest Wall Street firm by capitalization, and AIG, which had been the world’s largest insurer.

The losses on securities backed by assets such as home loans in Florida and California signal that U.S. taxpayers may be forced to reimburse the central bank through the Troubled Asset Relief Program, according to Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics.

“The numbers basically confirm that Treasury is going to have to take some TARP money and reimburse the Fed,” said Whalen, whose financial-services research company analyzes banks for investors. “It is essentially up to the Treasury to get the Fed out of this.”

The central bank lent $2 trillion to financial institutions and has not disclosed information about most of the collateral backing those loans.

Read the rest

The Treasury Bubble

2009-04-22T12:37:00.003-05:00

Bloomberg reports that a soaring U.S. budget deficit will mean billions in bond sales.

With spending on unemployment insurance and other safety- net programs rising, the deficit is already at a record $956.8 billion six months into the fiscal year. To help close that gap, the Treasury Department has more than quadrupled borrowing, pushing the government deeper into debt.

“Tax receipts are just collapsing,” said Chris Ahrens, head of interest-rate strategy at UBS Securities LLC in Stamford, Connecticut, one of 16 primary dealers required to bid at Treasury auctions. The need to sell more debt “is a big issue in the Treasury market and it is ongoing. The surging budget deficit is the primary cause.”

The government will have to sell $2.4 trillion in new bills, notes and bonds in fiscal 2009, according to UBS. From October through December, the Treasury sold a record $569 billion, up from $82 billion in the same period a year earlier, and auctioned another $493 billion in the last quarter, up from $156 billion. That helps to make up for the drop in tax receipts, pay for the rise in spending and refinance maturing debt. Along with the principal, the sales add additional interest costs to the deficit for years to come.

At some point, the Treasury will find it more and more difficult to find enough buyers for all of its debt. This comes at a time when primary treasury dealers are already holding a record amount of treasuries.

The amount of Treasuries held by primary dealers has reached a record as the Federal Reserve buys U.S. debt to combat the recession and bring down consumer borrowing costs.

The bet on higher prices means that if prices fall, the move to bigger yields will be “violent,” according to UBS Securities LLC. UBS is one of the 16 primary dealers that trade directly with the Fed.

[…]

“If this alteration in dealer positions represents a secular change in balance-sheet risk management” it will be another case of unintended consequences, UBS strategists led by William O’Donnell wrote in a note to clients yesterday. “In striving to drive market rates lower, the Fed may have created the conditions for a more violent rise in yields.”

It won't happen any time soon but eventually the economy will start to turn around. Perhaps before then, the existing supply of treasuries will be massive and growing while T-bond holders are running for the exits. How much will the Fed be willing to buy when it sees interest rates cranking up?

The Great Inflation Debate

2009-04-15T15:44:00.001-05:00

Here is a good offering in defense of the "nasty inflation will come" position. The big counter argument presented by the "deflationists" hasn't changed. They argue that inflation fears are unfounded because we've already had our inflation. We created nasty asset bubbles and now the air is rushing out in all directions. So no matter how much money the Fed creates, it simply can't create nearly enough to fill the monetary black hole that's opening up as the entire economy delevers from absurd heights. And so the debate rages on.

Stress Test as a Relaxation Exercise

2009-04-06T09:08:00.001-05:00

Geithner's stress test for the banks' balance sheets is quickly being revealed as pollyannaish. Calculated Risk wrote off the baseline scenario and the "highly unlikely" adverse scenario looks far too relaxing as well. What will Treasury say as unemployment (the "official" rate that is) closes in on 10% before the year is out?

Public-Private Money Laundering

2009-04-03T12:16:00.003-05:00

Banks Plan To Bid Up Each Other's Toxic Assets With Taxpayer Money

The tragi-comedy continues.

Mark-to-Massaged-Market: Two Cows Version

2009-04-02T12:30:00.003-05:00

Now that mark-to-market rules have been chastened and sent to bed without supper, Clusterstock has produced the two cows version of the new accounting rules.

You borrow $200 to buy two cows. You pay $100 for each cow. You write that down.

Lightning strikes one of your cows, an unlikely event that should only happen once every 10,000 years.

Lightning strikes the other cow.

You notice the cows are on fire.

Your paper still says $100.

Fortunately, mark to market has been suspended so you don't have to pay attention to the fire.

Your cows look dead.

Your paper still says $100.

Fortunately, mark to market has been suspended so you don't have to pay attention to the fact that the cows look dead. They're probably just sleeping.

You notice that you aren't getting as much milk as expected, so you adjust the model and mark the cows down to $98. You are confident, however, that the dislocated stream of milk revenue will quickly revert to expectations once the cows wake up.

You need to borrow some money so you ask investors for a loan against the cows. The investors tell you the cows are dead, and you already owe them $200 dollars you borrowed to buy them in the first place. You show them the paper that says the cows are worth $98 each and say the cows are just sleeping.

They light your paper on fire.

You ask the government to buy the sleeping cows at $98 each.

Tim Geithner tells you about the public-private investment partnership, which will encourage BlackRock and Pimco to buy the dead cows. Pimco puts in $5 and the Treasury puts in $5, and the FDIC lends $60 to a new entity called Pimcows, LLC. They buy the cow for $70. Tim whispers that he expects you'll buy a new cow with the $70.

You have two dead cows, $70 and $200 in debt to your investors. You have no plans to buy new cows.

My Manhattan Project

2009-03-31T12:45:00.002-05:00

How I helped build the bomb that blew up Wall Street

I have been called the devil by strangers and “the Facilitator” by friends. It’s not uncommon for people, when I tell them what I used to do, to ask if I feel guilty. I do, somewhat, and it nags at me. When I put it out of mind, it inevitably resurfaces, like a shipwreck at low tide. It’s been eight years since I compiled a program, but the last one lived on, becoming the industry standard that seeded itself into every investment bank in the world.

I wrote the software that turned mortgages into bonds....

South Park Reveals True Geithner Plan

2009-03-27T08:01:00.002-05:00

Finally, someone takes us behind the veil to reveal Treasury's true methodology for addressing the financial crisis.

From Dealbreaker

Mark-to-Market Again

2009-03-26T07:29:00.004-05:00

We now have yet more evidence that MTM accounting is hardly the problem here. Not only are the big banks not being forced to write their assets down to fire sale prices, they are barely writing them down at all. Zero Hedge refers to a Goldman Sachs report that shows banks carrying most of their assets at 90% of face value or better (oops, that's face value - last 12 months charge-offs - reserves). How long will it be before the market will actually pay that much? The banks may try to hold much of this to maturity and hope defaults going forward are low. In addition, these numbers wouldn't necessarily look crazy if the banks already had huge loss reserves built up but I wouldn't bet good money on that.

Federal Debt Soars Like Icarus

2009-03-23T13:37:00.003-05:00

Frontline will be looking at the federal debt this week. Should be worth watching. Of course, they may be having some trouble keeping up as witnessed by the show's title: Ten Trillion and Counting. In the time it took them to produce the show, the federal debt ripped passed $11T.

Mark-To-Monkey-Business Accounting?

2009-03-21T11:37:00.002-05:00

The subtitle for this post: Is FASB channeling the ghosts of Arthur Andersen? The answer to these questions would be ‘yes’ according to two recent writers.

Recall that in the first installment of the mark-to-market soap opera, we distinguished between assets that required marking (i.e., pricing) to some current and active market, marking to financial models (“mark-to-model”), and marking to management’s rough estimate (“mark-to-myth”).

It now appears that the assault on the old ways may be bearing some rotten fruit.
In the Next Round of Bank-Based Appeasement, a Seeking Alpha writer unloads on three potential accounting changes.

First:

Consider the bill sponsored by Representative Ed Perlmutter of Colorado - the "Federal Accounting Oversight Board Act of 2009." It fairly bristles with the kind of rewards the banking industry would love: better than bonuses, it could give them the kind of regulation they want. The bill would transfer the SEC's oversight of the FASB to the new "Federal Accounting Oversight Board." Look at its mission - it's a banker's dream come true:

(1) APPROVAL OF ACCOUNTING POLICY- The FAOB shall approve and oversee accounting principles and standards… the FAOB shall consider--

(A) the extent to which accounting principles and standards create systemic risk exposure for--

(i) the United States public;
(ii) the United States financial markets; and
(iii) global financial markets;

[…]

(C) whether certain accounting principles and standards should apply to distressed markets differently than well-functioning markets;

(D) the balance between investors' need to know a value of a company or financial institution's balance sheet at any given time versus financial regulators' responsibility to examine a company or financial institution's capital and value on both a liquidation and going concern basis;

[…]

(G) the need for accounting principles and standards to take into account the need for financial institutions to maintain adequate reserves to cover expected losses from assets held by such institution

[…]

It's downright Orwellian: to protect the public, this "oversight body" would blind them from the mistakes made by financial institutions by making accounting less transparent. The body has right to determine "the balance between investors' need to know a value of a company's balance sheet ... versus regulators responsibility to examine capital?" Doesn't that mean that the actual owners of an institution take a back seat to the regulators' decision to keep them in the dark about its true condition?

Truly incredible stuff. This bill wouldn't just turn the asylum over to the inmates; it would arm them with pistols and napalm, too.

Something does smell a little off in the state of Denmark. Could this be an accounting murder most foul? Point 1A is curious with its emphasis on ‘create.’ It seems to me that the real focus here should be the extent to which accounting principles and standards expose the foolish systemic risk taken on by financial institutions and subsequently dumped onto the public. Create or expose? I guess it depends on whose ox is being gored. Point 1G seems postmodern enough. Financial institutions get levered up to Pluto so that a small drop in (illiquid) asset values wipes out reserves. Do we fix this problem by requiring more reserves? Pish posh! We just need make sure accounting principles and standards “take into account” this massive leverage. What solvency issue?

Second:

On Tuesday the FASB released two exposure drafts that tinker with the edges of fair value reporting.

[…]

First up: FSP FAS 157-e, "Determining Whether a Market Is Not Active and a Transaction Is Not Distressed," which is intended to help preparers and auditors determine when a financial asset's trading price is affected by illiquid markets or a distressed transaction. It provides a list of indicators of illiquid markets; upon reviewing, if the preparer judges the securities in question to be trading in an illiquid market, it must take a second step.

That second step is a presumption that the price is associated with a distressed transaction; it's a presumption that can only be overcome by evidence that sufficient, usual and normal marketing activities occurred for the asset before measurement date, and that multiple bidders existed for the asset. If those conditions aren't met, then the asset must be valued using a valuation technique other than one that uses the quoted price without significant adjustment.

Bottom line, this will grease the skids for the expansion of "Level 3" valuations.

Mark-to-market, mark-to-model, or mark-to-monkey-business? Po-tay-toe, po-tah-toe.

Third:

Next: FSP FAS 115-a, FAS 124-a, and EITF 99-20-b, "Recognition and Presentation of Other-Than-Temporary Impairments." This tweak will create a broad class of new long-term corporate investors in both debt and equity securities. Why? Because a firm will not recognize an other-than-temporary [OTT] impairment charge through earnings if it does not intend to sell an impaired security, and it is more likely than not that the firm will not have to sell it before the recovery of its cost basis. Therefore, we will likely witness an outbreak of "patient capital."

[…]

Net result: if OTT impairments ever do occur, the hit to earnings will be less than they are now, all else equal. Accumulated other comprehensive income will take a blow for the non-credit loss charges - but financial institutions won't mind because it won't affect regulatory capital. Charges through the income statement definitely affect regulatory capital, and they'll decrease. And earnings will be so smooth, they'll make a baby's bottom look like 20 grit sandpaper.

In more accessible language, here’s what a Bloomberg commentator has to say on this one in his colorfully titled Accounting Brothel Opens Doors for Banker Fiesta.

This week, the Financial Accounting Standards Board unveiled what may be the dumbest, most bankrupt proposal in its 36-year history….
Here’s what the board is floating. Starting this quarter, U.S. companies would be allowed to report net-income figures that ignore severe, long-term price declines in securities they own. Not just debt securities, mind you, but even common stocks and other equities, too.

All a company would need to do is say it doesn’t intend to sell them and that it probably won’t have to. In most cases, it wouldn’t matter how much the value was down, or for how long. In effect, a company would have to admit being on its deathbed before the rules would force it to take hits to earnings.

[…]

A FASB spokeswoman, Chandy Smith, confirmed my understanding of how the rule change would work.

[…]

Under the current rules, securities get differing accounting treatments depending on how they are classified on the balance sheet. When labeled as trading securities, they must be assigned marked-to-market values each quarter, with all changes flowing through to net income. Otherwise, changes in value don’t hit the income statement, unless the securities have suffered what the accountants call an “other-than-temporary impairment.”

While the term may be cumbersome, the idea is that companies need to show losses in net income once they no longer can pretend that an asset’s plunge in value is only fleeting…..

The board’s proposal tosses the old principle aside. Even if a loss is deemed not temporary, companies still would be allowed to keep it out of net income. There’s one exception: If a company holding debt securities concludes some of the decline is due to credit losses, that portion would need to be included on the income statement. Otherwise, the losses stay off.

You just know how this will turn out: Debt holders will say their losses almost always are due to something other than credit losses, such as liquidity risk, because it’s impossible to prove their judgments wrong. So the dents to net income will be minimal. That’s exactly what the FASB is trying to accomplish.

The saga continues…

How Bad Will It Get?

2009-03-20T11:13:00.002-05:00

To help shed some light on this question, Carmen Reinhart and Ken Rogoff (former chief economist at the IMF) produced a short but useful paper a few months ago: The Aftermath of Financial Crises.

The authors looked at major financial crises (as opposed to looking at "garden variety" recessions) from the past in terms of five key macroeconomic indicators: real home prices, real equity prices, unemployment, real GDP, and real government debt.

Reinhart and Rogoff (2008a) included all the major postwar banking crises in the developed world (a total of 18) and put particular emphasis on the ones dubbed “the big five” (Spain 1977, Norway 1987, Finland, 1991, Sweden, 1991, and Japan, 1992). It is now beyond contention that the present U.S. financial crisis is severe by any metric. As a result, we now focus only on systemic financial crises, including the “big five” developed economy crises plus a number of famous emerging market episodes: the 1997–1998 Asian crisis (Hong Kong, Indonesia, Malaysia, the Philippines, and Thailand); Colombia, 1998; and Argentina 2001. These are cases where we have all or most of the relevant data that allows for thorough comparisons. Central to the analysis is historical housing price data, which can be difficult to obtain and are critical for assessing the present episode. We also include two earlier historical cases for which we have housing prices, Norway in 1899 and the United States in 1929.

The results from the paper, along with the current US numbers, are as follows.

The average peak-to-trough decline in real home prices for these financial crises is 35.5% with an average duration of about 6 years. The US Case-Shiller composite 10 index is currently down 28.3% from its peak in June 06 and the composite 20 index is currently down 27.0%. Given what we know about what's still out there and given where we are now, it looks like we'll exceed the average decline.

The average historical decline in equity prices is 55.9%. The average decline lasts 3.4 years. The S&P 500 recently fell to a low that was 57% below its Oct. 2007 high. It is currently about 50% down after the last week's bear market rally. S&P is currently estimating 2008 operating earnings to be $50/share. I've seen a number of level-headed analysts predict $40/share for 2009. Assuming a generous (for a crisis) P/E of 15, this puts the S&P 500 at 600 (the low so far has been 676). A more plausible P/E of 12 puts the S&P at 480. An S&P of 600 puts the Dow somewhere in the neighborhood of 5,800 while an S&P of 480 could put the Dow around 4,600. Pretty scary numbers and well below the historical average calculated by Reinhart and Rogoff.

The third indicator looked at by the authors is the unemployment rate. Granted, the current official methodology for calculating unemployment is lousy and the official number significantly understates the real problem. But the authors used official numbers so we'll go with that. The average total increase in the unemployment rate is 7 percentage points over a period of 5 years. Currently, the US rate has risen from 4.1% to 8.1% –- a four percentage point increase. It looks like we're headed for an official number that could top 11 percent.

Next up is real GDP. On average, this indicator fell a whopping 9.3% over an average timeframe of two years. The US real GDP has just begun to fall (it peaked in Q2 2008 and it's only fallen about 1%) so there's not much of a comparison here yet. But a 9% drop in GDP would make the current situation look like a cake walk.

Finally, we come to real government debt. On average, this value rose 86%. The authors say this about debt:

Reinhart and Rogoff (2008b), taking advantage of newly unearthed historical data on domestic debt, show that this same buildup in government debt has been a defining characteristic of the aftermath of banking crises for over a century…. As Reinhart and Rogoff (2008b) note, the characteristic huge buildups in government debt are driven mainly by sharp falloffs in tax revenue and, in many cases, big surges in government spending to fight the recession. The much ballyhooed bank bailout costs are, in several cases, only a relatively minor contributor to post–financial crisis debt burdens.

If we start with the federal debt at the end of FY2008 -- $10.0T -- then this indicator is the most disturbing of all. An 86% increase in the federal debt is a scary number and when (not if) interest rates push back up near 10%, rolling that mountain of debt over into pricier notes will send the federal interest payment well north of $1T per year. Combine that with the rising cost of social services such as Medicare and Social Security and this looks like a thundering freight train with very wobbly axles. Obama's budget forecasts -1.2% GDP growth this year followed by 3.2% in 2010, 4% in 2011, and 4.6% in 2012. These numbers are beyond laughable. Part of the problem is the administration's crazy unemployment estimate which it puts at 8.1% for the whole of 2009. But it already hit 8.1% in February and it's rising quickly.

By contrast, the consensus of forecasters surveyed by Blue Chip Economic Indicators in February predicted that the GDP will fall by a larger 1.9 percent this year and then increase at weaker rates of 2.1 percent in 2010, 2.9 percent in 2011 and 2012 and 2.8 percent in 2013.

[…]

For 2010, when the administration is forecasting the deficit will decline to $1.17 trillion, the administration is forecasting that the rebounding economy will boost revenues by 8.9 percent. Based on the stronger growth, the administration is forecasting steadily declining deficits in coming years with the deficit dropping to $912 billion in 2011, $581 billion in 2012 and $533 billion in 2013.

These GDP numbers still look quite optimistic to me (economists have consistently underestimated the extent of this crisis and even pessimists and bears have had to revise down their early estimates). These deficit numbers are fantasy. In reality, federal tax receipts will tank while federal spending explodes. How bad will it get? We are not a responsible nation and we are in the midst of a self-imposed world of hurt. The non-doctored math looks ugly.

(end of post; ignore continue reading statement below)

Double (Non-)Indemnity

2009-03-14T10:17:00.004-05:00

No, I'm not talking about Billy Wilder's excellent film noir adaptation of the James Cain novel. I'm talking about the non-insurance provided by AIG and the FDIC. In each case, the real insurer is the taxpayer.

Actually, the vast majority of AIG was a well-run company. We're really talking about the small, London-based AIG Financial Products division. This is the group that trashed the company by writing a mountain of CDS contracts with zero capital backing them up. At any rate, Gretchen Morgenson explains that AIG is now the place where taxpayers' dollars go to die.

Meanwhile, Michael Kranish informs us that thanks to Congress, the FDIC didn't collect insurance premiums from banks for years.

The federal agency that insures bank deposits, which is asking for emergency powers to borrow up to $500 billion to take over failed banks, is facing a potential major shortfall in part because it collected no insurance premiums from most banks from 1996 to 2006.

The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized - and that bank failures were so infrequent - that there was no need to collect the premiums for a decade, according to banking officials and analysts.

[…]

But if the FDIC suddenly had to take over a giant bank such as Citigroup or Bank of America, the fund would be drained "in a flash," said Cornelius Hurley, director of the Boston University law school's Morin Center for Banking and Financial Law.

[…]

Bair said yesterday that the agency's failure to collect premiums from most banks "was surprising to me and of concern." As a Treasury Department official in 2001, she said, she testified on Capitol Hill about the need to impose the fees, but nothing happened. Congress did not grant the authority for the fees until 2006, just weeks before Bair took over the FDIC. She then used that authority to impose the fees over the objections of some within the banking industry.

"That is five years of very healthy good times in banking that could have been used to build up the reserve," Bair, a former professor at the University of Massachusetts at Amherst, said in an interview. "That is how we find ourselves where we are today. An important lesson going forward is we need to be building up these funds in good times so you can draw down upon them in bad times."

[…]

Then, a booming economy left banks flush with cash, and by 1996 the insurance fund was considered so large that it could grow through interest payments and fees charged only to banks with high credit risk. Congress agreed that premiums didn't need to be collected if the fund was sustained at a level that was considered safe. Thus, about 95 percent of banks paid no premiums from 1996 to 2006, including some new ones that did not have to pay a premium, the FDIC said.

Congress mandates that the insurance fund must stay between 1.15 percent and 1.5 percent of all insured deposits. The reserve ratio on Dec. 31 was 0.40 percent, down from 1.22 percent at the end of 2007.

And so of course the taxpayers get to pay even more than they would have paid if the premiums would have been collected. I don't like the concept and existence of the FDIC even if it's done well. But a 1.5% capital ceiling? The only insurance outfit with a smaller capital reserve may well have been AIG Financial Products.

Remember why the FDIC was set up (at least purportedly). It was put in place after the 4,000 or so bank failures (along with bank runs) of the 1930s and it was meant to protect against a similar disaster in the future. The FDIC's mission is not to close a few banks here and there in a normal year. That's chump change that could be addressed in any number of ways. Rather, it is supposed to provide catastrophe insurance against a second Great Depression-like banking fiasco and stop massive bank runs. In that sense, it is much like AIG's CDS contracts which only insured the assets in question in the event of default. "No need for all of you people to make a run on your banks; you are insured by the FDIC. You can all sleep well knowing that your deposits are safe and secure."

But 1.5% is a joke. It is miles away from protecting against the kind of systemic collapse of the 1930s which means that the insurance it provides, much like AIG's CDS contracts, is a mirage. The real raison d'être of FDIC insurance is to give depositors the illusion of safety in order to keep them docile and convince them that a stampede is not necessary. FDIC insurance is herd control provided by one man with a dime store slingshot. If the herd ever figures out that he can't protect them from anything more savage than a single, toothless wolf with one bad leg, they'll flatten him. The FDIC would be crushed by even a smallish bank run (e.g., a run on 3% of deposited assets). But of course, the FDIC will run to the treasury as it is doing now. So in reality, it is once again the taxpayers who are the real insurers (this time insuring themselves). AIG and the FDIC are two peas in a pod. Both have written massive checks that only the taxpayers' bodies can cash.

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The Mark-to-Market Debate

2009-03-13T11:24:00.005-05:00

Early this week, someone asked me about the mark-to-market (MTM) debate. Was there some validity to the idea that a significant part of the financial crisis is being caused by the MTM requirement. I said that I didn't think so and thought about writing something up. I'm glad I didn't because David Reilly at Bloomberg has now made the case against MTM reform for me.

First some background. The banks assets are categorized into 3 classes: Level 1, Level 2, and Level 3 assets. Level 1 assets are fully liquid and are actively traded in a market. Thus, they have well-known prices associated with them. These are MTM assets. Level 2 assets are also known as "mark-to-model" assets. They are illiquid and don't have active markets associated with them. From Minyanville, they "have quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model derived valuations in which all significant inputs and significant value drivers [are - D.O.] in active markets." Level 3 assets have been called "mark-to-myth" or "mark-to-make-believe" assets. They are very illiquid and their prices can't even be estimated by decent models because inputs to the models would be unknowable and/or inadequate. They have no or few "observable inputs" and are therefore priced by the management's "best guess."

Markets for liquid assets tend to be rather volatile and right now, they have beaten rather low. The complaint against MTM is that many of these assets are worth more than the beaten down markets are claiming. After all, we know that in a recession (especially a significant one), equity markets for example tend to over-correct on the down side. So it would be unfair to force these banks to mark these "troubled assets" to market prices when we know that as the economy recovers (actually before), these markets with bounce back up.

But Reilly shoots big holes in the movement to "reform" MTM requirements.

Of the $8.46 trillion in assets held by the 12 largest banks in the KBW Bank Index, only 29 percent is marked to market prices, according to my analysis of company data. General Electric Co., meanwhile, said last week that just 2 percent of assets were marked to market at its General Electric Capital Corp. subsidiary, which is similar in size to the sixth-biggest U.S. bank.

What are all those other assets that aren’t marked to market prices? Mostly loans -- to homeowners, businesses and consumers.

Loans are held at their original cost, minus a reserve that banks create for potential future losses. Their value doesn’t fall in lockstep with drops in market prices.

Yet these loans still produce losses, thanks to the housing meltdown and recession. In fact, bank losses on unmarked loans are typically bigger than mark-to-market losses on securities like bonds backed by mortgages.

For most big bank assets, MTM simply isn't relevant because the assets are either mark-to-model or mark-to-myth. At this point, one might call them mark-to-broken-model. Nevertheless, they aren't Level 1 assets. Further, there is the transparency problem.

These investors already believe banks are underestimating just how bad losses will be on their unmarked loans. GE investors, for example, fled the stock due to concerns over its corporate loans and lending to Eastern Europe.

If investors could get a better sense of the losses actually facing GE, they might have more confidence in its financial strength. In other words, we need more mark-to-market accounting, not less.

On top of this, there is the banks' problematic business model of borrowing short and lending long.

This makes banks very different than, say, a homeowner who borrows a lot of money. In most cases, the homeowner has locked in funding. So long as the homeowner makes payments and doesn’t need to refinance, market prices aren’t that important.

Banks must tap debt markets for new money all the time. Investors buying that debt want to know how much the bank’s assets are worth. That tells them how much of an equity cushion the bank has to absorb losses.

For those investors, the current value of an asset, not what management thinks it will be worth, is vital. After all, their biggest concern is getting paid back in the event of default.

If they can’t gauge that likelihood, they stop lending. Banks then can’t finance themselves.

So why all the fuss over MTM.

So why is mark-to-market such an issue? It is being used as a scapegoat by banks and others to dodge two big issues -- their reckless use of borrowed money to boost returns and their inability to make sound loans and investments.

I would add one more point. The idea that we can fix a significant part of the crisis by fiddling with accounting regulations presupposes that this is a "liquidity crisis" and not a solvency issue. But this is what banks always assume when the levered scat hits the fan. "We're fine. Our business model is fine. All we need is a little more short-term cash to get us through the next few months." But this mess is hardly a short-term shortage of liquidity. It isn't even a garden variety recession. These assets are the product of a gigantic, unsustainable, cheap credit, debt-fueled bubble. Trying to re-blow the bubble is a terrible idea but it doesn't matter because it's not going to happen. And for assets like houses, they are still somewhat overpriced when compared to historical data (even after the big hit they've already taken).

Housing prices are not going to bounce back any time soon and may not stop falling for quite a while. These assets are not getting a big haircut from the market because the market is over-correcting. They are getting hammered because they have been massively overvalued. CDOs based on credit card, auto loan, and other non-mortgage debt were also unsustainable. Thus, these assets are not going to return to normal after bouncing off of an artificial market floor. Instead, the market is currently trying to push them back down to normal after bouncing off of an artificial and unsustainable ceiling. The banks are not in a liquidity crisis, they are in a solvency crisis.

The mark-to-market debate is a red herring. The big banks are levered up to Pluto with now-crappy assets bought using borrowed money during a period of massive debt bubble expansion (i.e., a Ponzi economy). And as sure as the purge must follow the gluttonous binge, the bubble is now in full deflationary mode. The big banks ate too much. Way too much. That yakking sound you hear is not an accounting fiction. It is quite real as is the smell of regurgitated CDOs.

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The Failure of Economic Models

2009-03-12T07:44:00.009-05:00

The Financial Crisis and the Systemic Failure of Academic Economics is an interesting exercise in self-flagellation by a far-flung group of academic economists. In this paper, the authors lament the poor state of mathematical modeling in the fields of economics and finance. While they don’t seem to consider or acknowledge that such models may never be adequate for many of their purported tasks, they nevertheless make a number of good critiques of the modeling world in economics. This is an academic paper so it’s filled with jargon and references to models that no one but other academics have heard of. But there are plenty of good points worth highlighting.

In fact, if one browses through the academic macroeconomics and finance literature, “systemic crisis” appears like an otherworldly event that is absent from economic models. Most models, by design, offer no immediate handle on how to think about or deal with this recurring phenomenon. In our hour of greatest need, societies around the world are left to grope in the dark without a theory. That, to us, is a systemic failure of the economics profession.

[…]

Much of the motivation for economics as an academic discipline stems from the desire to explain phenomena like unemployment, boom and bust cycles, and financial crises, but the dominant theoretical model excludes many of the aspects of the economy that will likely lead to a crisis. Confining theoretical models to ‘normal’ times without consideration of such defects might seem contradictory to the focus that the average taxpayer would expect of the scientists on his payroll.

It’s very difficult to model black swan events so the models usually leave out such events and assume that life is always ‘normal’ (in both the casual and statistical uses of the term). And yet, such events aren’t all that rare so there are numerous ways in which the models can and do break down.

Many of the financial economists who developed the theoretical models upon which the modern financial structure is built were well aware of the strong and highly unrealistic restrictions imposed on their models to assure stability. Yet, financial economists gave little warning to the public about the fragility of their models; even as they saw individuals and businesses build a financial system based on their work. There are a number of possible explanations for this failure to warn the public. One is a “lack of understanding” explanation--the researchers did not know the models were fragile. We find this explanation highly unlikely; financial engineers are extremely bright, and it is almost inconceivable that such bright individuals did not understand the limitations of the models. A second, more likely explanation, is that they did not consider it their job to warn the public. If that is the cause of their failure, we believe that it involves a misunderstanding of the role of the economist, and involves an ethical breakdown. In our view, economists, as with all scientists, have an ethical responsibility to communicate the limitations of their models and the potential misuses of their research. Currently, there is no ethical code for professional economic scientists. There should be one.

Here is a point that applies throughout economics. It is often thought that the field itself is and ought to be amoral. Like Dr. Mengele, human social interaction is reduced to an object of study and experimentation. Moral requirements and proscriptions are rarely seen as relevant.

For structured products for credit risk, the basic paradigm of derivative pricing – perfect replication – is not applicable so that one has to rely on a kind of rough-and-ready evaluation of these contracts on the base of historical data. Unfortunately, historical data were hardly available in most cases which meant that one had to rely on simulations with relatively arbitrary assumptions on correlations between risks and default probabilities. This makes the theoretical foundations of all these products highly questionable – the equivalent to building a building of cement of which you weren’t sure of the components. The dramatic recent rise of the markets for structured products (most prominently collateralized debt obligations and credit default swaps - CDOs and CDSs) was made possible by development of such simulation-based pricing tools and the adoption of an industry-standard for these under the lead of rating agencies. Barry Eichengreen (2008) rightly points out that the “development of mathematical methods designed to quantify and hedge risk encouraged commercial banks, investment banks and hedge funds to use more leverage” as if the very use of the mathematical methods diminished the underlying risk. He also notes that the models were estimated on data from periods of low volatility and thus could not deal with the arrival of major changes. Worse, it is our contention that such major changes are endemic to the economy and cannot be simply ignored.

This is consistent with the formula that was used to rate the risk of MBS tranches. The data behind the model were very thin, of dubious relevance, and came from a few years when houses were shooting up in value. Thus, the use of the model to justify pouring billions of dollars into illiquid securities was bound to end badly.

There are some additional aspects as well: asset-pricing and risk management tools are developed from an individualistic perspective, taking as given (ceteris paribus) the behavior of all other market participants. However, popular models might be used by a large number or even the majority of market participants. Similarly, a market participant (e.g., the notorious Long-Term Capital Management) might become so dominant in certain markets that the ceteris paribus assumption becomes unrealistic. The simultaneous pursuit of identical micro strategies leads to synchronous behavior and mechanic contagion. This simultaneous application might generate an unexpected macro outcome that actually jeopardizes the success of the underlying micro strategies. A perfect illustration is the U.S. stock market crash of October 1987. Triggered by a small decrease of prices, automated hedging strategies produced an avalanche of sell orders that out of the blue led to a fall in U.S. stock indices of about 20 percent within one day. With the massive sales to rebalance their portfolios (along the lines of Black and Scholes), the relevant actors could not realize their attempted incremental adjustments, but rather suffered major losses from the ensuing large macro effect.

Not only did Long-Term get so big that its models’ relevance bent under the hedge fund’s weight, it also suffered from “synchronous behavior” that neither the models nor Long-Term’s partners accounted for. Most of the big banks and numerous hedge funds were making many of the same trades as Long-Term (e.g., bond arbitrage, interest rate swaps, Russian bonds, equity vol.). The partners thought that there would be others who would pick up those trades if and when they had to bail but in fact, the opposite occurred. When the other big rats started to jump from the sinking ship, the weight transfer only made the ship sink faster. The partners could only watch helplessly as their illiquid assets plunged in value and the hedge fund quickly burned through its puny capital.

This leads to a related and well known example of synchronous behavior that the models don’t account for: the near truism that in a financial crisis, “all correlations go to one.” In such a situation, portfolio diversification is nearly impossible because even completely unrelated assets fall in lock step with each other. This is because they aren’t completely unrelated. Even though the assets themselves may be unrelated, they are owned by the same parties – hedge funds for example. And when such parties are forced to sell (due to margin calls for example), they can’t be too picky about what they sell. In such cases (which are quite common in crises), unrelated assets get nuked in parallel as the various parties try to raise capital by selling whatever will move. All correlations go to one and the models’ accuracies go to pot.

A somewhat different aspect is the danger of a control illusion: The mathematical rigor and numerical precision of risk management and asset pricing tools has a tendency to conceal the weaknesses of models and assumptions to those who have not developed them and do not know the potential weakness of the assumptions and it is indeed this that Eichengreen emphasizes. Naturally, models are only approximations to the real world dynamics and partially built upon quite heroic assumptions (most notoriously: Normality of asset price changes which can be rejected at a confidence level of 99. 9999…. Anyone who has attended a course in first-year statistics can do this within minutes). Of course, considerable progress has been made by moving to more refined models with, e.g., ‘fat-tailed’ Levy processes as their driving factors. However, while such models better capture the intrinsic volatility of markets, their improved performance, taken at face value, might again contribute to enhancing the control illusion of the naïve user.

The assumption that asset prices are normally distributed was also a major problem with Long-Term’s models even though the error of this assumption was known at the time. Life is full of “fat tails.” In other words, the supposed “once-in-a-thousand-years perfect storm” seems to show up, in one form or another, about every decade or so.

Many economic models are built upon the twin assumptions of ‘rational expectations’ and a representative agent. ‘Rational expectations’ forces individuals’ expectations into harmony with the structure of the economist’s own model. This concept can be thought of as merely a way to close a model. A behavioral interpretation of rational expectations would imply that individuals and the economist have a complete understanding of the economic mechanisms governing the world…. Leaving no place for imperfect knowledge and adaptive adjustments, rational expectations models are typically found to have dynamics that are not smooth enough to fit economic data well.

Technically, rational expectations models are often framed as dynamic programming problems in macroeconomics. But, dynamic programming models have serious limitations. Specifically, to make them analytically tractable, researchers assume representative agents and rational expectations, which assume away any heterogeneity among economic actors. Such models presume that there is a single model of the economy, which is odd given that even economists are divided in their views about the correct model of the economy….

The major problem is that despite its many refinements, this is not at all an approach based on, and confirmed by, empirical research.5 In fact, it stands in stark contrast to a broad set of regularities in human behavior discovered both in psychology and what is called behavioral and experimental economics. The corner stones of many models in finance and macroeconomics are rather maintained despite all the contradictory evidence discovered in empirical research. Much of this literature shows that human subjects act in a way that bears no resemblance to the rational expectations paradigm and also have problems discovering ‘rational expectations equilibria’ in repeated experimental settings. Rather, agents display various forms of ‘bounded rationality’ using heuristic decision rules and displaying inertia in their reaction to new information. They have also been shown in financial markets to be strongly influenced by emotional and hormonal reactions (see Lo et al., 2005, and Coates and Herbert, 2008) Economic modeling has to take such findings seriously.

Mathematical models of human action which contain dehumanizing assumptions that fly in the face of real world experience? Who’d of thunk it. But the illusion of control has a nasty bite to it.

Going Long on Torches & Pitchforks

2009-03-11T08:15:00.002-05:00

Barry Ritholtz takes a bite out of faux capitalists who love "free" markets when their levered profits are huge but run to the taxpayer when the house of cards tumbles.

The fear of 'nationalization' (which can mean about 10 different things) is both too late and a non sequitur. Not only are the big banks currently being nationalized in fits and starts, we already nationalized their potential losses (which are now be realized) years ago when we allowed them to gamble with more credit-money than the entire financial system could support.

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Bailing Out the FDIC

2009-03-06T12:14:00.004-06:00

Last September, Bloomberg reported that the FDIC's puny, underfunded [my assessment] insurance fund would probably need a big cash injection courtesy of taxpayers. Too many banks would fail for the FDIC to keep up. But the FDIC immediately shot back:

Bloomberg reporter David Evans' piece ("FDIC May Need $150 Billion Bailout as Local Bank Failures Mount," Sept. 25) does a serious disservice to your organization and your readers by painting a skewed picture of the FDIC insurance fund. Let me be clear: The insurance fund is in a strong financial position to weather a significant upsurge in bank failures. The FDIC has all the tools and resources necessary to meet our commitment to insured depositors, which we view as sacred. I do not foresee – as Mr. Evans suggests – that taxpayers may have to foot the bill for a "bailout."

Strong financial position. Ahem.

Last week, the FDIC proposed raising its insurance assessment fee for all insured banks in order to raise dough for the fund. This would of course transfer money from the competent banks to the incompetent banks (or technically, to their depositors and debt holders).

The Independent Community Bankers of America put out a statement Friday saying that its members are disappointed with the decision, and arguing that community banks and regional banks didn’t participate in the high-risk practices of Wall Street, yet they and their customers are being asked to “pay for the sins of Wall Street,” said Camden Fine, president and chief executive officer of the Independent Community Bankers of America, in a prepared statement.

“How ironic that on the same day that Citi is getting its third bailout from the government in six months, community banks are being kicked in the teeth by sharply higher FDIC assessments. The largest financial institutions are the ones that destabilized our economy,” Fine said.

Two days ago, we learned that the FDIC can't keep up with the supply of dying banks and that Sheila "Bair Says Insurance Fund Could Be Insolvent This Year."

And now we find that at the urging of the FDIC and others, Senator Dodd is looking to supply the FDIC with a "loan" courtesy of the taxpayers for up to $500 billion.

Senate Banking Committee Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department.

The Connecticut Democrat's effort -- which comes in response to urging from FDIC Chairman Sheila Bair, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner -- would give the FDIC access to more money to rebuild its fund that insures consumers' deposits, which have been hard hit by a string of bank failures.

Last week, the FDIC proposed raising fees on banks in order to build up its deposit insurance fund, which had just $19 billion at the end of 2008. That idea provoked protests from banks, which said such a burden would worsen their already shaken condition. The Dodd bill, if it becomes law, would represent an alternative source of funding.

Mr. Dodd's bill could also give the FDIC more firepower to help address "systemic risks" in the economy, potentially creating another source of bailout funds in addition to the $700 billion already appropriated by Congress.

[…]

In an interview, she stressed that all insured deposits were already backed by the "full faith and credit of the United States government."

The full credit of the United States ~~government~~ taxpayer. But its only a loan you understand. We'll get all of it back with interest. Sure, the S&L bailout ended up costing the taxpayers $125B. But that was a weird, 6 sigma aberration. Our current situation is nowhere near as dire. Besides, the FDIC is in a strong financial position.

And the bailout (gravy) train rolls on…

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The Public Pension Bomb

2009-03-05T12:08:00.004-06:00

Hidden Pension Fiasco May Foment Another $1 Trillion Bailout

Taxpayers, get ready to pony up some more loot for public (black hole) coffers.

"The misleading numbers posted by retirement fund administrators help mask this reality: Public pensions in the U.S. had total liabilities of $2.9 trillion as of Dec. 16, according to the Center for Retirement Research at Boston College. Their total assets are about 30 percent less than that, at $2 trillion."

[...]

"'There are accounting gimmicks in pension land which create economic fictions and which disguise the severity of the real problem,' Kramer says. 'Unfortunately, pension board members don’t have much of an appetite for disclosing inconvenient truths.'"

[...]

"'It’s pitiful, isn’t it?' says Frederick "Shad" Rowe, a member of the Texas Pension Review Board, which monitors state and local government pension funds. 'My experience has been that pension funds misfire from every direction. They overstate expected returns and understate future costs. The combination is debilitating over time.'"

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The Formula That Killed Wall Street

2009-02-24T12:21:00.002-06:00

This is very good look at a central aspect of the MBS (mortgage backed securities) ratings alchemy. How do you turn subprime slope into AAA gems. Look inside the black box with this article.

A "quant" came up with a mathematical model that supposedly drastically reduced or even eliminated risk (at least that is how it was interpreted by the bankers). Banks used the model to lever up to the moon. The whole thing fell apart in less than 10 years and the model's deficiencies were dramatically exposed. Where have we heard this story before? Several generations ago… far enough back that no one remembers it? Of course not. It was only last decade when the quants at Long Term Capital Management started the hedge fund based on their own risk-crushing model of bond arbitrage. And they levered up. And in less than 5 years, the hedge fund imploded right down on top of the model, the fund's partners, and its investors. Déjà vu all over again.

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Our Ponzi Banking System

2009-02-19T12:36:00.005-06:00

“Give me a lever big enough and a place to stand on and I will destroy the world.”

Oh, wait. That’s not exactly what Archimedes said. Of course, Archimedes never dreamed of the kind of ~~ingenuity~~ alchemy that would be practiced by our modern financial “wizards.” All they needed was a minuscule amount of capital and a lever arm so long it bent under its own weight.

I found a good intro. to bank leverage at Option ARMageddon. The first installment provides 2008 Q3 bank leverage calculations along with a discussion of how dangerous such leverage is. There are a couple of shorter follow-up posts here and here. The leverage calculations were recently updated for Q4 here. As the posts point out, these leverage numbers are likely to be conservative because they don’t account for “other assets” or off-balance sheet assets (e.g., special investment vehicles). Yet the numbers are still scary large.

In the “good” times, a bank with a 30x lever would make a 150% return on equity when its assets appreciated by just 5%. But now that the bill for this unsustainable leveraged credit bubble has come due, this same bank would be insolvent if its assets dropped by just 5%. And the collateral that is behind much of these assets has obviously fallen by far more than 5%. As these losses become actualized by the foreclosing housing market and a tanking economy, the pressure will mount on the bank to mark these assets to market (i.e., what the market is willing to pay for them today) instead of marking them to model (i.e., what the bank’s management optimistically thinks the assets would be worth in a stable and only slightly depressed market) thus exposing the bankruptcy of the bank’s business model. Since a 30x bank can only absorb a small portion of the losses, the rest of the losses must go elsewhere. And since the other big banks are also levered up with these tanking assets, they can’t deal with their own slop much less take on more slop.

This means that you (the taxpayers) get to bail out the guys who were getting crazy rich from the lever arm in the up years. You never saw any of these bonuses, of course, but you will certainly see the losses. They received the 30x profits but you’ll get much of the 30x losses. Our government will ensure this in order to avoid the cascading cross defaults that would result if these banks were to begin falling. When Lehman went down, the financial markets nearly ground to a catastrophic halt as Lehman’s levered losses threatened to bring down its numerous counterparties and credit default swaps (insurance contracts taken out on financial instruments such as bonds that pay out if and only if the instrument defaults) on Lehman’s debt were triggered that crushed AIG (which was also heavily leveraged with very little capital and huge credit default swap obligations). The government and the Fed had no choice but to jump in and stop this massive domino pattern from erupting (whether or not their actions were the best of the available options is another matter).

But as the latest numbers show, the banking system is still highly leveraged. The more the economy falls, the crappier these bank assets will become. It hardly looks like we’ve found the bottom yet. The scary scenario is this: the leveraged debt bubble is so big that even if the Fed prints money with both hands flailing, it still wouldn’t be enough to fill the credit black hole as it implodes. I don’t know how likely this is but the banks’ balance (and off-balance) sheets don’t inspire confidence.

Obviously there is nothing “free market” about a system predicated upon dumping huge economic externalities onto the rest of the economy and especially onto taxpayers (i.e., the banking version of an industry-wide pollution racket designed to lower the costs of production). The gains were all privatized while most of the risks and costs were socialized. Even apart from our fiat currency or the usual Fed manipulation of money and credit, the free market was dead in the banking sector years before the first bailout.

Bernie Madoff was a lightweight. Unlike our ponzi banking system, his puny $50B scheme was never a threat to bring down the entire world financial market.

Europe's Monetary Stalingrad

2009-02-16T12:35:00.002-06:00

Germany's economy is tanking while the German government is having trouble raising funds.

Meanwhile, Ambrose Evans-Pritchard is not in an optimistic mood:

Failure to save East Europe will lead to worldwide meltdown

Austria's finance minister Josef Pröll made frantic efforts last week to put together a €150bn rescue for the ex-Soviet bloc. Well he might. His banks have lent €230bn to the region, equal to 70pc of Austria's GDP.

"A failure rate of 10pc would lead to the collapse of the Austrian financial sector," reported Der Standard in Vienna. Unfortunately, that is about to happen.

The European Bank for Reconstruction and Development (EBRD) says bad debts will top 10pc and may reach 20pc. The Vienna press said Bank Austria and its Italian owner Unicredit face a "monetary Stalingrad" in the East.

[…]

Not even Russia can easily cover the $500bn dollar debts of its oligarchs while oil remains near $33 a barrel. The budget is based on Urals crude at $95. Russia has bled 36pc of its foreign reserves since August defending the rouble.

"This is the largest run on a currency in history," said Mr Jen.

In Poland, 60pc of mortgages are in Swiss francs. The zloty has just halved against the franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story. As an act of collective folly – by lenders and borrowers – it matches America's sub-prime debacle. There is a crucial difference, however. European banks are on the hook for both. US banks are not.

Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks. En plus, Europeans account for an astonishing 74pc of the entire $4.9 trillion portfolio of loans to emerging markets.

They are five times more exposed to this latest bust than American or Japanese banks, and they are 50pc more leveraged (IMF data).

Spain is up to its neck in Latin America, which has belatedly joined the slump (Mexico's car output fell 51pc in January, and Brazil lost 650,000 jobs in one month). Britain and Switzerland are up to their necks in Asia.

Whether it takes months, or just weeks, the world is going to discover that Europe's financial system is sunk, and that there is no EU Federal Reserve yet ready to act as a lender of last resort or to flood the markets with emergency stimulus.

[…]

The sums needed are beyond the limits of the IMF, which has already bailed out Hungary, Ukraine, Latvia, Belarus, Iceland, and Pakistan – and Turkey next – and is fast exhausting its own $200bn (€155bn) reserve. We are nearing the point where the IMF may have to print money for the world, using arcane powers to issue Special Drawing Rights.

Its $16bn rescue of Ukraine has unravelled. The country – facing a 12pc contraction in GDP after the collapse of steel prices – is hurtling towards default, leaving Unicredit, Raffeisen and ING in the lurch. Pakistan wants another $7.6bn. Latvia's central bank governor has declared his economy "clinically dead" after it shrank 10.5pc in the fourth quarter. Protesters have smashed the treasury and stormed parliament.

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Asia In Trouble

2009-02-16T12:31:00.004-06:00

Japan's GDP fell 12.7% in Q4 while the rest of Asia is in an export free fall.

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Just Say 'No' to Monetary Fascism

2009-02-13T15:03:00.003-06:00

The popular uprising against central banking

http://www.amconmag.com/article/2009/feb/09/00016/

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The Home as ATM

2009-02-11T07:23:00.008-06:00

Federal Reserve economists Alan Greenspan and James Kennedy produced two papers [1] [2] in recent years that analyze some trends in US mortgages. Since then, they have adjusted and updated their analysis [3]. Among other things, they looked at equity extraction – the amount of home equity that was converted into liquid funds by US homeowners. Gross equity extraction, or mortgage equity withdrawal (MEW) as it is also termed, is defined as equity extracted due to home sales (first mortgages minus the debt paid off due to the sale) plus cash out due to refinancing of first mortgages plus the change in home equity loans net of any unscheduled payments on first mortgages. Net MEW is gross MEW minus costs associated with the equity extraction such as closing costs. Net mortgage equity withdrawal is the stored value that homeowners removed from their houses and converted into cash in order to make various purchases, provide funds for investments, or to payoff non-mortgage debt.

An interesting thing happens when we compare their net MEW numbers with GDP for the US economy [4]. Because the home equity we are looking at here was liquidated and spent, it showed up in the calculation of GDP (see a caveat to this statement below). If the equity had not been extracted, however, it would not have impacted the GDP. It would still be there in the various homes as equity. Thus, we can compare real GDP growth as it has been reported [5] with real GDP growth minus net MEW. In this way, we can get a good idea of how GDP would have changed if US homeowners had not extracted equity from there homes. We can also look for any changes in the comparison over time.

The following chart presents the comparison of real GDP change and real GDP w/o net MEW.

There are several interesting points to this chart. First, the overall impression is that MEW has been a significant part of the official measure of economic growth for years. Second, we can note that MEW has had an increasing impact on real GDP since roughly 1996. From 1991 to 1995, new MEW added about 1% to the growth of GDP. But in 1996 and 1997, the impact grew to about 1.5%. After 1997, the impact of MEW on GDP grew until, by 2004, net MEW was contributing 6.5% to the change in GDP. Since 2004, net MEW has declined and with it, the GDP. The third point we can note is probably the most obvious. Had it not been for sizable amounts of equity extraction, the US economy, as measured by real GDP, would have contracted every year since the last recession. And with drops of 1.5-3.5% per year, we’re talking about a significant contraction.

There is one caveat that I’d make here. Some of the free cash generated by the equity withdrawals was used to make investments such as stock and bond purchases. While some investments directly show up in GDP (e.g., art or precious metal purchases), the purchase of financial instruments such as stocks and bonds are not counted in GDP. The investments listed by Greenspan and Kennedy are not distinguished by source so there is no way to tell what showed up in GDP and what did not. However even if we assume that none of the investments showed up in GDP, investment as a category explains no more than a moderate portion of MEW. Moreover, the percent of extracted free cash that went into investments consistently declined over the period in question. In addition, the purchase of financial instruments does have some indirect impact on GDP. All this is to say that for the purposes of this analysis, it is assumed that all of net MEW showed up in GDP. This overstates somewhat the affect of MEW on GDP and makes the chart look a little more dramatic than actual events would warrant but I don’t think the error is large. Absent net MEW, we would still be left with a falling GDP throughout this decade.

So to put it bluntly, US homeowners have been using their houses as ATMs. The equity they withdrew fostered the illusion that our economy was healthy and growing. But the spending growth was not fueled by new savings that was invested to increase production. Instead, current assets were leveraged and consumed to fuel the GDP. In some cases, the assets were realized capital gains (such as home sales) but in other cases, the gains were unrealized (such as home equity loans). And now that the housing market has been crushed, this fire hose of funds has been reduced to a trickling garden hose at most. With few exceptions, net MEW was $150B-$200B per quarter from 2005 to Q2 2007. Since then, net MEW has tanked as follows [6]:

Q3 2007: $119.3B
Q4 2007: $92.3B
Q1 2008: $51.2B
Q2 2008: $9.5B
Q3 2008: -$64.1B

And judging by the hit that the US housing market has taken, it will be some time before it's even possible for mortgage equity withdrawal to be a significant player in GDP again. Perhaps now we’ll begin to realize that leveraging and consuming assets is not the path to sustained economic growth.

Notes

[1] Estimates of Home Mortgage Originations, Repayments, and Debt On One-to-Four Family Residences, Sept. 2005, http://www.federalreserve.gov/pubs/feds/2005/200541/200541pap.pdf

[2] Sources and Uses of Equity Extracted from Homes, March 2007, http://www.federalreserve.gov/pubs/feds/2007/200720/200720pap.pdf

[3] http://beacheconomist.com/documents/Kennedy-Greenspanequityextractiondata2007Q2.xls

[4] The idea for this comparison came from John Mauldin (http://www.frontlinethoughts.com/pdf/mwo101708.pdf). There is a consistent difference between his calculation of how MEW impacts GDP and my results. I show a bigger affect of MEW on GDP for each year that our charts have in common. However the respective overall points as well as the diachronic trends displayed by our charts are the same. I have contacted Mauldin’s company to ask about the difference but have not heard back from him.

[5] GDP data retrieved from http://www.bea.gov/national/index.htm#gdp

[6] The most recent data came from the following sources:
http://www.calculatedriskblog.com/2007/12/q3-mortgage-equity-withdrawal-133.html
http://www.calculatedriskblog.com/2008/03/q4-mortgage-equity-withdrawal-76.html
http://www.calculatedriskblog.com/2008/06/q1-2008-mortgage-equity-withdrawal-512.html
http://www.calculatedriskblog.com/2008/10/q2-2008-mortgage-equity-withdrawal.html
http://www.calculatedriskblog.com/2008/12/q3-2008-mortgage-equity-extraction.html

There is No Paradox of Thrift

2009-02-10T12:13:00.005-06:00

http://mises.org/story/3064

Frank Shostak on why the paradox of thrift/deleveraging is no paradox at all. Economies bloated with hot air (i.e., phony, leveraged credit) need to deflate and save. The real paradox is how otherwise intelligent people can think that a leveraged, debt-ridden country with dwindling savings can fix its economic problems with more debt and spending.

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1,000 CCs of Statism, Stat!

2009-02-10T12:07:00.003-06:00

Ruin Your Health With the Obama Stimulus Plan
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_mccaughey&sid=aLzfDxfbwhzs

[…]

But the bill goes further. One new bureaucracy, the National Coordinator of Health Information Technology, will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective. The goal is to reduce costs and “guide” your doctor’s decisions (442, 446). These provisions in the stimulus bill are virtually identical to what Daschle prescribed in his 2008 book, “Critical: What We Can Do About the Health-Care Crisis.” According to Daschle, doctors have to give up autonomy and “learn to operate less like solo practitioners.”

[…]

Hospitals and doctors that are not “meaningful users” of the new system will face penalties. “Meaningful user” isn’t defined in the bill. That will be left to the HHS secretary, who will be empowered to impose “more stringent measures of meaningful use over time” (511, 518, 540-541)

What penalties will deter your doctor from going beyond the electronically delivered protocols when your condition is atypical or you need an experimental treatment? The vagueness is intentional. In his book, Daschle proposed an appointed body with vast powers to make the “tough” decisions elected politicians won’t make.

[…]

Hiding health legislation in a stimulus bill is intentional. Daschle supported the Clinton administration’s health-care overhaul in 1994, and attributed its failure to debate and delay. A year ago, Daschle wrote that the next president should act quickly before critics mount an opposition. “If that means attaching a health-care plan to the federal budget, so be it,” he said. “The issue is too important to be stalled by Senate protocol.”

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Japan faces 'unimaginable' contraction

2009-02-10T12:05:00.004-06:00

http://us.ft.com/ftgateway/superpage.ft?news_id=fto020920091358127080

Japan's economy faces an "unimaginable" contraction, the chief economist of its central bank warned on Monday, as figures revealed surging bankruptcies and a big fall in machinery orders.

The warning from Kazuo Momma, head of the Bank of Japan's research and statistics department, underscored the gloom surrounding the world's second-largest economy as export orders dry up, companies shut down production lines and consumers stop spending.

Japan, where industrial output plunged a record 9.6 per cent month on month in December, is due to announce fourth-quarter gross domestic product data next week. Polls of economists suggest GDP will have fallen more than 3 per cent compared with the previous quarter - an annualised decline of more than 10 per cent.

"From October to December the scale of negative growth [in GDP] may have been unimaginable - and we have to consider the possibility that there could be even greater decline between January and March," Mr Momma said in a speech on Monday.

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Bailing Out the Bailouters

2009-02-09T12:34:00.003-06:00

We're running out of buckets to bail with.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4560897/IMF-may-run-out-of-cash-to-fight-crisis-in-six-months-Strauss-Khan-warns.html

Dominique Strauss-Kahn said the [International Monetary] Fund needed an urgent cash infusion if it was to continue bailing out troubled economies in the future. Mr Strauss-Kahn also indicated that the world's advanced economies were now tipping from recession into full-blown depression, cementing fears about the scale of the economic slump in rich nations.

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Krugman Doesn't Understand Recessions

2009-02-09T12:30:00.007-06:00

http://globaleconomicanalysis.blogspot.com/2008/12/krugman-still-wrong-after-all-these.html

Back in December, Mish ripped Paul Krugman's discussion of "the hangover theory" of recessions.

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What's Wrong with Fiscal Stimulus?

2009-02-06T12:15:00.008-06:00

“We’re all Keynesians now.” Nixon didn’t actually say this, but judging by what is being said these days by many politicians, news outlets, and economic pundits, this mythical assessment certainly seems to be true today. Many have jumped on the fiscal stimulus bandwagon. If we just spend a gazillion dollars we don’t have, we’ll create jobs and kick-start the economy back to life. But how much sense does this make, and why is it that no one seems to count the opportunity costs of such stimulus plans? What will we actually accomplish and will it be relevant? For now we’ll bypass the question of whether or not the government has the authority and responsibility to spend taxpayer money for economic stimulus and just address its consequences.

The first question we should be asking is, “Why are we in a recession in the first place?” This rarely seems to matter to Keynesians who just want to spend money in an attempt to prime the economic pump. References to animal spirits don’t explain anything or alternatively, such references could potentially explain everything (which is just as useless). But if a substantial cause or exacerbating factor of the recession was a prior inflationary bubble fueled by reckless borrowing and spending, it seems rather problematic to attempt to solve this problem with more borrowing and spending.

Moreover, Keynesians usually see deflation and recession as causes to be counteracted or as problems to be fixed. But what if a deflationary recession is the cure/fix? What if a recession were the market’s attempt to clear itself of credit-driven overproduction and rebalance misallocated resources? In this case, injecting more fiat money into the economy and/or trying to prime the pump with government spending would fall somewhere between irrelevant action and action that is diametrically opposed to the cure and that prolongs the problem.

In fact, all of this is the case. Easy credit, artificially low interest rates, and leverage helped propel large amounts of ill-advised borrowing/spending, and deflation is precisely what is needed for the market to rebalance after such an inflationary binge. A recession is simply the way in which the market purges itself of a general overproduction of goods and fixes the prior misallocation of resources. At best, fiscal stimulus is an irrelevant waste of money that will probably pump up a few consumption-dominated statistics (e.g., GDP) for a while. But more often than not, such stimulus also involves an attempt to fight a symptom and in so doing, it actually retards the cure.

We have been on a debt-fueled binge for years and it is no longer sustainable. The last thing we need is the government to step in where the private sector left off and continue the same binge with new debt of its own. People need to start saving money so that future investments will be backed by capital we have actually accumulated instead of being based on debt and leverage. The market needs to liquidate inflationary bubbles and re-balance misallocations. These aims are not furthered when the government tries to blow new bubbles thus creating new misallocations. As far as recessions are concerned, fiscal stimulus spending is a complete non sequitur.

There is also the general problem of what Jim Rogers refers to as transferring capital and assets “from the competent to the incompetent” and the inefficiencies and economic drag that this creates. Depressed sectors are depressed for a reason. Failing companies are failing for good reasons. When we take money from the economy at large (either through tax changes, borrowing, or inflation) and give in to the “troubled” parts of the economy, we are directly contravening an important and necessary aspect of capitalism: the liquidation of poor/failed ventures for the benefit of good/thriving ventures. This inversion of market forces adds a long-term depressive aspect to the economy instead of a stimulative one. We get more of what we subsidize and less of what we tax.

The second big question we should be asking ourselves is, “Where will the federal government get the stimulus money from?” What follows is an analysis of the alternative sources.

1. Raise taxes, borrow from loaned up banks, borrow from banks w/ excess reserves that they will not part with; borrow from the private sector

This simply takes money from circulation and redistributes it. It therefore adds no new spending/stimulus. The government simply redirects the money into investments that were less valued by the market (otherwise the market would have already spent the money on those investments). Investors would have directed the money towards other sectors and investments but the government stepped in and redistributed that money elsewhere. This lowers prices in the sectors where the money would have been spent thus depriving some sellers in these sectors while it bids up prices in the sectors where the money is actually spent thus pricing the marginal buyers in these sectors out of the market. This adds a layer of inefficiency and distorts the market. Such an effect is especially problematic in a recession because sectors need to rebalance (some more than others) in order to clear gluts and malinvestments. The bottom line here is that some sectors receive a short-term, debt-fueled boost, some sectors pay the price via a short term drag, and resources are poorly allocated.

In addition, money borrowed on the market will add a new and large bidder to the capital markets thus raising interest rates above what they would have been w/o this extra bidder. The private borrowers at the margin are priced out; they don’t get the funds they need and suffer economic loss because of this. Others will pay more to borrow funds thus increasing their costs (and leading to an increase in their prices) and lowering their return. Some people will get economic stimulus while others will pay the price. On the other hand, tax increases will add a new burden to the whole economy thus adding a depressive aspect to the useless redistributive aspect.

2. Monetize debt by borrowing from the Fed

This adds new money to the economy (i.e., inflation). This new money will bid up prices in the sectors to be stimulated. Marginal buyers of these sectors will be priced out of the market and suffer economic loss. As the new money flows throughout the economy, it pushes prices higher than they otherwise would have been (keep in mind that this could take the form of stable prices when, in the absence of the new money, prices would and should be falling). Those who get the new money early get the benefit of the pre-inflation prices while those who get the new money later will pay more for the goods/services they buy than they would have paid. Those on fixed incomes are victimized the most as their purchasing power is looted and redistributed. The economy eventually has more money but prices are also higher than they would have been.

This increase in prices includes the price of credit. When lenders find out that the government is monetizing debt, interest rates will rise (or fall less than they would have fallen in the absence of the new money) so that lenders can protect themselves from the anticipated inflation. The marginal private borrower will be priced out of the market while other borrowers will pay more for credit thus lowering their overall rate of return and pressuring them to raise prices. If the Fed tried to counteract upward pressure on interest rates by buying a significant amount of treasuries from the market, this would artificially balance the credit markets but it would create new problems (e.g., interest rates that are held lower than they would be based on non-manipulated credit market conditions and a manipulated money supply would further the same easy credit binge that brought us this mess). More manipulation doesn’t eliminate policy costs, it simply shifts them around so that they reemerge in a different place and/or form.

3. Borrowing from commercial banks w/ excess reserves where the banks allow reserves to fall

This would seem like a remote possibility. All other things being equal, new government borrowing should not induce banks to lower their reserves. If they have substantial excess reserves, they must have good reasons for it (like a financial crisis perhaps). Government borrowing shouldn’t change those reasons. Nevertheless, under this situation, new money would be added to the economy and the effects would be similar to those produced by government borrowing from the Fed.

4. Tax cuts as direct stimulus

This would be much less problematic than the previous options if done the right way. For example, rebates are no different from stimulus checks. They are one time or short-term payments that don’t provide the sustained improvement that is necessary. And because they are indiscriminate transfer payments, they don’t do what tax cuts are meant to do: lower the burden on productivity and encourage work. Tax reductions must therefore take the form of sustained marginal rate cuts on labor, capital, and business activity.

However, the Laffer curve not withstanding, this would still be no silver bullet. It would be helpful for removing some of the burden on the economy but tax cuts don’t and can’t address the cause of the problem: the prior inflationary boom which resulted in overproduction, debt accumulation, and misallocation of resources. Tax cuts lower one of the burdensome constants of the equation but they don’t address the variable part of the equation: the boom and bust cycle itself. Taxes in the US are far too high. They should be lowered, but this doesn’t have anything to do with the business cycle.

5. Sell federal land

This would require the sale of a massive number of acres – a move that would significantly depress land prices in an already depressed market (this assumes the government could even move enough of this “product” to raise a significant amount of funds). It would also take far too much time to implement. While a theoretical possibility, it is never a serious option.

Now that we’ve reviewed some important short and medium term effects of the various options that the government has for raising money, we should mention the primary long term effect that results from most of those options. Any borrowing along with tax cuts will add to the public debt, a burden that will eventually need to be repaid by someone. Since government debt is almost never repaid in short order (i.e., 1-5 years), this amounts to a tax on future taxpayers to pay for the indulgences and mistakes of current taxpayers. The two groups will have substantial overlap for a decade or two but some future taxpayers will be paying a bill they never helped run up. This is stealing from the future to pay for the present, and the longer the debt is held, the greater the amount of money that will be stolen from future victims to pay off the currently generated debt.

Moreover, these future payments on the debt will burden the economy by diverting resources. Instead of producing and buying useful goods/services, these future payments will go to pay down the glutinous national credit card bill.

This debt adds an additional cost in the form of interest. Some claim that the new debt we are now accruing is not much of a problem in this regard because current interest rates are so low. This is true now but the potential for a significant problem in the not too distant future is large. It is almost surely the case that the government will not run significant budget surpluses in the near future. This means the new debt, along with the old, will need to be rolled over. As interest rates rise, this will add billions of dollars to the cost of servicing the debt at the same time that entitlement costs will be rising substantially. If we have a $15 trillion debt that starts to roll over into bonds costing 8-12%, the phrase “international debt crisis of the 1980s” may start to show up in more and more news articles. If we think our budget is being mismanaged now, wait until yearly debt servicing payments push past $1 trillion.

The bottom line here is economics 101: there ain’t no such thing as a free lunch. In order to raise new money for a fiscal stimulus plan, the government can deficit finance by borrowing, deficit finance by cutting taxes, raise taxes, or inflate. All of these actions (with the partial exception of intelligent tax rate cuts) cause numerous market-distorting, debt-accumulating problems, have limited and questionable benefits, and are irrelevant or even exacerbating when it comes to the real problem. We got here by way of distorted credit markets, debt, leverage, and a lack of saving. Even if we manage to manipulate some consumption-dominated statistics for a while, we’re not going to solve the problem with more of the same.

Banana Capitalism?

2009-02-02T12:41:00.002-06:00

http://finance.yahoo.com/tech-ticker/article/166389/Hybrid-or-Hydra-Meet-the-New-Bailout-Same-as-the-Old-Bailout

Blodget and Task are right. The irresponsible banks can be restructured or liquidated in an orderly manner without mugging the taxpayers. Shockingly enough, this would require the debt and equity holders to actually accept the consequences of the choices they made. But pretty much all of the talk so far regarding bailout part deux, like TARP, involves taxpayers taking risks and/or losses so that the banks, their equity holders, and their debt holders can escape those consequences or possibly even make money (e.g., bonuses given out by banks currently at the public trough). The gains are privatized while the losses are socialized. What is the economic equivalent of a banana republic?

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What Caused the Financial Crisis

2009-01-30T07:52:00.008-06:00

I wrote this in another forum in September when all of the hoopla started. It was quick and dirty back then and it could definitely use some filling out and additions. Maybe one day. But for now I'll just throw it up here. I should say that this takes for granted the "normal" business cycle courtesy of our Fed money managers and credit expanders. For this piece, I focused on why this recession (which started in late 2007 / early 2008 as indicated by the industrial production numbers) turned into a financial train wreck.
__________________________

As far as what "caused" this crisis, I don't have the time to argue much for this so I'll just lay it out. I see 4 significant causes here:

(1) The general social context of greed. This is nearly everywhere in our lives and it affects all aspects of the economy. This is this context -- the atmosphere in which this kind of thing can take place. For example, compare the national savings rate to the various credit levels (http://yellowroad.wallstreetexaminer.com/blogs/?p=32). We are quite simply living way beyond our means and the "credit bubble" is a big part of the result. I put fractional reserve banking (FRB) here. It is part of the background problem and functions as an exacerbating factor. But that's been around for years. The huge credit bubble is the new aspect here.

(2) There certainly appears to have been political pressure applied to lenders in order to make them lend "sub-prime." (http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=1 and http://www.nypost.com/seven/09292008/postopinion/opedcolumnists/os_dangerous_pals_131216.htm). I don't discount this as a real cause but I think it is clear that talking-point Republicans try to make way too much of this. And why not. Any stick to beat Democrats with is good enough. But this, by itself, cannot explain numerous aspects of this crisis such as the problems associated with mortgage backed securities (MBS), the collapse of the Baltic dry goods index, the unwinding of the carry trade, or the massive "credit crunch" (i.e., delevering) to name just a few. Moreover, I think the pressure explanation only explains so much of the crazy lending. The fact is that lenders, investment banks, rating agencies, and nearly everyone one else on this gravy train were making a killing off of the sub-prime and alt-A markets. Pressure was applied but it is also the case that much of the risky business was self-imposed. They saw the profits to be made and they went for it. So for example...

(3) There was some real funny business going on in the packaging and rating of these mortgage backed securities.

E.g., http://www.bloomberg.com/apps/news?pid=20601109&sid=ah839IWTLP9s
and http://www.bloomberg.com/apps/news?pid=20601109&sid=ax3vfya_Vtdo and
http://www.minyanville.com/articles/C-citigroup-banks-Investment-loans-RMBS/index/a/19103 and
http://www.minyanville.com/articles/jpm-Credit-fre-fnm-ms-mortgage/index/a/18766

This whole area significantly obscured, masked, and misrepresented the risks involved and it appears to be ripe for criminal investigation.

(4) And now to what is probably the grand daddy of them all. This is why we have massive cross defaults (or at the very least, the threat of it): leverage. These investment banks and "special investment vehicles" were levered up to the top of Everest. I've seen various numbers mentioned: 20 to 1, 30 to 1, 40 to 1, and sometimes more. These guys made the FRB system look miserly. Without this, you would have a recession but you wouldn't have a credit implosion. Delevering ratios this big will always be ugly. Look at the LIBOR right now. Banks don't have any actual money to cover losses or lend out because most of what they had was ex nihilo hot air. The metaphor of a bubble or balloon losing a lot of air quickly is quite appropriate. We can add some grimy but important details by pointing to such things as a 2004 SEC change in the net capital rule which allowed investment banks and the MBS market to go from huge levers to ludicrous levers (http://www.nysun.com/business/ex-sec-official-blames-agency-for-blow-up/86130/ and http://www.nytimes.com/2008/10/03/business/03sec.html?_r=1&ref=business&pagewanted=print&oref=slogin). Of course it figures that Henry Paulson was one of the ones pushing for the change (http://paul.kedrosky.com/archives/2008/10/03/quote_of_the_da_6.html).

Moreover, this situation inherently socialistic. Some conservatives are complaining that they don't want to move away from "free market principles" by "bailing out" these companies. But with respect to this aspect of the economy, we never had a free market. If someone levers up 30x, he cannot possibly cover his losses when the economy goes south. So much of the risk (potential losses) is socialized and spread to others. When his business does goes under, the potential losses becomes actual losses. This isn't socialistic if a single individual or small company were to do this provided the other entities who took on the 29x of risk/loss that the levered one couldn't handle did so voluntarily. And if they can handle it (i.e., they have sufficient capital/assets), then the damage is contained to them alone. But when a significant number of huge companies lever up like this, they have in fact spread the extra 29x of risk/liability that they can't pay for to the rest of the economy -- to everyone.

Saying that they were "too big to fail" leaves out the crucial factor. In reality, they were too big and too levered to fail. If a few of them were to go down, they very well could destroy the entire banking system and credit markets (depending on the size of the lever). Only an underwriter the size of the entire country could insure such huge debts. And so those in Government knew that if these levered goliaths ever started to shake, the State/Fed would rush to shore them up at all costs. This means that we have all been underwriting these banks for years, and now that they have begun to shake, all of us are forced to absorb the losses associated with 29x worth of leverage. The socialism doesn't start with a "bail out." All of us were already on the hook for these investments. This is a clear case of an economic "externality" -- no different in principle from pollution. The massive levering meant that the companies had taken a significant part of the cost of the economic process and dumped it onto everyone else. Companies like Goldman Sachs privatized the massive profits (some mid-level execs were getting 7 figure bonuses in addition to their usual pay) while many risks and costs were socialized throughout the economy and onto taxpayers. This is not a free market, it is theft.

In sum, this is not something so small or simple as a "U.S. sub-prime lending crisis." This is massive, world-wide, debt/lever problem. We created a collective asset bubble (in housing, credit cards, equities, commodities, etc.) the size of Titan and now the hot air is rushing out. Recessions come and go due to our "normal" inflationary operations (e.g., Fed easy credit). But this time around, heavy debt (taken on by nearly everyone) and even easier credit (especially in the housing market) magnified by massive lever arms (MBS, credit debt swap market) and clouded by highly dubious security rating schemes (Moody and S&P voodoo) and opaque security packaging/repackaging created a titanic asset bubble that turned a recession into something much nastier. The bigger the bubble, the louder the noise when it pops.

Gordon Brown's Fountain

2009-01-29T14:11:00.003-06:00

http://www.telegraph.co.uk/comment/columnists/iainmartin/4295219/Gordon-Brown-brings-Britain-to-the-edge-of-bankruptcy.html

"This catastrophe happened on his watch, no matter how much he now opportunistically beats up on bankers. He turned on the fountain of cheap money and encouraged the country to swim in it. House prices rose, debt went through the roof and the illusion won elections. Throughout, Brown boasted of the beauty of his regulatory structure, when those in charge of it were failing to ask the most basic questions of financial institutions. The same bankers Brown now claims to be angry with, he once wooed, travelling to the City to give speeches praising their 'financial innovation'."

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Fictitious Capital

2009-01-29T13:56:00.002-06:00

"There is no surer source of commercial distress than the creation and extension of fictitious capital; and of an appearance of prosperous trade without the reality, which is the inevitable consequence of a paper currency."

Robert Jenkinson, Great Britain's Prime Minister, 1812-27.

Jenkinson should have known that Corn Laws and repressive thuggery aren't very good for commerce either. Nevertheless, this be a good quote.

(end of post; ignore continue reading statement below)

All in the Family

2008-03-13T20:05:00.001-05:00

A Primer on Covenantal Objectivity and Apostasy

The relatively recent controversy in Reformed circles over the “Federal Vision” is complicated and involves disagreement over a number of issues. One of the broader issues has been termed the “objectivity of the covenant.” Who are the members of the new covenant, and what if anything do they receive by virtue of their membership in the covenant (i.e., without regards to how faithful they are toward God)? How does God relate to the “visible” Church, and in particular to those who are in the Church but who are not faithful to Him? Intimately related to this is the issue of apostasy from the covenant. When a non-elect (using the Westminster Confession sense of the term ‘elect’) individual who is a Church member falls away, what if anything has he lost? Was he ever really in covenant with God to begin with? Was he ever really a Christian?

In this essay, I would like to address these broad issues without going into much detail. What follows will therefore be a somewhat extended outline of covenantal objectivity and apostasy along with some discussion of common criticisms of these ideas.

In Reformed circles, it is common for us to make strong and clear distinctions within the covenant between the “elect” and the “reprobate.” The former are often said to be in the covenant “internally” while the later are only in it “externally.” Particular Baptists, whom I think are more consistent at this point, only distinguish between those who are in the covenant and those who are not. If one is in the covenant (or in it “internally”), it is because he has been elected to eternal life. He can never finally fall away. On the other hand, if someone is not part of the elect, he will never be in covenant with God. And if someone does leave the Church after having professed faith, this just proves that he never had “true” faith to begin with. He was never really in the covenant – never in it internally. He may have been in the “sphere” of the covenant and may have seen some “common operations of the Spirit” but he was never truly nourished by the covenantal grace of God.

It is not difficult to see why we say these kinds of things. We do this in order to protect the integrity and truth of our decretal doctrines, most noticeably the “five points of Calvinism.” But I believe this is both unnecessary and problematic. Our overzealous hedging of these doctrines is unnecessary because the doctrines of covenantal objectivity and apostasy need not contradict Reformed decretal doctrines and it is problematic because we have a habit of defining systematic terms and ideas in ways that lead to deductions which work against numerous and explicit statements of Scripture.

The thesis of this essay is that the Bible has some rather shocking things (to Reformed ears anyway) to say about members of the “visible” Church and in particular about those who fall away from the new covenant. I believe the Bible predicates far more of the reprobate in terms of covenant status and gifts than we do.

The Objectivity of the Covenant: A Systematic Summary

The NT forcefully states that all visible Church members, not just those who will persevere to eternal life, are in covenant with God and have been given the status, gifts, and grace that pertain to it. They are all His people and He graciously showers them with many gifts. The following lists help to show this.

Salutations, Names, and Titles Applied to Those in the Visible Covenant (i.e., Who They Are):
Christians: Acts 11:26
Beloved of God: Rom. 1:7
Saints: Rom. 1:7; Eph. 1:1; Phil. 1:1
Saints and faithful brethren: Col. 1:2
Brethren: Rom. 8:12; 12:1; I Cor. 3:1; 10:1; II Cor. 1:8; Phil. 1:12; Gal. 1:11; 3:15; I Thess. 1:4
Holy brethren: Heb. 3:1
Those sanctified in Jesus and called saints: I Cor. 1:2
The body of Christ: Rom. 12:4, 5; I Cor. 12:27
The Church of God: I Cor. 1:2; II Cor. 1:1; I Thess. 2:14
Church in God and Jesus: I Thess. 1:1
The holy, Spirit-indwelt temple of God: I Cor. 3:16, 17; II Cor. 6:16
Sons of God: Gal. 3:26; 4:6; Heb. 12:5-7
Abraham’s seed: Rom. 4:1; Gal. 3:29 w/ v. 27
Children of the (Abrahamic) promise: Gal. 4:28
Members of the household of faith: Gal. 6:10
Followers of the apostles and of the Lord: I Thess. 1:6
Spiritual house and holy priesthood: I Pet. 2:5
Chosen generation, holy nation, and special people of God: I Pet. 2:9, 10

How They Received This Status:
Disciples are made by being baptized into (eis) the Triune God and by being taught: Matt. 28:19
The are baptized into Jesus and His death and thereby united to Him: Rom. 6:3-5
They are baptized by the Spirit into the body (of Christ, cf. 1 Cor. 12:27) and thus drink of the Spirit: I Cor. 12:13
They were circumcised by being buried and raised with Christ in baptism: Col. 2:11, 12
As many as are “baptized into Christ have put on Christ”: Gal. 3:27

What They Have Objectively Been Given by Virtue of Their Covenant Membership:
God purchased the specific congregation at Ephesus with His own blood: Acts 20:28
A calling of Jesus Christ: Rom. 1:6
God’s love: Rom. 5:8
Christ died for: Rom. 5:8; 8:32; Eph. 5:2
The Spirit’s intercession: Rom. 8:26
Christ’s intercession: Rom. 8:34
Mercy: Rom. 11:30, 31
Grace: Rom. 12:6; II Cor. 8:1
“[enrichment] in everything by Him… so that you come short in no gift…”: I Cor. 1:4-6
The Spirit of God: I Cor. 2:12
All things: I Cor. 3:21, 22
Belong to Christ: I Cor. 3:23
Begotten through the gospel to be “beloved children” of Paul: I Cor. 4:14, 15
Mosaic and Davidic promises to be God’s people/children and have Him dwell w/ them: II Cor. 6:16 – 7:1
Jesus gave Himself for their sins: Gal. 1:4
Called by the grace of Christ: Gal. 1:6
A beginning in the Spirit: Gal. 3:3; 5:7
They had been “known by God”: Gal. 4:9
Blessed with every spiritual blessing: Eph. 1:3
Predestined to holiness and adoption as sons: Eph. 1:4, 5
Redemption and forgiveness of sins: Eph. 1:7; Col. 1:14; 3:13
Life from the dead: Eph. 2:5; Col. 2:13
Salvation: Eph. 2:8
Members of the household of God: Eph. 2:19
Members of the holy temple of the Lord: Eph. 2:21, 22
Qualified to partake of the inheritance of the saints: Col. 1:12
Deliverance from the power of darkness into the kingdom: Col. 1:13
Election: Col. 3:12; I Thess. 1:4; I Pet. 1:2
The Holy Spirit: I Thess. 4:8 (keep in mind that Saul received the Spirit but was later abandoned by Him)
Chosen for salvation: II Thess. 2:13
Partakers of a heavenly calling: Heb. 3:1
Membership in the city of God, the New Jerusalem, the Church with Jesus as its mediator: Heb. 12:22-24
Sprinkled by Jesus’ blood: Heb. 12:22-24 (cf. Heb. 10:29)
Enlightenment: Heb. 10:32
Sanctification by Jesus’ offering of Himself: Heb. 10:10
Rebirth: I Pet. 1:1-3
Redemption by the blood of Christ: I Pet. 1:18, 19
Christ’s atonement for sins: I Pet. 2:24
All things pertaining to life and godliness through the knowledge of God: II Pet. 1:3

What They Have That Can Be Lost, Fallen From, or Abandoned:
Hears the “word of the kingdom” and “receives it with joy”: Matt. 13:18-21
Kingdom of heaven is like a man whose debt (i.e., sin) was forgiven but he was unforgiving so he was delivered to “the torturers” (i.e., hell) until he paid his whole debt. “So My heavenly Father also will do to you [if you are unforgiving].”: Matt. 18:21-35
Life from the word of God: Luke 8:4-7, 11, 13
The kingdom of God: Matt. 21:43
Faith/belief: “Believe for a while” (Luke 8:13); Simon “believed” “the word,” “things concerning the kingdom of God,” and “the name of Jesus Christ” (Acts 8:4, 9-25); it is possible to “believe in vain” and thus not be saved (I Cor. 15:2); some had strayed from a “sincere faith” (I Tim. 1:5-7, “sincere faith”, cf. II Tim. 1:5); some thrust away faith and thus made shipwreck of their faith (I Tim. 1:18-20); some had strayed from “the faith” (I Tim. 4:1; 6:10); “overthrow the faith of some” (II Tim. 2:18)
Being in Christ: John 15:1-10
Being graphed into the covenant and being partakers of the root and fatness of it: Rom. 11:16-22
“One for whom Christ died” can be destroyed by causing him to go against conscience: Rom. 15:15
Communion w/ body and blood of Christ: I Cor. 10:1-12, 16, 17 (just as those who died under judgment in the wilderness partook of Christ)
Beginning in the Spirit: Gal. 3:1-5 (cf. Gal. 5:1-4)
“The liberty by which Christ has made us free”: Gal. 5:1-4
Grace: Gal. 5:1-4
Reconciliation to God can be lost if one doesn’t continue in the faith: Col. 1:21-23
Some had strayed from a pure heart: I Tim. 1:5-7 (“pure heart”, cf. Matt. 5:8; 2 Tim. 2:22; Heb. 10:22)
Some had strayed from or thrust away a “good conscience”: I Tim. 1:5-7; 1:18-20 (“good conscience”, cf. Acts 23:1; 1 Pet. 3:16, 21)
“Departing from the living God”: Heb. 3:12
Enlightenment: Heb. 6:4 (“enlightened,” cf. Heb. 10:32-34; Eph. 1:18)
“Tasted the heavenly gift”: Heb. 6:4 (“tasted” means to partake of, cf. Heb. 2:9)
“Partakers of the Holy Spirit”: Heb. 6:4 (“partakers,” cf. Heb. 3:1, 14)
“Tasted the good word of God and the powers of the world to come”: Heb. 6:5 (“tasted”, cf. Heb. 2:9)
Repentance: Heb. 6:6
Having Christ’s crucifixion applied to them: Heb. 6:6
Receives “blessing from God”: Heb. 6:7
“The knowledge of the truth”: Heb. 10:26
“A sacrifice for sins”: Heb. 10:26
Sanctification by the blood of Christ: Heb. 10:29 (sanctify, cf. Heb. 2:11; 10:10-14; 13:12)
Cleansing from sin: II Pet. 1:9
Being bought by the Lord: II Pet. 2:1 (bought, cf. Acts 20:28; I Cor. 6:19, 20; 7:23; Rev. 5:9; 14:3, 4)
Go astray from “the right way”: II Pet. 2:15
Entangled again after escaping from pollutions of the world through the knowledge of Christ: II Pet. 2:20
“Known the way of righteousness”: II Pet. 2:21
“Beware lest you fall from your own steadfastness”: II Pet. 3:17
“Your first love”: Rev. 2:4, 5
One’s name in the Book of Life: Rev. 3:4, 5; 22:19 in the AV (cf. Ps. 69:28)
Christ’s love: Rev. 3:14-16, 19

These lists are forceful enough for the many themes they contain. The NT predicates many things of Church members in general that I have only ever heard predicated of “true believers,” “the truly regenerate,” or “the elect” in Reformed circles. I’m still enough of a rationalist and a “TR” to be made nervous and uncomfortable by a few of the things that the NT casually predicates of all Church members. It is clear that our system defines terms and gives grace/gifts far more restrictively than does the NT.

But apart from the specific points made by the various items on these lists, a systematic point can also be made. When it comes to the question of how God relates to His covenanted people (and the sub topics of covenantal objectivity and apostasy), there is basic continuity between the old covenants and the new covenant. From these lists, we can point out some of the major themes where there is general continuity between the OT and the NT:

Abraham’s seed
The circumcision (Phil. 3:3)
Being clean (II Pet 1:9 vs. OT cleanings)
Quotes from the OT used in the NT (I Pet. 2:9, 10)
Holy people
Church of God / Assembly of Yahweh
Vine/olive tree/garden
Israel/new Israel
Adoption into the family (Rom. 9:4)
Known by God (Amos 3:2; Gal. 4:9)
God’s love
Election
Being “sacramentalized” into the covenant head (I Cor. 10)
Partaking of the covenant meal(s)
Priestly people
Having a sacrifice for sin
Having the same promises in NT as in OT: God dwells w/ them and sons of God (II Cor. 6:16 – 7:1)
Temple of God
Restored house of David (Acts 15)
Membership in the city of God (Heb. 12)

The astute observer will notice that we have just listed, in order, many of the major themes that make up the three major old covenants – the Abrahamic, Mosaic, and Davidic covenants. These themes are developed and fulfilled in the NT and they are applied to the whole new covenant Assembly of God (the “visible” Church) just as they were applied to the whole OT assembly. Their fulfillment is not reserved solely for those who persevere to eternal life but for all of those brought into the covenant community. In this way, the NT applies these themes the same way the OT does – visibly and “objectively.”

Thus, the NT casually and consistently assumes a fundamental continuity between the OT and NT when it comes to how God relates to all of His chosen people (including those who are unfaithful). If God had wanted to show a fundamental discontinuity between the two testaments at this point by saying that the OT was “external” and “objective” while the NT is “internal”, “subjective,” and only for those who are foreordained to persevere to final glory, we would be forced to conclude that He had done an awfully poor job of it. Not only does the NT make all manner of “objective” statements regarding what all NC members are given, it seems to make a repeated point of linking these gifts with the very themes applied to the visible community under the old covenants.

The Objectivity of the Covenant: A Narrative Approach

In this section, I want to present some of the previous material in a different format. What follows are summaries of three NT books with respect to the subject of this essay. The previous material is presented in a rather general and systematic way. The following should help complement that approach by focusing on specific congregations and by summarizing their situations according to the way they are described by the biblical text.

I Corinthians:

Paul began by calling the Corinthian congregation the “church of God” – those sanctified in Jesus and called saints (1:2). He thanked God for the grace that He had given to them and that because of this grace, they had been “enriched in everything by Him… so that [they came] short in no gift…” (1:4-6). Paul also called them “brethren” numerous times (e.g., 3:1; 10:1). He reminded them that they were the holy, Spirit-indwelt temple of God (I Cor. 3:16, 17). And later in his letter, Paul also reminded them that they were all baptized by the Spirit into the one body and had thus been made to drink the one Spirit (12:13). Therefore they were all members of the body of Christ (12:27) and they all had communion with Christ (10:16, 17). They had received the gospel and they stood in it (15:1).

But these were the same people that Paul had to harshly criticize because of a number of serious problems such as sectarianism, a lack of discipline, and abuse of the Eucharist. These problems called for stern warnings and a comparison between the gentile Corinthians and Israel in the wilderness. The Corinthians’ Jewish fathers (the Corinthians had, after all, really been adopted into the one family) had been baptized into Moses and had partaken of the same spiritual food: Christ. And yet their bodies were scattered in the wilderness because they had been unfaithful. They had been given important and efficacious gifts but had squandered them in unbelief and so were judged. So even with all of the gifts that the Corinthians had been given, their situation was not unique. They were in fact in a situation quite comparable with their Jewish fathers when it came to the topic of the loss of spiritual gifts. And the same condemnation could fall on them if they chose to squander the gracious gifts given to them. They should therefore heed the example Paul cited – an example that was written for their admonition (10:1-11).

Yet even though their behavior was rebellious, Paul was still quite comfortable with strong affirmations of their real, substantial, and full covenant membership and participation in Christ. In fact, it is just because of their full, objective status that Paul could then apply the intimate “family” rebukes and warnings to them. Those who are outside of Christ and “strangers to the covenants of promise” do not provoke the Lord to jealousy (cf. 10:22; II Cor. 11:2). God is not cheated on or betrayed by those not united to Him.

Galatians:

The Galatian Christians had begun well and in the Spirit (3:3; 5:7). They formed real churches (1:2). They had been called by the grace of Christ (1:6) who gave Himself for their sins and to rescue them from an evil age (1:4). Paul thought of them as “brothers” (1:11; 3:15). They were all baptized into Christ (3:27) and were therefore sons of God (3:26; 4:6). They were children of the promise (4:28) and members of the household of faith (6:10). They had been “known by God” (4:9).

And yet Paul had doubts about them (4:20) and called them “foolish” and “bewitched” (3:1) because they had been duped into thinking that they needed to go under the Mosaic covenant in order to be faithful to God. Such a move would have been a grave sin. It would have meant that they were denying that Jesus fulfilled and transformed the old covenants such that there is now neither Jew nor Greek, circumcision nor uncircumcision. They had already been baptized into Christ and therefore had the fullness of covenantal grace. It is just because they really had what Paul ascribed to them that a denial of Christ’s work by them would have been an estrangement from Christ and a real fall from real grace (5:2-4). One can not fall from a place one was never at.

Hebrews:

The recipients of the epistle to the Hebrews were “holy brethren” who were “partakers of a heavenly calling” (3:1). They were the sons of God and were treated as such (12:5-7). They were members of the city of God, the New Jerusalem. This is to say, they were members of the Church with Jesus as its mediator (12:22-24). They were receiving the unshakable kingdom (12:28).

Their calling gave them access to the promise of the eternal inheritance (9:15), for Jesus appeared before the face of God for them (6:17-20; 9:24). They were the beloved who had shown the fruit of good works (6:9, 10). They had been “enlightened” (10:32) and sanctified by Jesus’ self-offering (10:10). In other words, they had been sprinkled by His blood (12:22-24). Thus, they had boldness to enter into the holy place by that blood (10:19, 20). Because they were part of the house of God with Jesus as its priest, they could draw near to God (10:21, 22).

And even though they had all of this (or rather, because they had all of this), they still needed to persevere. They needed to give heed to what they had heard lest they drift away from all that they had been given (2:1). For if the judgment for OT covenantal apostasy was sure, the judgment for apostasy from the great salvation of the new covenant will surely come (2:2, 3). The recipients were compared to those who fell in the wilderness (3; 4). Unlike those who fell due to unbelief, they had indeed entered God’s rest (4:3). But they still needed to be diligent to enter that rest so that they would not fall according to the OT example (4:11). Thus, they needed to beware of unbelief – something that can cause one to depart from the living God (3:13).

For it is possible for someone to be enlightened, to have tasted of the heavenly gift, to be partakers of the Holy Spirit, to be repentant, and to have Christ’s crucifixion applied to him and yet fall away from all of these blessings (6:4-8). If the Hebrews were to abandon Christ in this way, they would no longer have a sacrifice for sins (10:26). Covenantal adultery under the old covenant brought strong retribution, but apostasy from the new covenant would be a greater betrayal (not a lesser one) and would therefore bring a more severe judgment. To whom much is given, much is required, and the Hebrews had been sanctified by the blood of the new and better covenant. Betrayal of this would come at a very high price (10:26-29).

The Judgment of Charity View

One way that this huge amount of material has been viewed (some would say “brushed aside”) in the Reformed world is by way of a “judgment of charity.” The thought is that when a writer addresses a group of people in the Church (e.g., a congregation), it makes sense to write to them as if they are who they claim to be – Christians. And surely it was the case in NT times that most of them were. Thus, the biblical writers made a “judgment of charity” with regarding to any specific individual within the group to whom he was writing. This individual claimed to be a Christian and he was part of a group of Christians so he was addressed as such. But if it turned out later that he showed himself to be unfaithful – to be an unbeliever – then we can revise our initial judgment with regard to this person and say based on better evidence that he was not a Christian after all. He was baptized, he was with Christians, and he claimed to be a Christian, but he was an impostor. On this view then, Christian principles led the NT writers to accept someone’s credible profession of faith at face value. But if that person later showed himself to be an unbeliever, the writers could revise that judgment and say that he was not really a covenant member after all. He was simply a fraud. And we know this because we know that true faith/salvation/etc. cannot be lost.

So what is wrong with viewing the statements made of new covenant members as “judgments of charity” (JOC)? To begin with, such an explanation is never explicitly taught. The biblical writers never use this concept/language by saying that it is only presumed that covenant members have such and such a status or such and such gifts/graces. Instead, they directly say who these people are (i.e., their “status”) and what they have been given. The JOC view is obviously quite important to some versions of Reformed systematics. If it were as important to the overall biblical message and if the biblical writers were really writing all of their letters/comments based on a tentative and revisable assumption, one would think that they would at least occasionally mention this fact. But they never do.

The writers do not say that they merely assume their audience members are holy, brethren, members of the Church of God, members of the New Jerusalem, etc. They do not tell them that they may have been baptized into Christ (and Jesus did not tell the apostles to baptize people in the hopes that they would be in Him). They do not tell them that they may have various promises and gifts but only if they have been “truly converted.” Over and over again, the writers plainly tell many people who they are and what they have been given. Notice that at this point, I’m not claiming that the JOC could have no biblical justification at all or that it could not even be inferred as a “good and necessary consequence.” But the point here is that this crucially important and far reaching concept is not held because its supporters found four or five clear examples where the principle itself is explicitly mentioned and described. Rather, the concept is generally held because it is thought to be a logically necessary arbiter between two lines of biblical data that seem to run counter to one another (i.e., covenantal objectivity on the one hand and some Reformed systematic doctrines such as the five points on the other hand).

Unfortunately, this arbitration is quite one-sided. To see this, we can think of all of the passages that teach on God’s exhaustive sovereignty and foreordination along with all of the passages that teach on man’s volitional choices and moral responsibility. There appears to be a real tension here, but the typical Reformed answer is that the two sets of passages are in fact compatible. It is the Arminian view that tries to remove the tension by effectively eviscerating God’s sovereignty through various qualifications and explanations. The Reformed community holds both concepts to be equally true and rejects the idea that there is a contradiction between them but it does not try to supply an exhaustive description of the mechanics of how the two concepts relate. The JOC attempts to explain a different tension, but as with the Arminian view just mentioned, it can only do so by cutting the legs out from under one (quite full) line of biblical data. Instead of defending both lines, one is protected by the sacrifice of the other. And yet this rather one-sided solution has not come about because it seems clearly to be taught in Scripture but rather because some think that it is logically necessary and because they do not know of anything else that will accomplish the “tension-removing” task. This is a very slender thread with which to hold and wield a rather tendentious and truncating hermeneutical weapon, especially one with such a wide purview. We should therefore be very slow to adopt and apply such a principle. Its prima facie plausibility is low.

But the JOC only loses plausibility when we focus in on the shear volume of material it would need to address. The JOC would be much more plausible if the Bible usually talked about covenantal status and gifts in third person language (e.g., the elect are holy, the truly converted have been given this and that) and only rarely talked about these things in the second person (e.g., you are saints, you have been baptized into Christ, you have been given this and that). In that case, the JOC would explain a few apparent exceptions in terms of the language of that which was the norm. But the Bible constantly speaks of these things in the second person and it does so using a variegated raft of terms, phrases, and even arguments. This is hardly an exception; it is the norm. If we find that we must qualify the norm out of existence, our system is in serious need of revision.

Things only get worse for the JOC when we note that the Bible links the status of covenant members with their privileges and responsibilities. Perhaps a JOC can be consistent with simple salutations or names, but when the Bible actually spends several sentences recording that people have been baptized into the body and thus have this or that privilege/responsibility, the JOC loses what little appeal it had left. How can one tell a child that he has the responsibility as a member of the family to take out the trash if his adoption into the family was really a JOC? Was he actually adopted into the family or not? If not, then the rest of the sentence – his privileges, responsibilities, etc. – become non sequiturs. We can’t have our cake and eat it too by telling him that he definitely has the responsibility of a family member but that it is only a JOC that he has the raison d’etre of that responsibility – actual adoption into the family.

Additionally, the JOC is not even applicable to much of the biblical data mentioned above. Once again, if the Bible went no further than salutations or simple, second person statements made to undifferentiated groups, a JOC with respect to any given individual within those groups would have some plausibility. But when the Bible tells us that a specific individual such as Simon Magus had faith, the JOC cannot apply even in theory. We are no longer talking about something said of a group that is true for most of its members but that may not be true for some (and we don’t know who those people would be). We are talking about something that is directly predicated of a specific individual. It is either true of him or it is not, and the Bible tells us that it is true. There is no ignorance here for which we must make an assumption.

Moreover, there are straightforward, generalized, didactic statements listed above where the JOC cannot apply. If I say to a group gathered in an auditorium, “I’m glad to see all of you ticket holders here tonight for this wonderful concert,” the JOC could have applicability. I am addressing a group in the second person by assuming that everyone in attendance has a ticket for the concert. But it is possible that a few people slipped into the auditorium without paying for tickets. If I found them during the intermission and had them thrown out, I could then revise my JOC with respect to these particular people. I now know that these individuals were in the group of ticket holders but they themselves did not have tickets. But third person, didactic propositions such as “Ticket holders can show their tickets at the concession stand for a free drink” cannot be candidates for a JOC. Such a statement is not a generalization addressed to a mixed group; it is a direct predication of anyone who is part of the subject. Biblical statements of this type include “Some hear the word of the kingdom, receive it with joy, and believe for a while,” “Branches that are in Christ but fail to bear fruit will be cast out,” “As many as have been baptized into Christ have put on Christ,” and “Some have tasted the heavenly gift”. Statements such as these are not subject to a JOC even in theory because they are statements of fact made about anyone in the subject group.

The Bible also discusses many specific gifts that can be lost. Obviously, the JOC is inapplicable here as well. It would simply make no sense to say that I am making a JOC with regard to the nature of some gift. The JOC is a principle used to address our ignorance regarding some individual within a group. The group in general has quality X but some specific individual may or may not have it. We don’t know for sure. But the Bible’s statements regarding gifts that can be lost are very different statements. They have nothing to do with our ignorance of an individual within a group. They are straightforward statements of fact about quality X. We do not need to know anything about any specific individual because individuals are not part of the subject of the statement. The quality itself is the subject and there is no ignorance regarding its nature.

Finally, if the JOC were true and ubiquitous throughout the NT, the universal answer to apostasy would be that apostates never had anything significant to begin with. We thought they were “in” but they later showed that they were still pagans. But numerous passages that address apostasy say the very opposite. In fact, the judgments described by them are predicated on the fact that what was said of the apostates was actually true. The basis of the judgment for adultery/treason was just that those judged really were part of God’s wife/nation and that they abandoned real gifts/grace. When parallels are drawn or when arguments are made in these passages (e.g., I Cor. 10; Heb. 10), they absolutely require that the apostates actually had what was predicated of them. If there was only a “judgment of charity,” the arguments would turn into rather bizarre non sequiturs. But the biblical statements regarding what apostate covenant members lose are not speculative judgments capable of being revised. These states are quite clear: the apostates actually had these gifts and they actually squandered them, and such treason is the very basis for their harsh punishment.

In short, the JOC is a manifestly tendentious and systematically driven hermeneutical weapon, it is not directly taught by the Bible, it can not do justice to the shear volume of certain ways in which the Bible speaks/teaches, it cannot make sense of familial responsibilities, it is not even applicable to many biblical statements regarding the objectivity of the covenant, and it is contradicted by the arguments and assumptions related to apostates and their judgment. There is no way to be charitable to the JOC. It simply doesn’t work.

The Hypothetical Warnings View

There is another view in Reformed circles that I believe has the effect of downplaying the force of the new covenant “warning passages” (and thus, it downplays the objectivity of the covenant). This view states that the new covenant warnings are “hypothetical.” This is to say that the warnings accurately describe what would happen if apostasy were to occur, but in reality, we know that such apostasy does not or can not occur because of doctrines such as the perseverance of the saints. We are therefore told that the point of the warning passages is to be a means by which God keeps His elect from actually doing what the passages describe. So the passages are not irrelevant or useless. While the content of the passages – the apostasy – can not occur, the passages themselves are used by God to sanctify and preserve His elect.

I do not have any problem with the “warnings-as-a-means-of-encouraging-faithfulness” part of this explanation. I have no doubt that God’s warnings are in fact one way by which He keeps some people faithful to Him. But the “hypothetical” part of this explanation cannot be true because a number of the major NT warnings are not simply warnings. They are warnings that draw direct parallels with situations where people had in fact apostatized. God did not simply say, “This is what would happen if someone were to fall away.” He said, “If you fall away, I will judge you like I judged these other apostates on whom I had shown grace and showered with many gifts.” There was nothing hypothetical about the apostasy of the Jews in the wilderness and there was nothing hypothetical about the Jews in the 1st Century whom the Roman Christians saw cut out of the covenant. And the warnings given to the Christians drew direct and explicit parallels between the situations of those Jews and the situation of the Christians. Thus, there was nothing hypothetical about their situation. The warnings given to the Christians were just as real as those given to the Jews. Faith believes the warnings and trembles. It is covenantal presumption (e.g., “Abraham is our father,” Luke 3:8; John 8:39) that tries to brush them off as hypothetical but impossible.

We can also note an interesting contrast. Some who hold to the hypothetical warnings view try to draw a major contrast between the old covenant and the new covenant at this point. They admit that real apostasy from the old covenant was possible and did occur but they claim that things are different under the new covenant. Such apostasy is not possible now because the new covenant is unbreakable; it is only made with the eschatologically elect.

Yet at the very place where this view tries to draw a stark contrast, the NT warnings draw a direct parallel. Far from being unlike the old covenant when it comes to the subject of apostasy, the new covenant is very much like it. To the Corinthian Christians for example, Paul wrote that the Jews in the wilderness had the same spiritual gifts and yet they fell away. Thus, the punch line was that the Corinthians should take heed and learn from this example which was written in Scripture for them. Their situation was directly analogous to and comparable with the Jews in the wilderness. They had the covenant gifts but they too could fall. Paul also told the gentile Roman Christians not to be presumptuous or they would be cut out of the covenant tree just like the natural Jewish branches that had been cut out. In the letter to the Hebrews, we are even given something more. It is not just that there is a parallel drawn with those under the old covenant. Several times, an a fortiori argument is constructed. Thus, we are told that the judgment for apostasy from the new covenant would be much more severe than was the judgment for apostasy from the old covenant. Not only is NT apostasy possible and not only is it like OT apostasy, it is actually OT apostasy on steroids.

Thus, at the very place where some try to draw a strong contrast, the NT draws a strong parallel and even goes beyond that parallel. Under the old covenant, apostasy was adultery. Some would have us believe that such adultery cannot really occur under the new covenant because those united to Christ cannot betray Him. Those who do abandon Christianity, it is therefore claimed, were never really Christians at all. So instead of adultery, their crime has been lowered to spiritual fornication coupled with misrepresentation (identity theft, perhaps?). Yet the NT says the very opposite. Not only is betrayal of the new covenant like that of the old covenants, it is actually worse: adultery on steroids as it were. To whom much is given, much is required. Non-elect (in the Westminster Confession sense of ‘elect’) members of the new covenant have not been given less than non-elect members of the old covenant, they have been given more. This is precisely why the warning language in the NT is so strong.

This stark difference can be summarized from another angle: the way in which conclusions are drawn. Some rightly note that the gifts given under the new covenant are “greater” than those given under the old covenant. This supposedly leads to the fact that the new covenant is unbreakable. Therefore, “true” believers cannot fall away, and those who do fall away never had any real or significant covenant status/gifts to begin with. So they need to repent and believe for the first time so that they may become Christians for the first time. But the Book of Hebrews draws the opposite conclusion. All of its early chapters are given over to arguing that the new covenant in Jesus is superior to and a fulfillment of the old covenants. But far from drawing conclusions regarding the impossibility of apostasy from such a superior covenant, the book concludes that such apostasy is not only possible but is actually worse than apostasy from the old covenants. Some hypothetical warnings supporters look at the newness and greatness/superiority of the new covenant and conclude that it is so great that one cannot fall from it. But the book of Hebrews tell us that because of the newness and greatness of the new covenant, there can be such a fall and that it would be much worse than apostasy in the old age. The difference is striking.

Conclusion

So where does all of this leave us? Has this essay denied any meaningful notion of Reformed doctrines such as limited atonement and perseverance of the saints? No, but it does argue against simplistic, reductionistic versions of such doctrines. I have often seen (and been one of) those in Reformed circles who read the NT as if it were written like a philosophy textbook – dealing with generalized doctrines in an atemporal, systematic, and comprehensive manner. From this reading, they form a set of universal, unqualified propositions. These propositions (which are pretty much all from decretal theology) address topics such as election, regeneration, perseverance, etc. The relevant terms are defined in technical and restrictive ways. The propositions are then arranged in logical/temporal order. This “ordo salutis,” Tulip, or similar systematic construction is then used to draw all kinds of unwarranted conclusions – conclusions that bump pretty hard up against many “plain” NT passages. If someone does not persevere, it proves that he had nothing real to begin with. Otherwise, if we admit that he had been shown real covenantal grace and been given many gifts, we will have contradicted one or more of our decretal propositions.

But none of this follows. Perseverance, for example, does not require us to say that non-persevering people never received anything significant in terms of covenantal grace. And the idea of a limited, efficacious atonement does not logically require an all or nothing approach whereby someone either perseveres to eternal life because Jesus died for him or he gets nothing because Jesus’ death was not meant to secure anything at all for him. If Jesus died to secure the temporary faith of Simon Magus (and only that much for him), this still means that the atonement was limited in scope and fully efficacious regarding that which it was meant to secure. But we define “regeneration” differently from the biblical usage (usually as if it was some kind of permanent metaphysical transformation or infusion of a substance called “grace”), link it absolutely and completely to election (which is also defined in a very narrow and technical way), and conclude that only the “elect” can be “regenerate.” This by itself would not be “fatal” but we then combine it with a strong tendency to put the protective fence up three miles away from the actual systematic doctrines it is meant to protect. And so the “reprobate” (even those in the Church) can not have anything that even remotely smells of this internal metaphysical change which means, in the end, that they can not have (or lose) anything that the Bible clearly and repeatedly says that they have and/or lose. And so we must engage in sometimes embarrassing hermeneutical gymnastics in order to “explain” (or is it explain away?) passages like the ones catalogued above. For a community that prides itself on its intellectually sophisticated and mature theology, this does not make us look scholarly.

We rightly object to this kind of thing when performed by Arminians (e.g., rationalistic deductions from statements about human responsibility and choice that contradict numerous passages that describe God’s sovereignty) for example. But we often do the very same thing and we do it in order to guard against contradictions which do not exist (e.g., the belief that someone can have “true” faith for a time and lose it does nothing to endanger good, hearty doctrines of sovereignty, election, and perseverance). Before the foundation of the world, God foreordained that John Doe would accept Christ as Lord and Savior and would have true faith. Christ died to secure this gift for Doe. But God also decreed that Doe would later abandon his faith and leave the body of Christ, and sometime after coming to the faith, Doe did in fact choose of his own volitional will to abandon Christ. And so Doe’s final state was worse than his former unbelief – worse than the unbelief of someone who had never accepted Christ. God is sovereign, man makes meaningful and volitional choices, Christ’s atonement secures all that it was meant to secure, those who have been so ordained do persevere to eternal life, real apostasy from God does occur, and such apostasy is far worse than the unbelief of those who have never been the recipients of covenantal grace.

There is a final misunderstanding that I want to address here. When a Federal Vision advocate describes the objectivity of the new covenant, it is common for his critics to see the spectre of nominalism raising its ugly head. If people really do get all of these gifts by virtue of their covenant membership, if they really are in Christ by virtue of their baptism, and if they really are “Christians” and “holy” without regard to how trusting or faithful they are, then surely we have here the recipe for presumption. People will be inoculated against a true “inner” trust in God by being told that they are already Christians simply because they were baptized. They will be led to trust in outward rituals and in their objective status even though they have not really been converted and do not really have faith in God. The Federal Vision therefore eliminates the need for an explicit conversion and/or “closure with God” and it encourages nominalism.

The existence of this objection is understandable. After all, we have plenty of examples throughout the history of Christendom where a theological paradigm that contained a robust view of objectivity helped foster and exacerbate formalism and unfaithfulness. American Protestants are probably most familiar with how this works in some parts of Roman Catholicism or Anglicanism for example. Theologically liberal groups usually have at least some view of the objectivity of Christianity and this only feeds the rampant nominalism therein. One of the main tools used by “conservative, Bible-believing” Christians to combat this enemy is the punctiliar, one-time conversion/confession. This conversionistic paradigm insists on a specific point at which the individual has become mature enough to convert/confess/make the faith his own. Without this explicit transition point, the great fear is that there will be no real defense against formalism. And the Federal Vision, with all of its talk of covenantal objectivity, doesn’t really seem to provide this kind of subjective, punctiliar conversion point.

But the critics of covenantal objectivity should realize that not all views of objectivity originate from the same theological paradigm, and it is quite possible for two groups to hold similar views of some concepts for very different reasons. And this can lead these groups to implement these concepts in very different ways and to draw very different implications from them. As it turns out, the Federal Vision advocates’ view of covenantal objectivity operates very differently from the aforementioned formalistic groups, and it actually has stronger tools to fight formalism than does the conversionistic paradigm. For instead of a single conversion, those who see the objective aspects of the covenant are also comfortable viewing “regeneration” as a lifelong process. A two year old should have behavior and a personal confession that are age-appropriate. The same goes for a 10 year old, a 20 year old, and so forth. Every day and at every age, it is central to covenantal identity that we make age-appropriate prayers of repentance, confessions of our faith, and the like, and the maturity level of these things should grow as we get older. Moreover, it is not in spite of the objectivity of the covenant that these things should occur but because of it. It is just because we actually have the status and gifts mentioned above that we have the responsibility to constantly confess this faith while fully trusting the Lord for all things and to appropriate and grow in all the gifts we have been given.

Thus, the fear of formalism can be countered by pointing out that the Federal Vision does not just look for or focus on a one-time transition. It focuses on an entire life of transitioning from the old man to the new man – working out salvation with fear and trembling. During every day and at every age, Christians should be exhibiting age-appropriate faith, confession, and behavior (and this applies in private prayer, in family life, in public worship, on the street – everywhere).

Finally, the charge of formalism can be finished off by pointing out what should be obvious: the Federal Vision has a strong and developed view of apostasy (and therefore of Church discipline). It often seems that when critics charge FV advocates with the promotion of formalism, they are not paying attention to the whole story. But the concepts of covenantal objectivity and apostasy can not be separated and dealt with in isolation. They are, in fact, intimately related. It is just because the status and gifts of the covenant are real that apostasy really exists. The adultery is real precisely because the marriage really exists. Thus, while some liberal groups may have a concept of objective Christendom that lacks discipline, such a view has no connection with the FV. After all, FV advocates are strong supporters of doctrines such as sola Scriptura and tota Scriptura. Thus, they take the NT warning passages seriously and they teach and discipline accordingly.

All the Promises of God VI

2007-11-08T10:42:00.001-06:00

The Cleansing-Incorporation Rites

Circumcision was the sacramental sign of entrance into the Abrahamic covenant. It was a sign that marked one out as a covenant member and sealed the promises of the covenant to the recipient.

And God said to Abraham: “As for you, you shall keep My covenant, you and your descendants after you throughout their generations. This is My covenant which you shall keep, between Me and you and your descendants after you: Every male child among you shall be circumcised; and you shall be circumcised in the flesh of your foreskins, and it shall be a sign of the covenant between Me and you. He who is eight days old among you shall be circumcised, every male child in your generations, he who is born in your house or bought with money from any foreigner who is not your descendant. He who is born in your house and he who is bought with your money must be circumcised, and My covenant shall be in your flesh for an everlasting covenant. And the uncircumcised male child, who is not circumcised in the flesh of his foreskin, that person shall be cut off from his people; he has broken My covenant.” (Gen. 17:9-14 cf. Rom. 4:11)

All those who were either born into or “bought into” a covenant family had both the privilege and the obligation to receive the sign of circumcision – a rite so important that it could be equated with the covenant itself (“This is My covenant… Every male child among you shall be circumcised…”). Failure to do so would mean that an individual would be “cut off” (karath) from the covenant community. This is why it was so important for Moses’ wife Zipporah to “cut off” (karath) the foreskin of her son’s flesh (Ex. 4:25). Either the foreskin was cut off or the person was cut off. Gentiles outside of such a covenant family could also enter the covenant through circumcision. It was not obligatory for them to do so, but they would need to be incorporated into the covenant if they wanted to partake of the Passover communion meal (Ex. 12:48). True communion with the covenant community presupposed union with it.

Along with being an incorporation rite, circumcision was also a cleansing rite. It cut off the old flesh in order to present a new man to God. This re-generation, performed on the male organ of generation no less, provided a graphic picture of God’s cleansing work whereby He cuts away the old, dead heart (Deut. 10:15, 16; 30:6; Jer. 4:4). Sinful man needs the old creation cut away before he can enter the new humanity.

There were other sacraments of incorporation and cleansing given by God in the Old Testament besides circumcision. The flood was the original circumcision. God was grieved that man had filled up the measure of his wickedness, so the mass of humanity was “cut off [karath] by the waters of the flood” (Gen. 9:11). However, He also reserved a remnant for Himself and He saved it through the waters. This salvation through water was in fact a baptism and an Old Testament type of which Christian baptism is the antitype (I Pet. 3:20, 21). He brought the people out of the old and dying creation and into a new creation via the circumcision/baptism of the flood.

The Red Sea crossing was another rite of cleansing and incorporation. “Moreover, brethren, I do not want you to be unaware that all our fathers were under the cloud, all passed through the sea, all were baptized into Moses in the cloud and in the sea…” (I Cor. 10:1, 2). The Red Sea crossing was a baptism. If God’s people had previously been circumcised into Abraham, then this generation was baptized into Moses. Through this crossing, the Israelites (as the new humanity) were brought out of the land of death and into life (cf. the cleansing of Israel, Ezek. 16:3, 4). The crossing of the Jordan into the Promised Land functioned in the same way. It was another circumcision. The Israelites who entered the land had not been circumcised; they were the sons and daughters of those who were required to wander the wilderness for 40 years due to disobedience. When the second generation reached the Jordan, God held back the waters just as He had done with the previous generation at the Red Sea (Josh. 3; 4). But God did not just withhold the waters; the text says four times in three separate verses that He “cut off” (karath) the waters (Josh. 3:13, 16; 4:7). And just after this crossing, the Israelites were required to get circumcised (Josh. 5:2-7). Their foreskins were rolled away and cut off, because as God told them, “This day I have rolled away the reproach of Egypt from you.” (Josh. 5:9) The alternative to this would be for the people themselves to be “cut off” as God had done with the generation of the flood and as He would do again with the wicked inhabitants of the land (karath; Deut. 12:29; 19:1). These crossings were therefore baptisms and circumcisions. The waters were cut off for the covenant community so that they would not be cut off like the wicked.

Finally, we may consider some of the sprinkling, pouring, and washing rites that were instituted under the Mosaic covenant. The water crossings were not the only Old Testament baptisms; the New Testament also refers to the Mosaic washing rites which the writer of Hebrews terms “various washings” – various “baptisms” (diaphorois baptismois; Heb. 9:10). They involved water, oil, and blood, and through these baptisms the unclean were made clean. The writer referred to three such baptisms in some detail after he introduced the general topic. He first mentioned the sprinkling of sacrificial animal blood for cleansing of the unclean (Heb. 9:12, 13). Three examples of this kind of cleansing are as follows. A leper was cleansed by being sprinkled with blood, washed with water, and by having oil poured on his head (Lev. 14:1-32). An unclean house was also sprinkled with water and blood so that it would be cleansed (Lev. 14:51, 52). Finally, if someone came into contact with death, he was unclean. A mixture of heifer ashes and water was then sprinkled on him for cleansing (Num. 19:14-19). The second baptism mentioned by the writer of Hebrews is Moses’ sprinkling of blood and water on the people for the inauguration of the covenant (Heb. 9:18-20 cf. Ex. 24:1-8). The third baptism he listed is Moses’ subsequent sprinkling of blood on the tabernacle and its utensils (Heb. 9:21 cf. Ex. 24:6; Lev. 8:15, 19; 16:14-16).

In addition to cleansing the recipient, the various washings also served as consecration anointings and incorporation rites. Levites, for example, were set apart for the priesthood by a baptism. These would-be priests were to be anointed by the pouring of oil on the head (Ex. 29:7-9; Lev. 8:10-12), and they were to be sprinkled with blood and oil (Ex. 29:21; Lev. 8:30). They were also cleansed by being sprinkled with water (Num. 8:5-7). Through these washings and “anointings” (mashach; Ex. 29:7), the priests were “sanctified” (qadash; Ex. 29:21) to the holy work of the priesthood. Therefore, these various washings were cleansing rites. In addition, some were for incorporation into the covenant or the priesthood while others were for restoration to full covenant communion for the covenant member who had become unclean.

Many years after these rites were instituted, the prophet Isaiah spoke God’s promise to restore His fallen and exiled people and pour out His Spirit on them.

“Fear not, O Jacob My servant;
and you, Jeshurun, whom I have chosen.
For I will pour water on him who is thirsty,
and floods on the dry ground;
I will pour My Spirit on your descendants,
and My blessing on your offspring;
they will spring up among the grass
like willows by the watercourses.” (Is. 44:2, 3)

Here we see the connection between water being poured on the people and the Holy Spirit being poured down upon them. As Jeremiah related of the restored people, “I will cleanse them from all their iniquity by which they have sinned against Me…” (Jer. 33:8). Some measure of the blessing of the Spirit was given to those who returned from the Babylonian exile, but as was discussed earlier in connection with Ezekiel’s vision of a new temple, the promises offered here go well beyond the post-exilic period. The full and ultimate restoration had yet to come, but when it came, it would bring a new and glorious cleansing.

“For I will take you from among the nations, gather you out of all countries, and bring you into your own land. Then I will sprinkle clean water on you, and you shall be clean; I will cleanse you from all your filthiness and from all your idols. I will give you a new heart and put a new spirit within you; I will take the heart of stone out of your flesh and give you a heart of flesh. I will put My Spirit within you and cause you to walk in My statutes…” (Ezek. 36:24-27)

The prophet Joel spoke of the new age using similar language.

“And it shall come to pass afterward
that I will pour out My Spirit on all flesh;
your sons and your daughters shall prophesy,
your old men shall dream dreams,
your young men shall see visions.
And also on My menservants and on My maidservants
I will pour out My Spirit in those days.” (Joel 2:28, 29)

The people would need these restorative cleansings because they had become unclean. The unfaithful Israelites had turned their circumcision into uncircumcision.

And the Lord said, “Because they have forsaken My law which I set before them, and have not obeyed My voice…” therefore thus says the Lord of hosts, the God of Israel: “Behold, I will feed them, the people, with wormwood, and give them water of gall to drink. I will scatter them also among the gentiles, whom neither they nor their fathers have known.”…

“Behold, the days are coming,” says the Lord, “that I will punish all who are circumcised with the uncircumcised – Egypt, Judah, Edom, the people of Ammon, Moab, and all who are in the farthest corners, who dwell in the wilderness. For all the nations are uncircumcised, and all the house of Israel are uncircumcised in the heart.” (Jer. 9:13, 15, 16, 25, 26)

Paul taught the same regarding the unfaithful Jews of his day. After pointing out their unfaithfulness (Rom. 2:17-24), he went to the heart of the matter: The cleansing rite of circumcision becomes uncircumcision to the one who is unfaithful to the covenant, while the faithfulness of the uncircumcised is counted as (i.e., reckoned as) circumcision.

For circumcision is indeed profitable if you keep the law; but if you are a breaker of the law, your circumcision has become uncircumcision. Therefore if an uncircumcised man keeps the righteous requirements of the law, will not his uncircumcision be counted as circumcision? And will not the physically uncircumcised, if he fulfills the law, judge you who, even with your written code and circumcision, are a transgressor of the law? For he is not a Jew who is one outwardly, nor is circumcision that which is outward in the flesh; but he is a Jew who is one inwardly; and circumcision is that of the heart in the Spirit… (Rom. 2:25-29).

These words would no doubt have been shocking to a first century Jew, but the ones who were faithful to the covenant and who knew their history saw the connection.

The fulfillment of the Abrahamic covenant by the new covenant in Christ brought changes to the mode of the cleansing rituals. Under the new covenant, baptism fulfils the function of circumcision and the various washings. Christ is the head of the new covenant. Just as people were circumcised into Abraham and baptized into Moses under the old covenants, so now people are baptized into Jesus under the new covenant. Baptism is a “putting on” or “clothing” of Christ. “For you are all sons of God through faith in Christ Jesus. For as many of you as were baptized into Christ have put on Christ.” (Gal. 3:26, 27). Under the old covenant, the sign of the Abrahamic promises was circumcision. It was the incorporation/cleansing rite of the Abrahamic covenant. It identified the seed. But because of Christ’s fulfillment of the Abrahamic covenant and promises and His inauguration of the new covenant, one becomes a son through baptism into Him. It unites one to Christ and to the benefits of His death. “Do you not know that as many of us as were baptized into Christ Jesus were baptized into His death? Therefore we were buried with Him through baptism into death, that just as Christ was raised from the dead by the glory of the Father, even so we also should walk in newness of life.” (Rom. 6:3-5). Because it is a putting on of Christ, baptism reflects the point where the Spirit grafts someone into the body of Christ (I Cor. 12:13).

Additionally, just as the various OT rites mentioned above cleansed the recipient (thus opening the way for his covenantal incorporation or restoration), so also baptism cleanses the recipient today (Acts 22:16; Eph. 5:26; Titus 3:5). (Note: The subject here is not “baptismal regeneration” but the broadly parallel nature of certain covenant rites. No assumptions should be made here regarding my view of the former.) Thus, baptism is for the new covenant what circumcision was for the Abrahamic covenant: the cleansing rite of entrance into the covenant. So with the fulfillment of the Abrahamic covenant by the new covenant in Christ, baptism has fulfilled circumcision. “In Him you were also circumcised with the circumcision made without hands, by putting off the body of the sins of the flesh, by the circumcision of Christ, buried with Him in baptism, in which you also were raised with Him through faith in the working of God, who raised Him from the dead.” (Col. 2:11, 12)

Since the Abrahamic covenant has been transformed and fulfilled by the new covenant, circumcision is no longer a theological requirement (Acts 15:1-29). One is now circumcised unto God by being baptized into Christ. However baptism, unlike circumcision, does not require the shedding of blood. This is because Christ has shed His blood once and for all as an unrepeatable sacrifice for our sins. No more blood needs to be shed (Heb. 7:26, 27; 9:9-12, 24-28; 10:10-18).

Indeed, the requirement of circumcision today would be a denial of Christ’s finished work of fulfillment. It would be a claim that the old covenants are still operating as they were before Jesus came. As we have seen, Paul wrote his epistle to the Galatians in order to address this very error: the Judaizers claimed that circumcision was still theologically relevant and necessary. But the one who insists on this would be attempting to roll back the clock as it were and to put himself “under the law” (Gal. 4:21) – under the Mosaic covenant apart from its Messianic fulfillment. And this would be a package deal. The Judaizers taught that the gentiles needed to get circumcised and keep all of the Mosaic ordinances because the Mosaic covenant was the continuation of and partial fulfillment of the Abrahamic covenant. Those under Moses were the seed of Abraham whom God had set apart to be His people. So if Jesus did not fulfill the Abrahamic covenant, then he did not fulfill the Mosaic covenant either. But Jesus was born “under the law” (Gal. 4:4) in order to fulfill it. He took its curses upon Himself and spread its blessings to the world by the same faith that Abraham had while uncircumcised. Therefore, someone who insisted on circumcision today would lose Christ as his sin offering and fall from the grace of the covenant because he would be denying the only way in which the Abrahamic covenant operates today – in Christ.

Stand fast therefore in the liberty by which Christ has made us free, and do not be entangled again with a yoke of bondage. Indeed I, Paul, say to you that if you become circumcised, Christ will profit you nothing. And I testify again to every man who becomes circumcised that he is a debtor to keep the whole law. You have become estranged from Christ, you who attempt to be justified by law; you have fallen from grace….

As many as desire to make a good showing in the flesh, these would compel you to be circumcised, only that they may not suffer persecution for the cross of Christ…. But God forbid that I should boast except in the cross of our Lord Jesus Christ, by whom the world has been crucified to me, and I to the world. For in Christ Jesus neither circumcision nor uncircumcision avails anything, but a new creation. (Gal. 5:1-4; 6:12, 14, 15)

Jesus came as the new Adam, and central to His messianic program was a new creation. From the old categories of Jew and gentile, He created one new man (Eph. 2:11-18). The physical rite of circumcision was therefore no longer applicable, for the new man comes by way of baptism into Jesus. It is this cleansing rite – this sacrament of entrance into the new covenant – that sums up and fulfills all of the old covenant cleansing rituals. Paul’s pun to the Philippian Christians encapsulates the matter. They were the true “circumcision” (peritome) while the unbelieving Jews around them had become the “mutilation” (katatome; Phil. 3:2, 3).

All the Promises of God V

2007-10-19T10:57:00.001-05:00

The Seed

Integral to the Abrahamic covenant was the promise of a great seed. Abraham’s offspring would be blessed by God; they would be numerous and they would constitute a thriving nation.

Now the Lord had said to Abram: “Get out of your country, from your family and from your father’s house, to a land that I will show you. I will make you a great nation; I will bless you and make your name great; and you shall be a blessing. I will bless those who bless you, and I will curse him who curses you; and in you all the families of the earth shall be blessed. (Gen. 12:1-3)

But Abram said, “Lord God, what will You give me, seeing I go childless, and the heir of my house is Eliezer of Damascus?” Then Abram said, “Look, You have given me no offspring; indeed one born in my house is my heir!” And behold, the word of the Lord came to him, saying, “This one shall not be your heir, but one who will come from your own body shall be your heir.” Then He brought him outside and said, “Look now toward heaven, and count the stars if you are able to number them.” And He said to him, “So shall your descendants be.” (Gen. 15:2-5)

Along with the seed promise, God also promised Abraham that through his seed, all the nations of the world would be blessed (Gen. 12:3; 18:18; 22:18). Many Protestants who read of the promise of Abraham’s seed think that it is an unconditional promise and that it applies simply and directly to racial Jews. But there are problems with this view.

The promise was guaranteed and infallible to be sure, but not in the way that is usually assumed. In fact, there was a real sense in which it was conditional. For example, with respect to any individual Old Testament Jew, the promise was never an unconditional statement. Individual Jews could be and were cut off from the covenant. Many examples from the Old Testament could be given. But right from the beginning, we learn that “the uncircumcised male child, who is not circumcised in the flesh of his foreskin, that person shall be cut off from his people; he has broken my covenant” (Gen. 17:14). Later, we learn that one could be cut off from the covenant because of a “high-handed” sin (Num. 15:30, 31). And Old Testament history is replete with examples of this. It should be no surprise then to see that many racial Jews in the O.T. were not ultimately saved.

For who, having heard, rebelled? Indeed, was it not all who came out of Egypt, led by Moses? Now with whom was He angry forty years? Was it not with those who sinned, whose corpses fell in the wilderness? And to whom did He swear that they would not enter His rest, but to those who did not obey? So we see that they could not enter in because of unbelief. (Heb. 3:16-19)

Though they partook of the covenant blessings for a time (cf. I Cor. 10:1-10), their genealogy did not make their covenant membership permanent and it did not guarantee their salvation. Early in the Gospel of Luke, the prophet John’s words to a multitude of Jews is recorded. “Therefore bear fruits worthy of repentance, and do not begin to say to yourselves, ‘We have Abraham as our father.’ For I say to you that God is able to raise up children to Abraham from these stones…. Therefore every tree which does not bear good fruit is cut down and thrown into the fire.” (Luke 3:8, 9) Circumcision brought them into the covenant, but it did not guarantee their faithfulness or perseverance. Through rebellion, Jews could and did turn their circumcision into uncircumcision (Rom. 2:17-29). And when they did this, they failed to inherit the fulfillment of the promises or to enter into God’s rest.

Moreover, the promised seed was not nearly as “racial” as many imagine. Though Israel as a nation was marked out by God to be His holy and priestly people, gentiles who desired this relationship and responsibility could enter into this covenant as well. From the very beginning, most of the “original Jews” were not actually descendents of Abraham. “So Abraham took Ishmael his son, all who were born in his house and all who were bought with his money, every male among the men of Abraham’s house, and circumcised the flesh of their foreskins that very same day, as God had said to him.” (Gen. 17:23) Here we have a reference to Abraham’s slaves as well as those under his command (Gen. 14:14). These were not his relatives or offspring. Later, we see that any gentile could be grafted into the covenant (Ex. 12:48).

But if it was common for Jews to be cut off from the covenant and gentiles to be grafted in, how can we speak of a guaranteed and infallible covenant promise? How can it be a promise? The New Testament gives an answer that may be as surprising to us today as it was to the 1st century Jews who first heard it.

The big-picture context for Paul’s letter to the Galatians was the perversion of the gospel (Gal. 1:6-9). The gospel is the proclamation that Jesus is the Messiah-King who came to fulfill the old covenants by restoring His people to a new covenant and incorporating the gentiles into that covenant. He embodied the old covenants in order to transform them into something more glorious: the new covenant in Him. The primary issue addressed by Paul in Galatians involved the covenant status of gentiles. Had the gentiles been brought into the new covenant as gentiles or did they first need to be circumcised and keep the Mosaic ceremonial laws (thus becoming Jews) before they could be real Christians? Was the Abrahamic covenant still operative in the Old Testament sense; was it still in operation as it had been before the Messiah came?

The event that brought the issue to a head was Peter’s separation from the gentiles during table fellowship. Paul first rebuked Peter publicly for this behavior.

Now when Peter had come to Antioch, I withstood him to his face, because he was to be blamed; for before certain men came from James, he would eat with the gentiles; but when they came, he withdrew and separated himself, fearing those who were of the circumcision. And the rest of the Jews also played the hypocrite with him, so that even Barnabas was carried away with their hypocrisy. But when I saw that they were not straightforward about the truth of the gospel, I said to Peter before them all, “If you, being a Jew, live in the manner of gentiles and not as the Jews, why do you compel gentiles to live as Jews? (Gal. 2:11-14).

Biblically, table fellowship is koinonia – the communion of the saints. By separating from the gentiles at table fellowship, Peter was actively denying that God had created one new man from the two old men in Jesus. His behavior presupposed that the Jew-gentile distinction was still in place. Quite apart from whether or not he meant to do this, he was saying that the gentiles had not really been grafted into the covenant. Thus, he was “not straightforward about the truth of the gospel” (Gal. 2:14). This is the issue in Paul’s epistle to the Galatians. Who are the people of God? Or perhaps more specifically, how can one be part of the God’s covenant family? Just behind this, of course, is the nature of the covenant after the Messiah had come. There is a very short path from Peter’s behavior to the belief that Jesus had not fulfilled and transformed the covenants in the way that the apostles were teaching. Instead, the idea was that the old covenants were still in place and operated just as they always had. In fact, this was the belief of those Jews who came from Jerusalem and caused Peter to waver.

Thus, after discussing his rebuke of Peter, Paul turned to the views of the Jewish false teachers (the “Judaizers” as they are known today) and their disastrous effects on the Galatian gentiles. He launched into a series of arguments designed to show that the gentiles who were in Christ were, because of that relationship, heirs to the Abrahamic promises. The gentiles did not need to be circumcised into the Abrahamic covenant in order to inherit the promises; they already had the promises in Christ. These promises were, in fact, the very gospel itself.

Therefore He who supplies the Spirit to you and works miracles among you, does He do it by the works of the law, or by the hearing of faith? – just as Abraham “believed God, and it was accounted to him for righteousness.” Therefore know that only those who are of faith are sons of Abraham. And the Scripture, foreseeing that God would justify the gentiles by faith, preached the gospel to Abraham beforehand, saying, “In you all the nations shall be blessed.” (Gal. 3:5-8 quoting Gen. 12:3; 15:6; 18:18; 22:18)

The conclusion to this was obvious. “So then those who are of faith are blessed with believing Abraham” (Gal. 3:9).

The reason this is true is because the Mosaic covenant (i.e., “the law”) was not the same as the covenant promises. “Yet the law is not of faith, but ‘the man who does them shall live by them.’” (Gal. 3:12 quoting Lev. 18:5) The law was not of faith because it was a present reality that the people already had. They did not have to hope and trust that they would get it some day; they already had it. But the promises related to future actions on God’s part. The people were to live within the covenant according to God’s command in Leviticus while trusting by faith that God would fulfill His promises. He did this by sending Jesus to take the curse of the law upon Himself so that the gentiles would receive the blessing of Abraham and the promise of the Spirit (Gal. 3:13, 14). Jesus is the connecting link between Abraham and the gentiles, for He is the true Seed of Abraham in whom the promises are infallibly fulfilled.

Now to Abraham and his seed were the promises made. He does not say, “And to seeds,” as of many, but as of one, “And to your seed,” who is Christ. And this I say, that the law, which was four hundred and thirty years later, cannot annul the covenant that was confirmed before by God in Christ, that it should make the promise of no effect. For if the inheritance is of the law, it is no longer of promise; but God gave it to Abraham by promise. (Gal. 3:16-18).

God gave His promise to Abraham before the law and independent of it, so the law could not have been the true fulfillment of the promise. It was a foreshadow to be sure, but it was not the final goal of the promise. That final goal was Jesus, the true Seed in whom the promises are fulfilled.

What then was the point of the law? “But before faith came [i.e., before the fulfillment came], we were kept under guard by the law, kept for the faith which would afterward be revealed. Therefore the law was our tutor to bring us to Christ, that we might be justified by faith. But after faith has come, we are no longer under a tutor.” (Gal. 3:23-25) Paul made the same point just a few sentences later. “Now I say that the heir, as long as he is a child, does not differ at all from a slave, though he is master of all, but is under guardians and stewards until the time appointed by the father.” (Gal. 4:1, 2) The law was a good thing. It was a guard and a “tutor” (paidagogos) – the one in the household responsible for training up the children. Before the Messiah came, the Mosaic covenant played the role of a “steward” (oikonomos) – one who rules and manages a house. The law guarded, trained, and managed God’s people until “the time appointed by the father” when the true Heir would come and claim His house (cf. Heb. 3:1-6). The Mosaic covenant was to bring God’s people to Christ. Thus, once the true Heir had arrived, the steward’s job was done.

Therefore the children of Abraham are all those (whether Jew or gentile) who have been baptized into covenant with the true Seed because of their faith in Him and what He had done.

For you are all sons of God through faith in Christ Jesus. For as many of you as were baptized into Christ have put on Christ. There is neither Jew nor Greek, there is neither slave nor free, there is neither male nor female; for you are all one in Christ Jesus. And if you are Christ’s, then you are Abraham’s seed, and heirs according to the promise. (Gal. 3:26, 29)

All those who have been baptized into Christ – both Jew and Greek – are Abraham’s seed and heirs to the promises specifically because they have been united to Jesus, the true Seed and Heir to the promises. The prophets had foretold of a time when the gentiles would be brought into the covenant (Is. 42:5-7; 49:1-9; 56:1-8; Acts 13:46-48; Rom. 9:22-29; 15:8-12), and that time had come. God’s promise to bless the nations through Abraham’s seed had been realized because God had given Jesus to the nations. Thus, both the seed promise and the promise to the nations have been and continue to be realized in Christ. In Him, Christians of every tribe, tongue, and nation are Abraham’s seed. They are the ones who receive the Abrahamic blessings and promises. “Christ has redeemed us from the curse of the law, having become a curse for us (for it is written, ‘Cursed is everyone who hangs on a tree’), that the blessing of Abraham might come upon the gentiles in Christ Jesus, that we might receive the promise of the Spirit through faith.” (Gal. 3:13, 14)

Paul made much the same point in his epistle to the Romans. After showing Jews that their covenant membership did not automatically ensure their salvation (Rom. 2; 3), Paul turned his attention to Abraham. The patriarch, Paul argued, proves an example of justification apart from circumcision. Thus, he is the father of all uncircumcised believers (gentiles) along with the faithful Jews (Rom. 4:9-12). “Therefore [the promise] is of faith that it might be according to grace, so that the promise might be sure to all the seed, not only to those who are of the law [i.e., Jews], but also to those who are of the faith of Abraham [i.e., the uncircumcised], who is the father of us all (as it is written, ‘I have made you a father of many nations’)...” (Rom. 4:16, 17). This is why Paul could make a statement to the Corinthian Christians in passing that would otherwise have made no sense. “Moreover, brethren, I do not want you to be unaware that all our fathers were under the cloud, all passed through the sea, all were baptized into Moses…” (I Cor. 10:1, 2). Paul could tell the gentiles at Corinth that the Jews whom God brought out of Egypt were their fathers because they were in fact in the same family. God’s family is defined by His gracious covenantal relationship, not race, and the connecting link between Christians today and Jews under Moses is Jesus, the true Seed. Those who are in Him and partake of Him (I Cor. 10:3, 4) are part of the seed.

Therefore, it is Christians, whether Jew or Greek, who have inherited the Abrahamic promises through faith in Christ. Christians constitute the real “twelve tribes” (Jas. 1:1) and the “pilgrims of the disporia” (I Pet. 1:1). The racial Jews who rejected Christ’s fulfillment of the Abrahamic promises had in fact become the “synagogue of Satan” (Rev. 2:9) and sons of the devil (John 8:37-47). Through unbelief and rebellion, they had lost their status as Abraham’s children. It must have seemed strange and ironic to both gentiles and Jews that many gentiles would become the sons of Abraham while many Jews would lose their status as sons. But as we have mentioned, covenant status is based on grace and faithfulness, not race. And this role reversal is just what had been foretold by Isaiah when he prophesied about the Messiah’s advent and restorative work.

Arise, shine;
for your light has come!
And the glory of the Lord is risen upon you.
For behold, the darkness shall cover the earth,
and deep darkness the people;
but the Lord will arise over you,
and His glory will be seen upon you.
The gentiles shall come to your light,
and kings to the brightness of your rising….

The wealth of the gentiles shall come to you….
and they shall proclaim the praises of the Lord….

Also the sons of those who afflicted you
shall come bowing to you,
and all those who despised you shall fall prostrate at the soles of your feet;
and they shall call you the city of the Lord,
Zion of the Holy One of Israel. (Is. 60:1-3, 5, 6, 14)

The unbelieving Jews during Jesus’ advent had become the synagogue of Satan because they had rejected the Messiah and His restoration of Zion. As the book of Acts records, many chose to afflict the Church instead. They therefore received what Isaiah said would come upon them. “I will make those of the synagogue of Satan, who say they are Jews and are not, but lie — indeed I will make them come and bow down before your feet, and to know that I have loved you.... He who overcomes... I will write on him the name of My God and the name of the city of My God, the New Jerusalem, which comes out of heaven from My God. And I will write on him My new name. He who has an ear, let him hear what the Spirit says to the churches.” (Rev. 3:9, 12, 13) The “you” spoken of by Isaiah was the restored Zion. The Redeemer would come to her (Is. 59:20), and foreigners would rebuild her walls (Is. 60:10). Her oppressors would bow down before her and declare her to be Zion, the city of God. And as Jesus told the Christians at Philadelphia, this was their heritage. The unbelieving Jews would bow down before them, for they were in Christ which means that they were part of restored Zion, the New Jerusalem.

All the Promises of God IV

2007-10-12T09:32:00.001-05:00

The New Heavens and Earth

In the beginning, God created the heavens and the earth. Christians know this, but this truth – or should I say this theme – is far more important than we usually think. Sometimes we go beyond the obvious when we acknowledge important systematic presuppositions and consequences of this truth. It assumes for example what is stated numerous times and in numerous ways throughout the Bible – God is absolutely sovereign over creation. The book of Isaiah alone is full of statements such as the following.

Remember the former things of old,
for I am God, and there is no other;
I am God, and there is none like Me,
declaring the end from the beginning,
and from ancient times things that are not yet done,
saying, “My counsel shall stand,
and I will do all My pleasure,”
calling a bird of prey from the east,
the man who executes My counsel, from a far country.
Indeed I have spoken it;
I will also bring it to pass.
I have purposed it;
I will also do it. (Is. 46:9-11)

And as one might expect, the Psalms also echo the truth of God sovereignty.

But our God is in heaven;
He does whatever He pleases. (Ps. 115:3)

We also sometimes recognize the doctrine of providence as a consequence of creation. Because God is who He is, He did not create the universe in order to let it run by itself. Every moment of every day, the Creator sustains and provides for His creation.

It is good that we recognize such aspects of creation, but because many modern Western Christians tend to think “topically” or systematically, it is no surprise that we would see such connections. However we tend to have difficulty viewing creation as an historical theme and an historical precedent. We also tend to have problems seeing the intimate connections between creation and redemption despite our knowledge of Second Corinthians 5:17. Our paradigms do not often bring the pieces together so that we see the big picture. But we can begin to rectify this by simply noting a few things about God’s original creation.

To begin with, it was all good. After each day, God saw His work and pronounced it good. But good did not mean “fully mature” or “finished,” so the next day would see more activity from the Creator. The created order was organized into three “zones”: the firmament or sky, the earth, and the water under the earth (cf. Ex. 20:3). In these zones God put all kinds of plant and animal life. He also created a garden in Eden and placed man in it. The garden contained rivers; trees that were good for food and pleasant to look at; and beautiful stones, jewels, and metals (e.g., Gen. 2:8-14). We should not miss the picture; this place was “paradise.”

But sin entered the world, and death entered through sin. Man rebelled, and because he was the covenant head over all of creation, the whole created order fell with him. When Adam fell, he lost the garden-sanctuary and was ejected from it (Gen. 3:22-24). Sin and corruption then spread to the family as brother killed brother (Gen. 4:1-12). This evil then metastasized further until the whole earth was corrupt (Gen. 6:1-6). As a result, God destroyed the earth and the old order with a great flood. What had been a process of creation became a process of “de-creation.”

The world was originally “without form and void.” It probably wasn’t much to look at. The created order was then built up, organized, and beautified so that it was a “good” creation. But man’s unchecked sin had turned this good creation into a moral cesspool. God therefore judged the world by subjecting it to the opposite of the creation process. The growth and glorification of creation was a blessing from God, so the curse – the consequence of widespread rebellion – would be the opposite of creation growth: a de-creation judgment in which the world was reduced to its pre-organized state. The heavens came apart as the water that had originally resided above the firmament (Gen. 6:7) was poured out on the earth. Water also came spewing forth from the subterranean realm (Gen. 7:11). Man was put in the middle “zone,” the earth, so the de-creation saw the depths erupt onto the earth and the heavens fall to the earth. Creation imploded on itself until everything on earth was disorganized, dead, and destroyed (Gen. 7:20-23). Or to be more accurate, everything was destroyed except for the life contained in one boat. From this destruction, God brought forth a remnant and He placed that remnant in a new creation. This was a new created order. It was a new heaven and earth with Noah and his family as the new humanity (Gen. 8).

This pattern would be repeated several times throughout history. As a prelude to the exodus of Israel from Egypt, God judged the existing order and the Egyptians with the plagues. These plagues not only served to humiliate the Egyptian gods who were supposed to be sovereign over the various instruments of the plagues, they also showed that creation itself was coming unhinged. They involved animals from the land (Ex. 9:1-7), the water (Ex. 8:1-15), and the sky (Ex. 8:20-32); uncontrollable weather (Ex. 9:13-35); infection (Ex. 9:8-12); the loss of the sun’s light (Ex. 10:21-29); and widespread human death (Ex. 11:1-10). The whole creation, both heaven and earth, imploded. But from this death of creation and man, a resurrection took place. God brought forth new life and a new creation. Israel was God’s “firstborn” (Ex. 4:22) – the new humanity. Just after the Egyptians had been drowned in a new flood which finished off the old order (Ex. 14:26-28), Moses taught the people a song. At the end of the song, the people would sing of themselves as a new crop:

You will bring them in and plant them
in the mountain of Your inheritance,
in the place, O Lord, which You have made
for Your own dwelling,
the sanctuary , O Lord, which Your hands have established. (Ex. 15:17)

As the prophet Isaiah would later say, this creation of Zion and planting of the people was actually the creation of a new heavens and earth.

But I am the Lord your God,
who divided the sea whose waves roared –
the Lord of hosts is His name.
And I have put My words in your mouth;
I have covered you with the shadow of My hand,
that I may plant the heavens,
lay the foundations of the earth,
and say to Zion, ‘You are My people.’ (Is. 51:15, 16)

We shouldn’t miss the point here. At first, one would think that the reference to the creation of heavens and earth would be a reference to the original creation in Genesis 1. However, the context clearly points in another direction. For we are here referred back to the Exodus by being told that this Lord “divided the sea whose wavers roared.” But more specifically, this Lord covered Israel (who obviously did not exist in Genesis 1) with the shadow of His hand so that He may form heavens and earth and call Israel His people. They were the remnant – the new humanity whom the Lord brought out of the destruction of the old created order and into a new creation.

Many centuries later, the Northern Kingdom of Israel and the Southern Kingdom of Judah were falling away from the covenant. One of the prophets sent by God to warn His people of the consequences of their rebellion was Micah. Israel was in especially bad shape and the prophet led off with the coming judgment on it.

The word of the Lord that came to Micah… which he saw concerning Samaria and Jerusalem….
For behold, the Lord is coming out of His place;
He will come down
and tread on the high places of the earth.
The mountains will melt under Him,
and the valleys will split
like wax before the fire,
like waters poured down a steep place.
All this is for the transgression of Jacob
and for the sins of the house of Israel….
“Therefore I will make Samaria a heap of ruins in the field,
places for planting a vineyards;
I will pour down her stones into the valley,
and I will uncover her foundations.
All her carved images shall be beaten to pieces,
and all her play as a harlot shall be burned with the fire… (Mic. 1:3-5, 6, 7)

The Lord would come down to judge His people for their widespread unfaithfulness by stomping on their “high places” – the places where the people worshiped and sacrificed to the false gods of the pagans around them. This would result in total destruction of the nation and the created order. Mountains would melt, valleys would split, and foundations would be uprooted. Creation would be torn apart as the Northern Kingdom reaped the fruits of its labor. This became a reality in 722 BC when God sent the Assyrian army to destroy and plunder the North (II Kin. 17; Is. 10:5, 6).

About a century later, the Southern Kingdom of Judah was ripe for judgment as well. Despite the reforms implemented by King Josiah, the Lord was still furious with Judah. The people had violated the covenant repeatedly and filled up the measure of their wickedness. The prophet Jeremiah described this violation and foretold of the exile-judgment to come. Israel had been judged and Judah would soon fall as well. The current order was coming to an end which is to say that the created order would be deconstructed.

“For My people are foolish,
they have not known Me.
They are foolish children,
and they have no understanding.
They are wise to do evil,
but to do good they have no knowledge.”

I beheld the earth, and indeed it was without form, and void;
and the heavens, they had no light.
I beheld the mountains, and indeed they trembled,
and all the hills moved back and forth.
I beheld, and indeed there was no man,
and all the birds of the heavens had fled.
I beheld, and indeed the fruitful land was a wilderness,
and all its cities were broken down
at the presence of the Lord,
by His fierce anger.

For thus says the Lord:

“The whole land shall be desolate;
yet I will not make a full end.
For this shall the earth mourn,
and the heavens above be black,
because I have spoken.” (Jer. 4:22-28)

God was about to judge His people for their sins and this meant that creation itself was falling apart. The land would be trashed, the mountains would quake, the heavens would fail to give their light, and in what may be the starkest de-creation reference in the entire Bible, the earth would be “without form, and void.” This is the same phrase used to describe the very beginning of creation before God had brought order and beauty out of the new matter (Gen. 1:2). This is de-creation; the rebellion of God’s people had led to a regression of the created order all the way back to the very primordial state of the original creation. But as bad as this was, it would one day be remedied by a new creation. Both Israel (Ezek. 23:5-10) and Judah (Ezek. 23:22-27) were put to death for their adulteries. But the chosen nation would also be “born again” from the dead (Ezek. 37:1-14). The restored people would be God’s “firstborn” of the new creation (Jer. 31:7-9). The original historical fulfillment of this came with the restoration of Israel after the 70 year exile in Babylon. But this restoration would not be the end of the story. The ultimate new heavens and new earth (Is. 65:17; 66:22) would make the restoration era pale in comparison. But for this new creation to come, the restoration world would have to be judged.

Jesus’ first advent brought with it the end of this world and the first days of a new order. Israel had become so corrupt that it was now a new Egypt. Just as the first Egypt had been judged and its world destroyed, the same thing happened to the new Egypt. This is why “last days” language is so prevalent in the New Testament documents (which were all written between the 30s and 60s AD). God was instructing His people that the old order was corrupt and was about to be destroyed.

[Jesus] was foreordained before the foundation of the world, but was manifest in these last times for you… (I Pet. 1:20)

God, who at various times and in various ways spoke in time past to the fathers by the prophets, has in these last days spoken to us by His Son… (Heb. 1:1, 2)

… but now, once at the end of the ages, He has appeared to put away sin by the sacrifice of Himself. (Heb. 9:26)

But [the Pentecostal outpouring of the Spirit] is what was spoken by the prophet Joel: “And it shall come to pass in the last days, says God, that I will pour out of My Spirit on all flesh…” (Acts 2:16, 17)

Now all these things happened to them as examples, and they were written for our admonition, upon whom the ends of the ages have come. (I Cor. 10:11)

Little children, it is the last hour; and as you have heard that the Antichrist is coming, even now many antichrists have come, by which we know that it is the last hour. (I John 2:18)

But the end of all things is at hand; therefore be serious and watchful in your prayers. (I Pet. 4:7)

For if the first covenant had been faultless, then no place would have been sought for a second. Because finding fault with them, He says: “Behold, the days are coming, says the Lord, when I will make a new covenant with the house of Israel and with the house of Judah”… In that He says, “A new covenant,” He has made the first obsolete. Now what is becoming obsolete and growing old is ready to vanish away. (Heb. 8:7, 8, 13)

But this I say, brethren, the time is short, so that from now on even those who have wives should be as though they had none… For the form of this world is passing away. (I Cor. 7:29, 31)

Notice that in all of these passages, the original, first century audiences were told that they were living in the last days of a covenant and world that would soon pass away. The period of time between 30 AD and 70 AD was the last days of the old world. The old covenant had become obsolete because the new man Jesus had come to fulfill and transform it. All of the old covenant types, shadows, pictures, and promises pointed to Him, and when the reality came, the pictures were no longer appropriate or adequate. Moreover, God’s people had corrupted the old order. Thus, Israel was given 40 years to repent before judgment would come. Those who did repent saw that Jesus was the Messiah and they went with Him in the new exodus. Those who did not repent were left behind in the old and apostate Israel that was judged in 70 AD. God used the Roman armies to destroy that world. (God also judged that beast and put an end to it by the Church.)

With the passing of the old heavens and earth, a new world was formed. Indeed, the new world grew out of the death of the old one with Jesus at the center of the transition. For His resurrection was literally a loosening of “the birth pangs of death” (hodinas tou thánatou, Acts 2:24 – many translations erroneously leave out the reference to birth and translate it as “pain of death” but the word hodín clearly refers to birth pangs). Death itself gave birth to the new man. And this death and rebirth would be recapitulated in the death of the old world and the birth of the new world. Jesus told his disciples that the “end of the age” (Matt. 24:3) would be accompanied by warfare, famine, disease, and earthquakes (Matt. 24:6, 7). Along with Jesus’ cosmic disaster language (Matt. 24:29), these events (which actually did take place in the time leading up to 70 AD) signaled that the created order was being torn apart. But this was not simply death; it actually led to a new birth. For as Jesus said, “All these are the beginning of sorrows” (Matt. 24:8; “sorrows” should be translated “birth pangs” – the sentence reads pánta dè tauta archè hodínon). “All these are the beginning of birth pangs.” Jesus died and was born again through His death and resurrection. Consequently, this led to a death and resurrection of the created order. Thus, the time after 70 AD when the exalted new man would sit on the throne was referred to as “the regeneration” (Matt. 19:28). This time, when the Mosaic ceremonial laws would pass away, was called “the time of reformation” (Heb. 9:10). It would in fact be the restoration of all things (Matt. 17:9-13). And just as we saw that Jesus will reign until all enemies – the last being death itself – are placed under His feet (I Cor. 15:22-27), so too the restoration will be an ongoing process that will not be finished until the Second Coming (Acts 3:19-21).

Thus, the death of the second Adam was followed by His rebirth via the resurrection. This resulted in the death of the old order out of which was born a new creation. Moreover, we can see that the new man brought a new humanity with Him into the new creation. Paul’s letter to the Galatians was written to refute the idea that the old covenants had not been fundamentally altered by Jesus’ first advent. Men from Jerusalem were teaching churches in Galatia that gentiles who converted to Christianity also needed to be circumcised (Abrahamic covenant) and keep all of the details of the Mosaic law (Mosaic covenant). Paul refuted this teaching (now known as the Judaizing heresy) by showing that Jesus fulfilled the Abrahamic promise and the Mosaic law by living under the law and taking its curse upon Himself. He was the true and faithful Jew who fulfilled these covenants and brought salvation to the gentiles apart from the law. “The law” (i.e., the Mosaic covenant) was a “tutor” (paidagogόs) designed to bring the Jews to Christ (Gal. 3:23-25), and with His coming, they were not to look back to the “weak and beggarly elements” of the law (Gal. 4:1-11). Moreover, Jesus’ fulfillment of the Abrahamic promises (He is the true Seed of Abraham, Gal. 3:16) means that all those who are baptized into Him are part of Abraham’s seed (Gal. 3:26-29). The distinction between Jew and gentile had been removed because Jesus had ushered in a new creation. “But God forbid that I should boast except in the cross of our Lord Jesus Christ, by whom the world has been crucified to me, and I to the world. For in Christ Jesus neither circumcision nor uncircumcision avails anything, but a new creation.” (Gal. 6:14, 15) The resurrection of the new man brought with it a new creation and a new humanity.

Therefore remember that you, once gentiles in the flesh – who are called Uncircumcision by what is called the Circumcision made in the flesh by hands – that at that time you were without Christ, being aliens from the commonwealth of Israel and strangers from the covenants of promise, having no hope and without God in the world. But now in Christ Jesus you who once were far off [i.e., the gentiles] have been brought near by the blood of Christ. For He Himself is our peace, who has made both one, and has broken down the middle wall of separation, having abolished in His flesh the enmity, that is, the law of commandments contained in ordinances, so as to create in Himself one new man from the two, thus making peace, and that He might reconcile them both to God in one body through the cross, thereby putting to death the enmity. And He came and preached peace to you who were afar off [gentiles] and to those who were near [Jews]. For through Him we both have access by one Spirit to the Father. (Eph. 2:11-18)

The enmity was actually the law itself as it constituted a “wall of separation” which divided Jew from gentile. But now, Jew and gentile had become one. The old covenant distinction no longer existed, because Jesus had fulfilled the old covenant by embodying its promises and taking its curses upon Himself. This produced a new humanity – the Church. As the body of Christ (the new man), it is the new humanity composed of Jew and gentile alike. One new man was created from the two.

Jesus produces a new humanity in another way as well.

But now you yourselves are to put off all these: anger, wrath, malice, blasphemy, filthy language out of your mouth. Do not lie to one another, since you have put off the old man with his deeds, and have put on the new man who is renewed in knowledge according to the image of Him who created him, where there is neither Greek nor Jew, circumcised nor uncircumcised, barbarian, Scythian, slave nor free, but Christ is all and in all. (Col. 3:8-11 cf. Eph. 4:20-24)

Because Jews and gentiles who are in Him have been recreated into one new man, they should reflect this new image/humanity in their conduct. Once again, as with the existence of the new creation in general, the existence of the new humanity is not an all or nothing proposition. The new creation has come, but it will not be perfected until death, the last enemy, is placed under Christ’s feet. Similarly, an individual Christian is part of the new humanity now, but he will not be perfected until the “old man” has been fully put off at death.

Thus, Jesus is the new Adam whose resurrection marked the firstfruits of a new humanity. After the transition period, the old age ended and a new creation was born. The old heavens and earth passed away, and a new heavens and earth were formed (Rev. 21:1-5). At first, this reference to Revelation 21 seems unsettling. After all, Christians have generally been taught that this part of Scripture refers to the final state of man after the consummation of time. But there are good reasons to see the last two chapters of Revelation as a description of the new covenant in Christ.

First, this view fits in well with the new creation theme that has been presented thus far. The identification of the new heavens and earth is not just an isolated idea; it is the culmination of a whole biblical motif that runs from Adam/creation to the new Adam / new creation. The New Testament tells us in a number of places that during the first century, the old order came to an end and a new creation was born. Thus, the identification of the “new heaven and earth” with this new era/creation is hardly a stretch. Second, we can note that the new bride of Christ (Rev. 19:6-9; 21:2, 9) associated with this new heavens and earth is none other than the Church. Unfaithful and unbelieving Israel was an adulterous wife who was divorced in favor of the faithful bride. This bride, who is composed of faithful Jews and gentiles alike, is Jesus’ body – the Church (Eph. 5:22-32; II Cor. 11:2).

Third, the New Jerusalem that comes down from heaven (Rev. 21:2) is also the Church. Here we can focus on a contrast presented by the writer of Hebrews. After warning his readers not to return to the old covenant ceremonies because they had been transformed and fulfilled by Jesus, he said that his readers had not come “to the mountain that may be touched and that burned with fire” (Heb. 12:18). They had not come to the Mosaic covenant represented by Mount Sinai because “you have come to Mount Zion and to the city of the living God, the heavenly Jerusalem... to the general assembly and church of the firstborn who are registered in heaven… to Jesus the Mediator of the new covenant, and to the blood of sprinkling that speaks better things than that of Abel.” (Heb. 12:22, 24) The New Jerusalem from heaven is the Church of “the firstborn,” Jesus (cf. Heb. 1:6). Forth, this new creation would see Jesus giving “the fountain of the water of life” to those who thirst (Rev. 21:6). This is conversion language that the apostle John had used before (John 4:10-14; 7:37-39). There will be people in this new creation who thirst and who will come to Jesus to receive the fountain of water by which they will cease to thirst. This, of course, happens today but it will not occur after death has been put under Christ’s feet and history consummated.

Fifth, the leaves of the tree of life are for “the healing of the nations” (Rev. 22:2). We know that there will be no need for healing either in heaven or on a post-consummation earth where everyone has resurrected, immortal bodies. But such healing is needed in the new covenant era, and Jesus provides such healing through the Church. Sixth, this time period will see much evangelism as new people are brought into the New Jerusalem. “Blessed are those who do His commandments, that they may have the right to the tree of life, and may enter through the gates into the city…. And the Spirit and the bride say, ‘Come!’ And let him who hears say, ‘Come!’ And let him who thirsts come. Whoever desires, let him take the water of life freely.” (Rev. 22:14, 17) The Church offers life to those outside her as she beckons them to enter her gates. This is clearly not referring to an immortal, post-resurrection state. Seventh, the Old Testament promises of the new heavens and earth show that this era cannot refer exclusively to the post-consummation eternity.

“For behold, I create new heavens and a new earth;
and the former shall not be remembered or come to mind….

“No more shall an infant from there live but a few days,
nor an old man who has not fulfilled his days;
for the child shall die one hundred years old,
but the sinner being one hundred years old shall be accursed.
They shall build houses and inhabit them;
they shall plant vineyards and eat their fruit….
They shall not labor in vain,
nor bring forth children for trouble;
for they shall be the descendants of the blessed of the Lord,
and their offspring with them.” (Is. 65:17, 20, 21, 23)

The new heavens and earth will contain birth, death, and sin. Children will be there, and there will be old men who will eventually fulfill their days. Moreover, the new heavens and earth would be the era in which the gentiles would see the glory of the Lord and would be brought to God’s holy mountain Jerusalem (Is. 66:18-23). Once again, this refers not to eternity but to the new covenant era and the New Jerusalem.

Finally, the recreation motif provides a fitting parallel to the rest of the material in this chapter. “Then He who sat on the throne said, ‘Behold, I make all things new.’” (Rev. 21:5) The new creation was just that; all things – heaven and earth – were new. But this is not the first time that an apostle had taught this theme to the Church. “Therefore, if anyone is in Christ, he is a new creation; old things have passed away; behold, all things have become new.” (II Cor. 5:17) The New King James Version puts “he is” in italics because these words do not appear in the original. They are an interpretation. A less interpretive translation of the passage would be: “Therefore, if anyone is in Christ, a new creation.” This would mean that Christ’s coming and gathering of people to Himself show that the new creation had arrived. This fits well with the rest of the verse. But even if we take “he is” to be a proper translation, the punch line of the verse is still obvious. The new creation had come because “all things have become new.” This is the state of those living in the new covenant, pre-consummation era today, and it is precisely the state of the new heavens and earth.

What then are we to make of some of the other “features” of the new heavens and earth? There will be no more pain and sorrow. There will even be no more death (Rev. 21:4). How does this square with what has just been said (especially what was said about the reference to death in Isaiah)? Once again, we should see this age as a progressive one. Everything does not come at once. The kingdom of God progressively grows from small beginnings (e.g., Matt. 13:31, 32). As we have previously noted, those who are in Christ are righteous in God’s sight even though they still sin. They were robed in righteousness (cf. Is. 61:10) when they put on Christ (Gal. 3:27), but they will continue to “work out their salvation” (Phil. 2:12) over the course of a lifetime “from glory to glory” (II Cor. 3:18). Just so, the new creation is a “work in progress.” And this progress will be parallel to the process whereby all enemies are put under the feet of the new Adam. The new humanity in Christ will take dominion over the new creation, but this will be an ongoing process that will end when the last enemy – death – is subdued. Then there really will be no more death. But this represents the goal and consummation of the process, not the entire period. Dominion takes time, growth, and maturity – from glory to glory.

All the Promises of God III

2007-10-08T12:05:00.001-05:00

The Son of God

If the title “son of man” emphasizes the humanity of the one so named, then it seems natural to suppose that the title “son of God” would emphasize the title bearer’s divinity. A son of God would himself be divine. And so Christians generally see the title “son of God” as a statement about Jesus’ divinity. However, this phrase is not typically used this way in the Old Testament. To be sure, Jesus is the divine Son of God in the sense that He is the second person of the triune Godhead. He was “begotten of His Father before all worlds” as the Nicene Creed puts it. He is the “only begotten” of the Father (John 1:18), the eternal Word (John 1:1).

On the other hand, the title “son of God” is often used to refer to God’s image bearer and representative. When Adam had Seth, we are told that Seth was born in Adam’s own likeness and after his image (Gen. 5:3). Seth was the “son of Adam” because he was Adam’s image bearer. Similarly, God created Adam and Eve “in His own image” (Gen. 1:26, 27). Adam was therefore the “son of God” (Luke 3:38). He was God’s first image bearer. Of course, a true son of God is one who should accurately and faithfully reflects God’s image – the thing that Adam (and man) was originally created to do. Adam’s failure would point toward the need for a truly faithful image bearer.

When God called the Israelites out of Egypt, He did not just rescue a group of people. He “gave birth” to His son. “Then you shall say to Pharaoh, ‘Thus says the Lord: “Israel is My son, My firstborn. So I say to you, let My son go that he may serve Me. But if you refuse to let him go, indeed I will kill your son, your firstborn.”’” (Ex. 4:22, 23 cf. Hos. 11:1) Israel was God’s firstborn son. He resurrected the people from the grave of Egypt so that they may bear His image. “You are the children of the Lord your God; you shall not cut yourselves nor shave the front of your head for the dead. For you are a holy people to the Lord your God, and the Lord has chosen you to be a people for Himself, a special treasure above all the peoples who are on the face of the earth.” (Deut. 14:1, 2) This was Israel’s calling: to be God’s holy children. But it did not take long for sin and rebellion to interfere with this calling. Numerous books of the Old Testament describe this process in detail. By the time of the prophet Isaiah, the image-bearing sons had become a “brood of evildoers” (Is. 1:2-4). And by the time the prophet John began to deliver his message, the sons had become a brood of vipers.

But when he saw many of the Pharisees and Sadducees coming to his baptism, he said to them, “Brood of vipers! Who warned you to flee from the wrath to come? Therefore bear fruits worthy of repentance, and do not think to say to yourselves, ‘We have Abraham as our father.’ For I say to you that God is able to raise up children to Abraham from these stones. And even now the ax is laid to the root of the trees. Therefore every tree which does not bear good fruit is cut down and thrown into the fire.” (Matt. 3:7-10)

Israel was in bad shape and God’s judgment was about to come. Here we see a theme that we will discuss in more detail later – the “de-creation” process that is produced by sin. Man was created to be God’s son, and redeemed Israel was chosen to fulfill this image-bearing role. But instead of maturing through faithfulness to become the lords of creation that man was supposed to be, their rebellion caused them to regress to the point of being brute beasts. To be more accurate, they had become like the beast – the serpent-beast. They were now his sons.

Jesus answered them… “I know that you are Abraham’s descendants, but you seek to kill Me, because My word has no place in you. I speak what I have seen with My Father, and you do what you have seen with your father.”

They answered and said to Him, “Abraham is our father.”

Jesus said to them, “If you were Abraham’s children, you would do the works of Abraham. But now you seek to kill Me, a man who has told you the truth which I heard from God. Abraham did not do this. You do the deeds of your father.”

Then they said to Him, “We are not born of fornication; we have one Father – God.”

Jesus said to them, “If God were your Father, you would love Me, for I proceeded forth and came from God… You are of your father the devil, and the desires of your father you want to do…. But because I tell the truth, you do not believe Me. Which of you convicts Me of sin? And if I tell the truth, why do you not believe Me? He who is of God hears God’s words; therefore you do no hear, because you are not of God.” (John 8:34, 37-42, 44, 45-47)

Thus was the song of Moses fulfilled:

They have corrupted themselves;
they are not His children,
because of their blemish:
a perverse and crooked generation. (Deut. 32:5)

The son of God is the position of a faithful image bearer. Through rebellion, Israel had lost his claim to be the son of God. Instead, he had become the son of the devil and the “synagogue of Satan” (Rev. 3:9). The ax was laid at the root of the trees.

However all was not lost. For the prophet Jeremiah had foretold of a time when Israel would be restored (Jer. 31:1-8). This would be a rebirth; God’s chosen people would again be His firstborn (Jer. 31:9). In the final genealogy given by God through revelation, Jesus is identified as the true Son of God (Luke 3:23-38). Just like Israel, this Son was called out of Egypt. There was, however, an ironic difference.

Now when they had departed, behold, an angel of the Lord appeared to Joseph in a dream saying, “Arise, take the young Child and His mother, flee to Egypt, and stay there until I bring you word; for Herod will seek the young Child to destroy Him.”

When he arose, he took the young Child and His mother by night and departed for Egypt, and was there until the death of Herod, that it might be fulfilled which was spoken by the Lord through the prophet, saying, “Out of Egypt I called My Son.” (Matt. 2:13, 14)

The prophet Hosea described Israel’s exodus as God’s calling of His son. “When Israel was a child, I loved him, and out of Egypt I called My son.” (Hos. 11:1) But from the Matthew passage above and the verses that precede it, we see that Herod had become a new Pharaoh who tried to slaughter the infants. And if Herod was a new Pharaoh, then it would seem that Israel would be a new Egypt. And sure enough, God delivered His true Son from this new Egypt. Jesus left Israel to go to Egypt, and ironically, this exodus out of unfaithful Israel fulfilled Hosea’s words regarding the Son’s exodus from Egypt. Thus, the passage from Hosea both looked back to an historical type and looked forward to the promised antitype. And as Matthew stated, Jesus is that antitype – the true Son. This was the Son in whom He was well pleased (Matt. 17:5). All other sons had in fact been imperfect types who foreshadowed the true Son. He is the only fully faithful one, the “express image” (charaktér) of God (Heb. 1:3).

For to which of the angels did He ever say:

“You are My Son,
today I have begotten You”?

And again:

“I will be to Him a Father,
and He shall be to Me a Son”?...

But to the Son He says:

“Your throne, O God, is forever and ever;
a scepter of righteousness is the scepter of Your kingdom….”

But to which of the angels has He ever said:

“Sit at My right hand,
till I make Your enemies Your footstool”? (Heb. 1:5, 8, 13)

This passage from Hebrews shows an dimension to the “son of God” title, a dimension that goes back to the first man. “Then God said, ‘Let Us make man in Our image, according to Our likeness; let them have dominion over the fish of the sea, over the birds of the air, and over the cattle, over all the earth and over every creeping thing that creeps on the earth.’” (Gen. 1:26) Integral to man’s creation in God’s image is the responsibility of bearing that image, and as we saw earlier, and important aspect of this is the task of taking dominion over the earth. The writer of Hebrews shows that the true and faithful man Jesus fulfils this task because He has been exalted to the throne at God’s right hand where He has received His kingdom.

The first quote within the Hebrews passage above is from Psalm 2. The “begetting” it describes is not Jesus’ eternal generation from the Father. Rather, as the psalm itself makes clear, the reference is to the Messiah’s enthronement as King. The Messiah would be the son of God whose inheritance would be to rule the nations. The second quote refers to the prophetic message that Nathan was to give to King David. “When your days are fulfilled and you rest with your fathers, I will set up your seed after you, who will come from your body, and I will establish his kingdom. He shall build a house for My name, and I will establish the throne of his kingdom forever. I will be his Father, and he shall be My son.” (II Sam. 7:12-14) Solomon was the type to which this immediately applied, but Jesus is the antitype – the ultimate recipient to which the type pointed. The writer of Hebrews has made it plain for us: Jesus is the son of David and thus, the Son of God. He is therefore the promised King and His kingdom will last forever. The third quote comes from Psalm 45 and its kingly message is straightforward. The fourth quote is from the Old Testament passage that is quoted most often in the New Testament: Psalm 110. This psalm is the announcement of the Messiah’s kingly reign. The connection between it and Paul’s words in I Corinthians 15 mentioned in a previous post should be clear.

With this series of quotations, the writer of Hebrews has brought us full circle. Jesus is the true Son of God and this means that He fulfills the dominion mandate and reigns as King. The “birth pangs” of the resurrection (Acts 2:24) led to His begetting as the Son of God. He was “declared to be the Son of God with power according to the Spirit of holiness, by the resurrection from the dead.” (Rom. 1:4) The Son was begotten as King at the resurrection.

But He is not the only son. With the end of the old order, many sons (but not all of course) were cast out of the covenant to receive what their rebellion had earned. But many others – gentiles – came from the east and the west to inherit the promises (Matt. 8:5-13 cf. Rev. 21:7). Now that the true Son has come, those who are in Him, the Christians, are the sons of God (Matt. 6:9; John 11:49-52; I John 3:1, 2). Their status as sons is determined by their faith-filled baptism into the true Son. It is not determined by race.

He came to His own, and His own did not receive Him. But as many as received Him, to them He gave the right to become children of God, to those who believe in His name: who were born, not of blood, nor of the will of the flesh, nor of the will of man, but of God. (John 1:11-13)

For as the body is one and has many members, but all the members of that one body, being many, are one body, so also is Christ. For by one Spirit we were all baptized into one body – whether Jews or Greeks, whether slaves or free – and have all been made to drink into one Spirit. (I Cor. 12:12, 13)

For you are all sons of God through faith in Christ Jesus. For as many of you as were baptized into Christ have put on Christ. There is neither Jew nor Greek, there is neither slave nor free, there is neither male nor female; for you are all one in Christ Jesus. And if you are Christ’s, then you are Abraham’s seed, and heirs according to the promise. (Gal. 3:26-29)

Do all things without complaining and disputing, that you may become blameless and harmless, children of God, without fault in the midst of a crooked and perverse generation… (Phil. 2:14, 15)

They are the true sons just because they have been adopted into God’s family through faith in Jesus (Gal. 4:4-7; Eph. 1:5). Moreover, this adoption as sons means that Christians are joint heirs with Christ of all things (Rom. 8:14-17 cf. Heb. 1:1, 2). They are in Him and thus, they share in His calling as the Davidic Son-King.

Do not be unequally yoked together with unbelievers. For what fellowship has righteousness with lawlessness?...

Therefore

“Come out from among them
and be separate, says the Lord.
Do not touch what is unclean,
and I will receive you.”
“I will be a Father to you,
and you shall be My sons and daughters,
says the Lord Almighty.”

Therefore, having these promises, beloved, let us cleanse ourselves from all filthiness of the flesh and spirit, perfecting holiness in the fear of God. (II Cor. 6:14, 17, 18; 7:1 quoting Is. 52:11 and II Sam. 7:14)

We saw above that according to the writer of Hebrews, Jesus is the true Davidic Son-King. Solomon’s sonship was a prophetic type that was fulfilled in the true Son Jesus. And now, the same promise of Fatherhood and title of son (and daughter) are given to Christians because they are in Christ. Christians are the sons of God and thus, they are the kings/kingdom of God (Rev. 1:6) and joint heirs of all things. The dominion mandate will be fulfilled in them because Jesus is the new Adam, Son of Man, and Son of God by whom the mandate will be fulfilled. He has all authority on heaven and earth now (Matt. 28:18), and all things will eventually be placed under His feet (I Cor. 15:22-26). They are in Him. Thus, His status is their status, His authority is their authority, and His mission is their mission.

All the Promises of God II

2007-10-05T07:31:00.001-05:00

The Son of Man and the Dominion Mandate

Adam, whose name is the generic term for man or mankind, was made in God’s image. While there has been much discussion among Christians regarding what the image of God encompasses, a significant part of the answer is given along with the original statement itself.

Then God said, “Let Us make man in Our image, according to Our likeness; let them have dominion over the fish of the sea, over the birds of the air, and over the cattle, over all the earth and over every creeping thing that creeps on the earth.” So God created man in His own image; in the image of God He created him, male and female He created them. Then God blessed them, and God said to them, “Be fruitful and multiply; fill the earth and subdue it; have dominion over the fish of the sea, over the birds of the air, and over every living thing that moves on the earth.” (Gen. 1:26-28)

Integral with the statement that God made man in His image is the so called “dominion mandate” – the command for man to take dominion over creation. Man was God’s vicegerent or prime minister on earth. Because he was made in God’s image, he was supposed to work with and govern creation for God.

When I consider Your heavens, the work of Your fingers,
the moon and the stars, which You have ordained,
what is man that You are mindful of him,
and the son of man that You give attention to him?
For You have made him a little lower than the angels,
and You have crowned him with glory and honor.

You have made him to have dominion over the works of Your hands;
You have put all things under his feet,
All sheep and oxen –
even the beasts of the field,
the birds of the air,
and the fish of the sea
that pass through the paths of the seas. (Ps. 8:3-8)

Adam/man was truly king of the world. All things were put under his feet – things from the sea, land, and air. He was put on the earth by God to rule creation, but this was not to be done in just any fashion that he could conceive of. Man’s kingship was never ultimate or autonomous; his authority was derivative of God’s ultimate authority. He was God’s representative to the rest of creation and the supreme reflection of His glory. He was therefore tasked to work with creation according to God’s instruction in order to bring even more glory to God. Adam was the first to be tasked with this role, and his progeny would inherit this role as well. As Psalm 8 indicates using the poetic devise of parallelism, the phrase “son of man” is equivalent to “man.” This same usage can be seen elsewhere.

God is not a man, that He should lie,
nor a son of man, that He should repent. (Num. 23:19 cf. Job 25:6; Ps. 80:17; Is. 51:12; Jer. 49:33)

The son of man is man himself – the creature that was allowed to share in the rule of the Creator. A big part of this task was man’s responsibility to care for and guard the garden – the sanctuary where God would walk with man (Gen. 2:15, the Hebrew verb translated “keep” in the NKJV and “take care of” in the NIV is better described as guard duty). This was the holy house and mountain of God (Ezek. 28:13, 14), so God’s vicegerent had a special duty to cultivate and protect it. Adam was also supposed to protect those under his charge, and this originally meant Eve. All of this can be described as Adam’s covenant headship. The creation or Adamic covenant consisted in the fact that God created Adam/man in His image to rule and govern His creation. Adam was creation’s covenant head – its representative before God. He was given the tree of life, a sacramental meal to sustain him while he served God by working with creation. The only thing he could not do was eat from the tree of the knowledge of good and evil.

This tree (Gen. 2:16, 17), from which Adam was not to eat, represented the kingly ability of mature judicial discernment. This is clear from the Bible’s other uses of the phraseology of discerning between good and evil. For when Solomon first became king, even though he was a grown man, he did not think that he was ready in and of himself for such a responsibility. He considered himself “a little child” who did not know “how to go out or come in” (I Kin. 3:7). He therefore prayed that God would give him “an understanding heart to judge Your people, that I may discern between good and evil. For who is able to judge this great people of Yours?” (I Kin. 3:9) He was already an adult, but he prayed that God would give him the ability to discern between good and evil. This is the difficult task of a king, and it is a high honor for a king to be good at such a task (II Sam. 14:17). This ability is not something that is found in the immature, but those who would be leaders should mature and grow into it.

For though by this time you ought to be teachers, you need someone to teach you again the first principles of the oracles of God; and you have come to need milk and not solid food. For everyone who partakes only of milk is unskilled in the word of righteousness, for he is a babe. But solid food belongs to those who are of full age, that is, those who by reason of use have their senses exercised to discern both good and evil. (Heb. 5:12-14)

This is why children do not initially have “the knowledge of good and evil” (Deut. 1:39). But notice as well that adults can lack this skill. For the author of Hebrews, at least some of his readers had been Christians for a while but had failed to develop their understanding of the “word of righteousness.” Thus, they needed to mature in the word before their consciences and theological/moral reasoning skills were such that they could discern between good and evil – before they could be teachers with responsibility over others. Therefore, this ability to discern has nothing to do with a supposed “age of accountability.” Biblically, the age of accountability is conception since all people are morally responsible and (outside of Jesus) guilty before God regardless of age (I Kin. 8:46; Ps. 51:5; 58:3; Rom. 5:12-14; Eph. 2:1-3). But the kingly task of discerning between good and evil is a high art requiring much wisdom. All children and many adults lack this ability. Such a skill must be learned through many years of studying God’s word and applying it to the day to day situations of life.

We therefore see that while Adam had the status of lord, this had not been worked out in practice. This was in fact the task that was given to him. Adam would have eventually received the knowledge of good and evil, but it would come through a maturation process. He was tasked to “work out his creation,” so to speak (cf. Phil. 2:12). This was the process by which he was to grow from glory to glory. Man was certainly created in glory, but by gradually and progressively taking dominion over creation, he would have brought even more glory to God and he would have fully matured into the kingly task of discerning between good and evil.

But as we know, Adam failed to be faithful to his covenant responsibilities. He abdicated his role as covenant head of creation and of his family, and he let a serpent-beast into the garden to attack his bride (Gen. 3:1-6). Adam was in the garden with his wife the whole time, but he provided no protection for the garden or the bride. Adam, we may say, was the world’s first true empirical scientist. God had given him a simple command accompanied by a threat. If Adam ate from this one tree, he would die. But then Satan came along and presented a counter claim. Not only would Adam not die, he would become like God. The course that Adam should have taken isn’t hard to understand. Covenantal faithfulness requires that all thoughts, even thoughts about the thinking and knowledge gathering process, should be subjected to God (cf. II Cor. 10:3-5). God’s word is true because it is His ultimately authoritative word. It is the final standard by which all other words and claims are to be measured. But Adam did not operate according to this standard. Instead, he tried to approach the situation as a “neutral,” objective scientist. God presented a claim and Satan presented a counter-claim. According to the assumptions of “neutral” empiricism, the way to determine the truth was to eat the fruit and observe the consequences. Perhaps Adam wasn’t brave enough for that, for it was his wife who became the guinea pig. Who was telling the truth? Who knows? The best bet is to assume that God’s word and Satan’s word are competing hypotheses that needed to be empirically tested. Eve “saw” that the fruit was good, and this “evidence” weighted more heavily than the word of God that she would have received from her husband. So she ate and Adam watched.

In failing to trust God’s word, Adam therefore became unfaithful to his covenant position and responsibilities. He did not simply fail to obey a seemingly trivial command, he failed to represent God. He failed to act like the covenantal head of creation, and as a result, the whole world and all of humanity fell with him. Adam was thrust out of the beautiful garden (which was subsequently destroyed by the flood) and into a cursed word full of hard labor, thorns, pain, and death (Gen. 3:16-19). The whole world and all of Adam’s heirs had in fact been cursed because of Adam. He was creation’s covenantal lord and representative, and his curse was its curse. “Cursed is the ground for your sake” (Gen. 3:17). He was the covenantal representative for all of humanity, and as an early American schoolbook put it, “In Adam’s fall, we sinned all.” (cf. Rom. 5:12-14) God’s representatives would still be responsible for taking dominion over creation to the glory of God (Gen. 9:1-3), but sin would continue to render the full and consistent implementation of this task impossible.

One biblical picture of the consequences of sin is the role reversal that is sometimes seen with respect to the relationship between man and beast. Man is supposed to exercise godly dominion over “the beasts of the field,” but man’s abdication of his responsibilities often shows up here. A common biblical picture of God’s judgment involves the dominion of beast over man. Moses had power over the insects and beasts and used them to bring judgment on Egypt (Ex. 8; 9; 10). Before the Israelites entered the holy land, God told them that their faithfulness would be met with help from the beasts. God would send the hornets to drive out the inhabitants of the land (Ex. 24:27, 28 cf. Josh. 24:11, 12). Elijah was fed by the ravens while he was hiding from Ahab (I Kin. 17:1-6). When God’s people were faithful, the beasts worked for them.

Rebellion, however, met with a different response. If and when Israel was unfaithful to her Lord, one of the curses of the covenant was that God would cause the people to be defeated by their enemies. Their carcasses would then be “food for all the birds of the air and the beasts of the earth, and no one shall frighten them away.” (Deut. 28:26) This threatened curse became a reality when God used Babylon to judge the Southern Kingdom (Ps. 79:1, 2; Jer. 7:32-34). Unfaithful Israel became food for the beasts, and except for a relatively brief period of time, she continued to be under the dominion of a beast-Empire. Daniel’s vision of the four beasts showed what Israel’s lot would be like for many years to come (Dan. 7:1-8). The first beast – the lion – was Babylon. This beast was subsequently conquered by the Medo-Persian Empire – the bear. The leopard represented the Greek Empire which took dominion when Alexander the Great swept through the Near East and conquered it. The forth beast was the Roman Empire. All of the beasts had dominion over God’s people and it was the Roman beast that ruled over God’s people at the time of Jesus’ incarnation. Finally, just as the great meal of blessing at the end of Revelation is the marriage supper of the Lamb (Rev. 19:7-9), so also God’s judgment takes the form of a great feast of the birds (Rev. 19:17-21). In short, the beasts tended to be a blessing to the faithful. The hierarchy of creation was preserved so that man had godly dominion over the animals. But rebellion is often punished with a reversal of roles. The beasts rise up and are used by God to rule, trample, and devour the wicked.

There is another aspect of Adam’s fall that should be pointed out here. It is here that we see the self-contradiction and irony of Adam’s rebellion. Adam abdicated his responsibility as lord and protector of creation. He failed to keep the serpent-beast out of the garden, and following that, he just sat around and watched as the beast attacked his wife. In so doing, he stumbled blindly into the knowledge of good and evil (Gen. 3:22). And ever since then, men have greedily grasped at this kingly office when it did not belong to them or when they were not mature enough to properly administer it. Adam’s abdication of authority led to fallen man’s desire to grab for authority and use it in a self-serving and oppressive manner (cf. Jesus’ description of pagan rulers, Matt. 20:25-28).

Because of Adam's failure to be a true man who would faithfully bear God’s image, a new man – a new “adam” – was needed. When God determined to destroy the world via the flood, God brought Noah forward as this new Adam. For after the waters of the flood receded, Noah was to take up where Adam left off. “So God blessed Noah and his sons, and said to them: ‘Be fruitful and multiply, and fill the earth. And the fear of you and the dread of you shall be on every beast of the earth, on every bird of the air, on all that move on the earth, and on all the fish of the sea. They are given into your hand.” (Gen. 9:1, 2) Here we see that Adam’s responsibility as ruler of the world is re-issued to Noah and his sons. God destroyed the old world with the flood. He then created a new world and gave it a new Adam charged with its governance. But as we know, this was not the end of the story. Noah was a new Adam, but he hardly accomplished all that Adam was to accomplish.

This new man would need to accurately represent God by fulfilling the role of servant-lord. He would also need to take upon himself the effects of Adam's disobedience so that humanity would once again image God in the proper way. And in God's providence, He promised just such a new man to humanity after Adam rebelled. This new man would be the seed of the woman – a true “son of man” – and he would crush the head of the serpent-beast (Gen. 3:15).

Many years later, the prophet Daniel had a vision in which the new man would fulfill the role that had been originally given to Adam. Daniel’s vision included the four beast-empires which had dominion over the earth (Dan. 7:1-8). This, as we have seen, was a major perversion of the creation order. Man was supposed to take dominion over the earth, but because of sin, he had abdicated this role and become ineffectual in it. As a result, beasts were taking dominion. But Daniel also recorded that something dramatic would occur. “I watched then because of the sound of the pompous words which the horn [of the fourth beast] was speaking; I watched till the beast was slain, and its body destroyed and given to the burning flame. As for the rest of the beasts, they had their dominion taken away…” (Dan. 7:12).

These beasts were usurpers. Like the serpent-beast in the garden, they tried to wrest authority over the creation away from man. It is true that the rule of the beasts was God-ordained. Babylon, for example, was the beast that God had sent to punish Judah. At the time of Jesus’ first advent, Israel was under Rome’s dominion due to her unfaithfulness. And in general, rule by beasts was the fitting punishment for man’s failure to worship the true God and obey His word. Nevertheless, this was an “unnatural state.” Apart from sin’s distorting effects, man should have been in charge of the beasts. So these beasts held an “unnatural” position born from a perversion of the creation order. Because of the sin of God’s people, this rebellion worked for a time. The beasts ruled as long as the people failed to live up to their assigned role (which is first of all to be worshippers of the true God and second to be His prime ministers for creation). But the new man would come and accomplish what the first man and subsequent men did not and could not accomplish.

I was watching in the night visions,
and behold, one like the son of man,
coming with the clouds of heaven!
He came to the Ancient of Days,
and they brought Him near before Him.
Then to Him was given dominion and glory and a kingdom,
that all peoples, nations, and languages should serve Him.
His dominion is an everlasting dominion,
which shall not pass away,
and His kingdom the one
which shall not be destroyed. (Dan. 7:13, 14)

Psalm 8 describes man’s original role as one of dominion over creation, but sin would keep him from properly fulfilling this description. The beasts of the field took over for a time, but “one like the son of man” would set things right. As previously mentioned, the phrase “son of man” is used as a synonym for and emphasis of the humanness of man. According to Daniel’s vision, the true “son of man” would bring humanity back to its proper role.

Several centuries later, this second Adam arrived during the dominion of Rome, Daniel’s forth beast. Like the first Adam, this second Adam had an encounter with the serpent-beast (Matt. 4:1-11). But unlike the first Adam, the second was completely faithful both to God and to man's true role. Jesus did not abuse his authority and neither did He abdicate His responsibility. Instead, He fought off the attack of the serpent-beast in the wilderness. Since Adam got man kicked out of the garden, the new Adam had to start where man was – in a wilderness. Unlike Adam the empiricist, the new Adam began with full trust in God’s word. Because of this, He took dominion over the serpent-beast (e.g., binding the “strong man” – Matt. 12:22-29) and his underling-beasts (e.g., casting out demons) during His ministry and especially at the cross (cf. Col. 2:13-15). And instead of failing to protect His bride, He did the opposite. He died for His bride, the Church (Eph. 5:22-32), thus providing the perfect example of the kind of servant-leadership that Adam should have displayed for his bride. As a result,

[God] raised [Jesus] from the dead and seated Him at His right hand in the heavenly places, far above all principality and power and might and dominion, and every name that is named, not only in this age but also in that which is to come. And He put all things under His feet, and gave Him to be head over all things to the church, which is His body, the fullness of Him who fills all in all. (Eph. 1:20-23)

Jesus humbly served God and man, and He thereby took dominion over creation (Phil. 2:5-11). As the true man, He also took upon Himself the consequences of Adam’s sin.

For He has not put the world to come, of which we speak, in subjection to angels. But one testified in a certain place, saying:

“What is man that You are mindful of him,
or the son of man that You take care of him?
You have made him a little lower than the angels;
You have crowned him with glory and honor,
and set him over the works of Your hands.
You have put all things in subjection under his feet.”

For in that He put all in subjection under him, He left nothing that is not put under him. But now we do not yet see all things put under him. But we see Jesus, who was made a little lower than the angels, for the suffering of death crowned with glory and honor, that He, by the grace of God, might taste death for everyone. (Heb. 2:5-9 quoting Ps. 8:4-6)

The true son of man not only remained faithful where Adam had not, He also suffered death in order to rectify the mess made by Adam.

For when we were still without strength, in due time Christ died for the ungodly... For if when we were enemies we were reconciled to God through the death of His Son, much more, having been reconciled, we shall be saved by His life…. Therefore, just as through one man sin entered the world, and death through sin, and thus death spread to all men, because all sinned… And the gift is not like that which came through the one who sinned. For the judgment which came from one offense resulted in condemnation, but the free gift which came from many offenses resulted in justification. For if by the one man’s offense death reigned through the one, much more those who receive abundance of grace and of the gift of righteousness will reign in life through the One, Jesus Christ. Therefore, as through one man’s offense judgment came to all men, resulting in condemnation, even so through one Man’s righteous act the free gift came to all men, resulting in justification of life. For as by one man’s disobedience many were made sinners, so also by one Man’s obedience many will be made righteous. (Rom. 5:6, 10, 12, 16-19)

Because of this sacrifice, Jesus was able to bring others with Him into the new creation. Through the resurrection, He became the firstfruits of a new humanity.

But now Christ is risen from the dead, and has become the firstfruits of those who have died. For since by man came death, by Man also came the resurrection of the dead. For as in Adam all die, even so in Christ all shall be made alive. But each one in his own order: Christ the firstfruits, afterward those who are Christ’s at His coming. Then comes the end, when He delivers the kingdom to God the Father, when He puts an end to all rule and all authority and power. For He must reign till He has put all enemies under His feet. The last enemy that will be destroyed is death. For “He has put all things under His feet.” (I Cor. 15:20-27)

There are three important Old Testament references in this passage. The first reference is to Genesis 3 and the failure of the first Adam. Death came because of the disobedience of the first man. The second reference is a quotation from Psalm 8 (“You have put all things under his feet”) describing the role that Adam should have fulfilled. The third reference is to Psalm 110 where the Messiah was to

Sit at My right hand [i.e., reign],
till I make Your enemies Your footstool. (Ps. 110:1)

The second Adam is therefore in the process of cleaning up the mess made by the first Adam. He received the status that His predecessor squandered and He will carry out the process by which all of creation will be subjected to His rule. He has a royal title to all things now, and the actual subjugation of the created order will progress through history until all parts and aspects of creation have been explicitly placed under His rule.

While it is certainly true that Jesus as God already had dominion and lordship over His creation, there is clearly a new aspect to His rule that is highlighted by the concept of Jesus as the firstfruits. The newness of the situation is precisely this. Jesus became man, and through faithfulness to God and true servant-leadership, a man has now accomplished what man was originally supposed to do. Thus, a faithful man has now received the status of lord that Adam lost, and He has begun the kingly process of taking dominion that fallen man always grasps for but always fails to obtain. And by this, He opened the way for a new humanity to join Him.

And so it is written, “The first man Adam became a living being.” The last Adam became a life-giving spirit. However, the spiritual is not first, but the natural, and afterward the spiritual. The first man was of the earth, made of dust; the second Man is the Lord from heaven. As was the man of dust, so also are those who are made of dust; and as is the heavenly Man, so also are those who are heavenly. And as we have borne the image of the man of dust, we shall also bear the image of the heavenly Man. (I Cor. 15:45-49)

Jesus is the new Adam, and those in Him also constitute a new man and a new creation. He is the new man, and because He fulfills the role that man was always meant to fill, those who are in Him share in His role. Just as He began to set the created order aright by taking dominion over Daniel’s beasts and crushing the head of the serpent-beast (Gen. 3:15), so also His representatives were given authority over the beasts (Luke 10:17-19). In fact, Paul told the Roman Christians that “the God of peace will crush Satan under your feet shortly” (Rom. 16:20). Jesus’ authority and mission become their authority and mission. “All authority has been given to Me in heaven and on earth. Go therefore and make disciples of all the nations…” (Matt. 28:18, 19). This is the Church’s dominion mandate: spread the gospel of the kingdom of God to all the nations. Jesus has all authority, and His people therefore have a “legal title” as it were to all things (Rom. 8:32; I Cor. 3:21, 22). Jesus is “heir of all things” (Heb. 1:2), and the sons of God are therefore “joint heirs with Christ” (Rom. 8:16, 17). They will, in fact, judge both the world and angels (I Cor. 6:1-3).

All the Promises of God I

2007-10-02T22:12:00.006-05:00

Introduction

Two thousand years ago, an angel named Gabriel visited a Jewish priest named Zacharias. He told the priest that his barren wife would soon conceive and bear a son. This would be no ordinary child, for “he will be great in the sight of the Lord” (Luke 1:15). “And he will turn many of the children of Israel to the Lord their God. He will also go before Him in the spirit and power of Elijah, ‘to turn the hearts of the fathers to the children,’ and the disobedient to the wisdom of the just, to make ready a people prepared for the Lord.” (Luke 1:16, 17) These were rather astonishing claims, but the priest had heard them before. Four and a half centuries previous to this, God had foretold through the prophet Malachi that

Behold, I will send you Elijah the prophet
before the coming of the great and dreadful day of the Lord.
And he will turn
the hearts of the fathers to the children,
and the hearts of the children to their fathers,
lest I come and strike the earth with a curse. (Mal. 4:5, 6)

Perhaps these words would have been all the more memorable to Zacharias because they were the last words of the Old Testament. They were the last recorded words that God had spoken to Israel through a prophet. Through Malachi, He told His people that He would send Elijah to them as a forerunner to judgment – to rekindle their faithfulness (Mal. 4:1-6). And now, Zacharias had just been told that his son would be that forerunner.

Six months later, Gabriel visited Mary, a lowly virgin who lived in an insignificant Jewish town. He told her that she had found favor with God. “And behold, you will conceive in your womb and bring forth a son, and shall call His name Jesus. He will be great, and will be called the Son of the Highest; and the Lord God will give Him the throne of His father David. And He will reign over the house of Jacob forever, and of His kingdom there will be no end.” (Luke 1:31-33) An angel also visited Mary’s fiancée Joseph in a dream and told him,

“Joseph, son of David, do not be afraid to take to you Mary your wife, for that which is conceived in her is of the Holy Spirit. And she will bring forth a Son, and you shall call His name Jesus [lit. “Yahweh saves”], for He will save His people from their sins.” So all this was done that it might be fulfilled which was spoken by the Lord through the prophet, saying: “Behold, a virgin shall be with child, and bear a son, and they shall call His name Immanuel,” which is translated, “God with us.” (Matt. 1:20-23)

There was a family connection as it turned out, because Mary was related to Zacharias’ wife Elizabeth. After the angel had visited her, Mary went to see her pregnant relative. Both of them knew what was going on, and after some conversation, Mary said of the situation that

He [God] has helped His servant Israel,
in remembrance of His mercy,
as He spoke to our fathers,
to Abraham and to his seed forever. (Luke 1:54, 55)

Three months later, after the birth of his son John, Zacharias prophesied of the coming events.

Blessed is the Lord God of Israel,
for He has visited and redeemed His people,
and has raised up a horn of salvation for us
in the house of His servant David,
as He spoke by the mouth of His holy prophets,
who have been since the world began,
that we should be saved from our enemies
and from the hand of all who hate us,
to perform the mercy promised to our fathers
and to remember His holy covenant,
the oath which He swore to our father Abraham...
And you, child, will be called the prophet of the Highest;
for you will go before the face of the Lord to prepare His ways,
to give knowledge of salvation to His people
by the remission of their sins,
through the tender mercy of our God... (Luke 1:68-73, 76-78)

John was the forerunner, and Jesus was the Lord who had come to reign as King and bring salvation to His people. He had come to fulfill the promises made to the fathers and the oath made to Abraham. God had remembered His covenant, and Jesus was the proof of this. But the promises were not made for the sake of Israel alone. After the Northern Kingdom of Israel had fallen to Assyria, Isaiah prophesied of a redeemer and a new covenant wherein God would restore His people and expand His covenant to include the gentiles.

“Behold! My servant whom I uphold,
My elect one in whom My soul delights!
I have put My Spirit upon Him;
He will bring forth justice to the gentiles….

“I, the Lord, have called You in righteousness,
and will hold Your hand;
I will keep You and give You as a covenant to the people,
as a light to the gentiles,
to open blind eyes,
to bring out prisoners from the prison,
those who sit in darkness from the prison house.” (Is. 42:1, 6, 7)

“And now the Lord says,
who formed Me from the womb to be His servant,
to bring Jacob back to Him,
so that Israel is gathered to Him
(for I shall be glorious in the eyes of the Lord,
and My God shall be My strength),
indeed He says,
‘It is too small a thing that You should be My servant
to raise up the tribes of Jacob,
and to restore the preserved ones of Israel;
I will also give You as a light to the gentiles,
that You should be My salvation to the ends of the earth.’”…

Thus says the Lord:

“In an acceptable time I have heard You,
and in the day of salvation I have helped You;
I will preserve You and give You
as a covenant to the people,
to restore the earth,
to cause them to inherit the desolate heritages;
that You may say to the prisoners, ‘Go forth,’
to those who are in darkness, ‘Show yourselves.’” (Is. 49:5, 6, 8, 9)

Then the Lord saw it, and it displeased Him
that there was no justice.
He saw that there was no man,
and wondered that there was no intercessor;
therefore His own arm brought salvation for Him;
and His own righteousness, it sustained Him….

“The redeemer will come to Zion,
and to those who turn from transgression in Jacob,”
says the Lord.

“As for Me,” says the Lord, “this is My covenant with them: My Spirit who is upon you, and My words which I have put in your mouth, shall not depart from your mouth, nor from the mouth of your descendants, nor from the mouth of your descendants’ descendants,” says the Lord, “from this time and forever more.”

Arise, shine;
for your light has come!
And the glory of the Lord is risen upon you.
For behold, the darkness shall cover the earth,
and deep darkness the people;
but the Lord will arise over you,
and His glory will be seen upon you.
The gentiles shall come to your light,
and kings to the brightness of your rising. (Is. 59:15, 16, 20, 21; 60:1-3)

After Jesus was born, his parents brought Him to the temple so that sacrifices could be made for Him. While there were there, a man named Simeon also came to the temple “by the Spirit” (Luke 2:27). The Spirit had revealed to this man that he would not die until he had seen the Messiah (Luke 2:26), and when he saw Jesus, he took the child in his arms and proclaimed the fulfillment of the Isaianic promises saying:

Lord, now You are letting Your servant depart in peace,
according to Your word;
for my eyes have seen Your salvation
which You have prepared before the face of all peoples,
a light to bring revelation to the gentiles,
and the glory of Your people Israel. (Luke 2:29-32)

He then told Mary that “this Child is destined for the fall and rising of many in Israel, and for a sign which will be spoken against (yes, a sword will pierce through your own soul also), that the thoughts of many hearts may be revealed.” (Luke 2:34, 35)

During His earthly ministry, Jesus often rebuked His people for failing to see that He was indeed the fulfillment of the various OT promises that God had made to them. He once told a group of Jews that if they really believed the writings of Moses, they would believe Him, because Moses wrote about Him (John 5:44-46). After His resurrection when His disciples failed to recognize Him, He rebuked them for being slow to believe all that the prophets had spoken (Luke 24:25, 26). “And beginning at Moses and all the Prophets, He expounded to them in all the Scriptures the things concerning Himself” (Luke 24:27). A little later, He said to the disciples, “These are the words which I spoke to you while I was still with you, that all things must be fulfilled which were written in the Law of Moses and the Prophets and the Psalms concerning Me” (Luke 24:44 cf. Acts 10:43; 28:23).

After His resurrection, Jesus commissioned His apostles to make disciples of all nations. They did this by proclaiming that Jesus was the fulfillment of God’s promises. Paul told a group of Israelites that after God had removed Saul as king of Israel,

He raised up for them David as king, to whom also He gave testimony and said, “I have found David the son of Jesse, a man after My own heart, who will do all My will.” From this man’s seed, according to the promise, God raised up for Israel a Savior – Jesus – after John had preached, before His coming, the baptism of repentance to all the people of Israel….

For those who dwell in Jerusalem, and their rulers, because they did not know Him, nor even the voices of the Prophets which are read every Sabbath, have fulfilled them in condemning Him. And though they found no cause for death in Him, they asked Pilate that He should be put to death. Now when they had fulfilled all that was written concerning Him, they took Him down from the tree and laid Him in a tomb. But God raised Him from the dead. He was seen for many days by those who came up with Him from Galilee to Jerusalem, who are His witnesses to the people. And we declare to you glad tidings – that promise which was made to the fathers. God has fulfilled this for us their children, in that He has raised up Jesus. As it is also written in the second Psalm: “You are My Son, today I have begotten You.” (Acts 13:22-24, 27-33)

Years later, Paul told King Agrippa, “And now I stand and am judged for the hope of the promise made by God to our fathers. To this promise our twelve tribes, earnestly serving God night and day, hope to attain. For this hope’s sake, King Agrippa, I am accused by the Jews. Why should it be thought incredible by you that God raises the dead?” (Acts 26:6-8) The Jews were looking for the promised hope, but they would not believe Paul when he proclaimed the fulfillment of that hope in Jesus.

As the Scriptures had foretold, Jesus was the gospel of God, having been declared the Davidic Messiah-King through the resurrection (Rom. 1:1-4). He had become “a minister to the circumcision for the truth of God, to confirm the promises made to the fathers, and that the gentiles might glorify God for His mercy” (Rom. 15:8, 9). This occurred because “Isaiah says:

‘There shall be a root of Jesse;
and He who shall rise to reign over the gentiles,
in Him the gentiles shall hope.’” (Rom. 15:12 referring to Is. 11:1, 10)

God had long ago chosen the Jews to be His priestly people. They were to mediate His goodness, presence, and glory to the world. But the time had come for the nations to see the salvation of God. Though they were once without God and without hope, the gentiles would now be joined with the faithful Jews. Both would have access to the Father because of the Son (Eph. 2:11-18).

Six centuries before the Annunciation, the prophet Jeremiah proclaimed a message of judgment and captivity for the Southern Kingdom of Judah (the Northern Kingdom of Israel had already fallen and the people sent into exile years earlier). The people had been unfaithful to the covenant. As a result, the covenantal curses would come upon them. A foreign nation would invade their nation, devastate all that they had, and carry them off into exile (cf. Deut. 28). But along with the proclamation of this judgment, Jeremiah also described a day when God would gather His people together again and reform them via a new covenant. The prophet stated that the days were coming when God would “bring back from captivity My people Israel and Judah... And I will cause them to return to the land that I gave to their fathers, and they shall possess it.” (Jer. 30:3) In that day, God’s people would be freed from their yoke to serve the Lord their God and David their king (Jer. 30:8, 9). The Lord would be God to all the families of Israel (Jer. 31:1) and He would rebuild Israel (Jer. 31:4). He would gather His people to Himself again, because “I am a Father to Israel, and Ephraim is My firstborn.” (Jer. 31:9) This would be nothing less than the redemption of the people from their sins (Jer. 30:12-15; 31:11, 18-20). This would be the replanting of Israel and Judah (Jer. 31:27, 28).

Behold, the days are coming, says the Lord, when I will make a new covenant with the house of Israel and with the house of Judah — not according to the covenant that I made with their fathers in the day that I took them by the hand to lead them out of the land of Egypt, My covenant which they broke, though I was a husband to them, says the Lord. But this is the covenant that I will make with the house of Israel after those days, says the Lord: I will put My law in their minds, and write it on their hearts; and I will be their God, and they shall be My people. No more shall every man teach his neighbor, and every man his brother, saying, ‘Know the Lord,’ for they all shall know Me, from the least of them to the greatest of them, says the Lord. For I will forgive their iniquity, and their sin I will remember no more. (Jer. 31:31-34)

This would be a joyous time in which the city of God would be rebuilt (Jer. 31:38) such that it would never be thrown down again (Jer. 31:40).

After the fall of the Southern Kingdom at the hands of the Babylonians, Ezekiel also foretold of the new covenant that God would make with His people.

Thus says the Lord God: “I do not do this for your sake, O house of Israel, but for My holy name’s sake, which you have profaned among the nations wherever you went. And I will sanctify My great name, which has been profaned among the nations, which you have profaned in their midst; and the nations shall know that I am the Lord,” says the Lord God, “when I am hallowed in you before their eyes. For I will take you from among the nations, gather you out of all countries, and bring you into your own land. Then I will sprinkle clean water on you, and you shall be clean; I will cleanse you from all your filthiness and from all your idols. I will give you a new heart and put a new spirit within you; I will take the heart of stone out of your flesh and give you a heart of flesh. I will put My Spirit within you and cause you to walk in My statutes, and you will keep My judgments and do them. Then you shall dwell in the land that I gave to your fathers; you shall be My people, and I will be your God. (Ezek. 36:22-28)

There is a real sense in which this promise came to fruition when, after the 70 year exile, God brought His people back to the land. Jerusalem was rebuilt and a new temple was also built. We are told of this restoration in the books of Ezra and Nehemiah. This was a real restoration of the people to the land but it was clearly not the end of the matter. For Ezekiel had foreseen a new city and temple that the restored versions simply could not match (e.g., Ezekiel’s amazing temple had a river of living water that flowed from it “toward the east” to give life wherever it went. Additionally, there were trees along the river that would bear fruit every month, and their leaves would be for healing: Ezek. 47:1-12. Jewish proselytizing among the nations certainly increased and was significant during this restoration covenant era, but from our perspective today, we can see that it was but a small foreshadow compared to the life giving flood that flowed and is still flowing from Jesus and His Church.)

Moreover, the second temple was in a real sense incomplete. It was, after all, supposed to be the place where God dwelt with His people. When the tabernacle was finished, the Shekhinah – the glory cloud manifestation of God’s special presence – covered the tabernacle so that “the glory of the Lord” was there (Ex. 40-34-38). After the first temple was built, God’s Shekhinah again settled on His house (I Kin. 8:10-13). This glory cloud of God’s presence departed the first temple just before He sacked Jerusalem and sent the people into exile (Ezek. 10; 11:22, 23). But after the restoration, God did not return to His people in this special way. The Shekhinah never entered the second temple. Part of the promise of the restoration involved God’s return to His people. They would be His people, and He would again dwell with them. But even after the restoration from exile, this was not a fulfilled reality.

Finally, we can point out that many Jews had not returned to the land. This situation became permanent and there were entire communities of Greek-speaking Jews who lived outside of Palestine. And those who did return to the land were still under foreign rule. Thus, we can say that the ultimate fulfillment of the promised new covenant had not yet arrived. The restoration from the Babylonian exile was a foreshadowing of the new covenant but the full glory of that covenant remained a promise.

But the true new covenant and the full realization of the promises would eventually come. During what was supposed to be the Mosaic covenant meal of the Passover, Jesus took a cup of wine and told His disciples, “This cup is the new covenant in My blood, which is shed for you.” (Luke 22:20) Years later, Paul wrote to the Christians at Corinth that he and his fellow workers were “ministers of the new covenant” (II Cor. 3:6). The writer of Hebrews made the connection most obvious. After discussing the instruction given to Moses regarding the tabernacle, he told his readers that Jesus had obtained a more excellent ministry because He was the mediator of a better covenant. “For if that first covenant had been faultless, then no place would have been sought for a second. Because finding fault with them [i.e., the people], He says...” (Heb. 8:7, 8) What follows is a quotation of Jeremiah 31:31-34.

This was meant to explain that Jesus was the high priest (Heb. 8:1) and mediator of a better covenant (Heb. 8:6). The old covenant ordinances were weak, temporary, and symbolic (Heb. 7:11-19; 9:1-14). They were “tutors” that would lead Israel to Jesus (Gal. 3:22-24). They were guardians and stewards given to teach and raise children up to become mature in Him (Gal. 4:1-5). “And for this reason, He is the mediator of the new covenant, by means of death, for the redemption of the transgressions under the first covenant, that those who are called may receive the promise of the eternal inheritance.” (Heb. 9:15) Therefore, the writer told his audience that because the new covenant in Jesus had arrived, the old was about to expire. “In that He says, ‘A new covenant,” He has made the first obsolete. Now what is becoming obsolete and growing old is ready to vanish away.” (Heb. 8:13) And thus, Christians had not come to the old covenant of Mount Sinai and Moses (Heb. 12:18-21) but to Mount Zion (Heb. 12:22) and to “Jesus the mediator of the new covenant” (Heb. 12:24). Jesus had returned to His people as King to announce the end of the old order and the dawn of a new one. This was, in fact, the promised gospel.

In sum, Jesus is the answer to the old covenant symbols, prophesies, and promises. With His First Advent, He confirmed the promises made to the fathers by ministering to the Jews and by bringing the reign of His kingdom to the gentiles. God promised this in the old covenant, and He stayed true to His word through Christ. “But as God is faithful, our word to you was not yes and no. For the Son of God, Jesus Christ, who was preached among you by us... was not yes and no, but in Him was yes. For all the promises of God in Him are yes, and in Him amen, to the glory of God through us.” (II Cor. 1:18-20) All of God’s promises are brought to fruition in Christ.

This is the good news. This is the big deal and the central focus of the New Testament documents. God has been faithful to the promises that He made to His people and to the world. He returned to His people as King, brought them back from exile, and brought the covenant relationship of salvation to the gentiles as well. All of this was accomplished by Jesus. The Father sent the Son in the Spirit to fulfill these promises – promises which amount to “the restoration of all things” (cf. Acts 3:19-21). This restoration was definitively begun by Jesus during His First Advent, and His Church in the Spirit will work out the effects of His First Advent until He returns again to consummate history and deliver the kingdom to the Father. This gospel is the core promise of the Old Testament but there are many aspects to it and it has many implications for the nature and shape of God’s covenant with His people. The following posts will describe the fulfillment of this promise from a number of angles in order to illuminate some of these aspects and implications. Focus will be placed on how Jesus transformed the old covenant into the new covenant by fulfilling the old covenant promises, types, and ordinances. These angles often overlap, and when taken together, they paint an amazing, intricate, and comprehensive portrait of God’s mercy and faithfulness.

Signs of Life

2007-10-02T07:23:00.000-05:00

At least for a while, this blog is back from the dead. For the next few weeks, I'll be posting articles dealing with the maturation and fulfillment of various biblical themes.

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Blogging Coma...

2007-09-27T07:43:00.000-05:00

...for now
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Fictional Truth

2006-11-09T21:17:00.000-06:00

“Pursuing Beauty: It is this attraction to loveliness that lies at the heart of nurturing soul. God has made us to be drawn to the beautiful. So often the divide between children who have full souls and those who don’t lies here with the pursuit of beauty. The serious pursuit of beauty, for both children and adults, has a delightfully amplifying effect on all other areas of life. It makes us better at everything else, whether that be theology, engineering, homemaking, or plumbing. The connection here is quite mysterious, but it’s often quite radical. Poetry, music, and fiction can utterly transform the coldest logician, computer programmer, or colonel into someone with soul....

“Children should be almost criminal in their love of stories. If they aren’t regularly begging you for stories, even after you seem to have been reading all day, then something may be wrong with them. They live and grow by means of narrative, especially fiction....

“Stories frame a child’s interior life for living in this world. Fiction is far more realistic than we realize. Fiction and poetry mysteriously transfer truth in a far more powerful way than anything else. God Himself chose to write in passionate poetry and narrative and parables rather than in the bureaucratic style of a systematic theology.” (Angels in the Architecture: A Protestant Vision for Middle Earth, Douglas Jones and Douglas Wilson, pp. 123, 124)

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Swallowing Foolish Reductios

2006-11-07T07:06:00.000-06:00

“The final divide between the embarrassed and unembarrassed horrifies those moderns who take the Enlightenment seriously, but it should also horrify decent, clean-shaven modern Christians, because so many of us are instinctively embarrassed by the claims of the Christian view of reality. Though the Judgment will forever divide the embarrassed and the unembarrassed, the embarrassed do appear to be making up a large portion of professing Christians. Think for a moment about how many squabbles in the Church stem from not wanting to have moderns think we are unenlightened throwbacks… dare we say, medieval? Consider how agitated we get in our rush to assure our Enlightenment lords that scriptural faith endorses nothing so obviously embarrassing and unmodern and wicked as excommunication, the death penalty, patriarchalism, slavery, a young earth, and monarchy, or that Scripture condemns sodomy, public schools, recycling, or whatever else might make moderns shake their fingers at us.

“But the important test question here isn’t whether Christianity teaches egalitarianism or an old earth, but what if it clearly didn’t? Would we be embarrassed then? What if Scripture really taught all those horrible things mocked so loudly by moderns—would we be ashamed? This is a wonderful personal test. Think of the most horrible moral or scientific accusation raised against the Christian faith and then ask, what if it’s true? Would we be embarrassed to stand by Christ? Or could we thumb our noses at modern scowls? We are promised that idolatrous wisdom is less than false; it is foolishness. The very first commandment calls us to disdain all other loyalties and fear God alone. That sort of attitude makes up the radical Scriptural challenge, ‘Let God be true, but every man a liar’ (Rom. 3:4). Every man? Could we stand firm if every scientific study and political expert denounced Christian truth? Could you stand loyal and unembarrassed against laughter pouring forth from the president of N.O.W., Stephen J. Gould, and Calvin College? Evangelicals have tended to buckle their knees at much less. We don’t know the great joy of swallowing the reductios from our opponents. Let them have their feeble idols; we have Christ.” (Angels in the Architecture: A Protestant Vision for Middle Earth, Douglas Jones and Douglas Wilson, pp. 48, 49)

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How to Leave Rationalism

2006-10-07T09:52:00.000-05:00

Significant chunks of Protestantism and especially Reformedom are awash in rationalistic pietism. Here are four fairly basic things (in no particular order) that one can do to help stab the beast of rationalism when it comes to one’s general epistemology. This doesn’t go beyond a brief introduction, but with a subject this big and foundational, the first step is a big one.

1) Read Doug Jones’s epistemological series in Credenda/Agenda. Study it. This is a good intro to some problems with the way we tend to view basic concepts such as knowledge, logic, etc. Over against the abstract, impersonal, mechanization of epistemology found in modernism, Jones sketches a more personal, incarnational view of the subject.

Knowing is Doing: http://www.credenda.org/issues/13-1incarnatus.php
Knowing is Haiku: http://www.credenda.org/issues/13-2incarnatus.php
Knowing is Presence: http://www.credenda.org/issues/13-3incarnatus.php
Knowing is Imaging: http://www.credenda.org/issues/13-5incarnatus.php
Knowing isn’t Syllogistic: http://www.credenda.org/issues/13-6incarnatus1.php
Knowing is Tracing: http://www.credenda.org/issues/13-6incarnatus2.php
Knowing is Loving: http://www.credenda.org/issues/14-1incarnatus.php
Knowing is Story: http://www.credenda.org/issues/14-2incarnatus.php
Knowing is Community: http://www.credenda.org/issues/14-3incarnatus.php
Knowing is Timing: http://www.credenda.org/issues/14-4incarnatus.php
Knowing is Falling: http://www.credenda.org/issues/14-6incarnatus.php

2) See what it would be like to formulate your theory of truth by beginning with John 14:6 instead of the standard secular debate on the subject. Is truth about correspondence or coherence? What about the pragmatists and those “social construction of reality” guys? Or perhaps we should just begin with the Alpha and Omega and His statement that He is the truth. Truth, though it can certainly be a quality of propositions, is not fundamentally and foundationally that. Truth is fundamentally a person, or the tri-personal Creator of the universe to be more precise. Therefore, truth is fundamentally personal and relational (among other things). What does this mean? See the Jones series. How do we know this description is true? See below. But we should think it quite bizarre when Christians let secular philosophers define such an important concept for them, and we should be amazed at the attempt to reduce truth to an abstract quality of how “propositions” relate to the “external world” when Yahweh, the Truth, created our minds, our speech, and the external world. If we start with truth as fundamentally a faithful Person, we get correspondence and coherence aspects thrown in. But if we start our discussion of truth by formulating an abstract theory independent of God, we have already traveled quite far down the road of modern rationalism.

3) Perform some biblical word searches of basic epistemological terms like ‘truth,’ ‘know,’ knowledge,’ and ‘wisdom.’ The results should shock and awe because they will provide us with qualities and situations that we don’t usually associate with epistemology. The following is far from comprehensive.

A. Some personal and action-oriented aspects of truth. Truth is first and foremost the tri-personal God and thus, it is first and foremost personal and ethical. It is about faithfulness.
God is true (this has strong connotations of ‘faithful’): John 3:33; 7:28; 8:26; I John 5:20
Jesus is “full of truth” (John 1:14) and “the truth” (John 14:6). His name is “True” (Rev. 19:11)
The Holy Spirit is the “Spirit of truth” (John 14:17; 15:26; 16:13) and “the truth” (I John 5:6)
Jesus is the Wisdom of God incarnate: I Cor. 1:24, 30
Truth as faithfulness: Gen. 24:49; Deut. 7:9; Josh. 2:14; II Kings 12:15; Neh. 7:2; Prov. 14:5; 29:14; Lam. 3:23
God’s people are to “walk” in truth: I Kin. 2:4; II Kin. 20:2; Gal. 2:14; II John 4; III John 3, 4
They are to “walk” in wisdom: Col. 4:5
Walking in truth is equivalent to walking according to God’s commandments: II John 4-6
They are to “walk” in the way of understanding: Prov. 9:6
Wisdom is associated with personal traits and actions: Jas. 3:17
Christians are to love “in truth”: I John 3:18 (cf. II Jn. 1; III Jn. 1)
The truth is righteousness: Prov. 12:17
Seeking truth is synonymous with doing justly: Jer. 5:1
Truth and knowledge of God are synonymous with goodness: Hos. 4:1
Wisdom and understanding are identified with upright behavior: Prov. 15:21
Believers have a moral obligation to speak the truth (Ps. 15:1, 2; Zech. 8:16; Eph. 4:25)
Sin gives rise to error, while truth is linked to goodness: Prov. 14:22
Evil naturally brings forth falsehood and is antithetical to truth: John 8:39-47
Truth is antithetical to evil: John 3:20, 21; I Cor. 13:5
Wickedness is antithetical to truth; it is an abomination to wisdom: Prov. 8:7 (cf. 8:1)
Wisdom speaks no perversity: Prov. 8:8
Truth is antithetical to unrighteousness: Rom. 2:8
Any kind of idolatry, as a sin, is a lie: Is. 44:20; Jer. 10:14; Rom. 1:18-23

B. Some personal and action-oriented aspects of knowledge.
Knowing as loving: Gen. 18:19; II Sam. 7:20; Amos 3:1, 2 (cf. Deut. 7:6-8; 9:10:15); Matt. 7:23; John 10:14, 15; Rom. 8:29; 11:2; II Tim. 2:19
Knowing as covenant choosing: Ex. 33:12, 17; Deut. 9:24
Knowing as the intimate physical outgrowth of love (though it can be perverted): Gen. 4:1, 17, 25; 19:5, 8; 24:16; 38:24-26; Num. 31:17, 18, 35; Judg. 11:39; I Sam. 1:19; I Kin. 1:4
Knowing as knowing a person (which is clearly more than just knowing things about that person): Gen. 29:5; Ex. 1:8; 33:13
Knowing as recognizing a person: Gen. 42:7, 8; I Sam. 26:17; I Kin. 18:7
Knowing as showing concern or care for: Ex. 2:25; 3:7; Deut. 2:7; Ps. 144:3; Prov. 29:7
Knowing as personally experiencing: Ex. 23:9, Num. 14:31, 34; Deut. 7:15; 11:2; Josh. 24:31; Eccl. 8:5; Is. 47:8
Knowledge as a physical skill: Ex. 36:1; I Kin. 5:6
Knowledge as practice: Ps. 101:4; Is. 59:8
Knowledge as personal relationship: Deut. 11:28; 13:2, 6, 13; 34:10; I Sam. 2:12; 10:11

4) Study the book of Proverbs in light of the subject of epistemology. Proverbs may well be the single most important book of the Bible when it comes to the basics of epistemology, and it has much to say on the subject. Compare the emphasis and “feel” of Proverbs to the way epistemology works in Reformedom. The differences are striking.

a) Knowledge and epistemology in Proverbs are very personal; our reduction of the subject to propositions, correspondence, and the like is very impersonal.

b) Epistemology in Proverbs is very down-to-earth, practical, and incarnational. We tend to be very abstract and locate nearly the whole subject in the mind.

c) Proverbs focuses heavily on wisdom which is itself a very personal and “earthy” concept. We focus on abstract facts, “propositional knowledge,” and the like.

d) Epistemology in Proverbs is action-oriented. What one does is every bit as relevant to the subject as how one thinks. But we think that epistemology is all about thinking and rarely if ever talk about the “doing” aspect of knowledge.

e) Epistemology in Proverbs in inextricably linked with ethics. We rarely if ever make the connection.

f) In sum, epistemology in Proverbs is very Hebraic. We tend very much to be children of the Enlightenment (which should really be called the Endarkenment) with our mechanized, impersonal, non-relational abstractions. If you begin by thinking Hebraically, you get things like propositions, sets, and validity thrown in. But by truncating epistemology down to the shallowness of modernism, we go a long way towards a variety of problematic practical implications (e.g., rationalistic and systematizing hermeneutic, failure to see the importance and widespread use of narrative and typology in Scripture, reducing the Eucharist to a memory aid, acting as if one is justified by believing certain doctrines, pitting faith against the Sacraments, corporate worship is long on information exchange and short on most everything else).

If we will do these things, take them to heart, and internalize them, we will have taken a major step away from our rationalistic pietism and towards a full-orbed, incarnational, covenantal worldview.

American P.I.E. V

2006-09-27T05:29:00.001-05:00

Part I
Part II
Part III
Part IV

This is the fifth and final installment of the American PIE series. Part one was a not too serious introduction and part two focused on the P in the PIE: pietism in general. Part three addressed the rationalistic side of pietism and part four addressed the experiential side of pietism. This part will focus on the E in the PIE: egalitarianism.

Egalitarianism
Individualism runs throughout. For most everything of significance, authority and responsibility center on the individual. Along with this comes the belief that any individual is competent and equipped to do most anything.

Held most strongly by: General and Particular Baptists, Restoration movement churches, Bible churches, non-denominational churches, most holiness movement and Pentecostal churches, most “generic evangelicals”

The great concern of egalitarianism is: subjection to oppressive, authoritarian rulers. This, of course, is a very American concern. Egalitarianism is largely a reaction against this foe.

Core Assumptions:

1. hierarchy: Any significant concept of hierarchy is rejected. A false dichotomy is often set up between localized authority (residing in, e.g., the local congregation or the individual) and oppressive, top-down authoritarianism. The idea that the body of Christ as a whole (e.g., via councils) has judicially binding authority is rejected in favor of “autonomy,” i.e., self-law. The one/unity and the many/diversity are not equally ultimate as one would expect from a Trinitarian theology. Instead, the many/diversity is quite a bit more central and important than the one/unity. Thus, egalitarianism is inherently “polytheistic” in structure even though evangelical Protestants obviously don’t translate this over into theology proper.

2. representation: Any significant concept of representation is rejected. Direct democracy is the ideal. Since representation is a key aspect of the covenants that God has made with His people, egalitarianism is inherently anti-covenantal.

3. individual competency: Any given individual is competent to do almost anything and he is responsible for almost everything. Thus for example, all Christians are qualified and capable exegetes who should be doing most of their own biblical study/exegesis. They are also qualified evangelists who should routinely be engaged in evangelism.

Some Effects:

1. individualistic hermeneutic: “The right of private interpretation” is a common phrase. It is simply a given that everyone is a competent biblical exegete who should be doing such exegesis often and by himself (or in small groups without ordained teaching oversight). The Bible is essentially and fundamentally seen to belong to the individual instead of to the body of Christ, the Church. Because of this, many biblical passages are decontextualized and applied directly to each individual. Thus for example, passages that promise the Spirit’s guidance to specific biblical individuals, ordained ministers, or the Church in general are redirected to apply directly to each modern individual. As another example, it is simply assumed that the Great Commission was given to each individual. In reality, it was given to ordained ministers.

2. congregational form of government: Local congregations are seen as “autonomous.” Authority and responsibility are pushed to the most local level possible, and hierarchy is eliminated (as much as is practically possible without creating rank chaos). Each individual congregation does what is right in its own eyes. Even though democracy is scarcely seen in the Bible (not in the family, Church, or state), a high priority is placed on decisions made via a direct democratic (demos = people, kratos = rule) vote. This leads to...

3. sectarianism: If authority is more or less exclusive to the most local entity possible (e.g., the single congregation or the individual), factionalism is inevitable. With something like 30,000 Protestant denominations in America, “atomism” is American Protestantism’s middle name.

4. “decisionism” / voluntary membership: The Church functions far more like a club than it does a family. Having a voluntary membership is of paramount importance. Each individual must first mature and then make his own decision to accept Jesus and enter the Church. The idea that someone may be adopted into the Church without his mature input is unacceptable. This of course works against the concept of covenantal representation and it doesn’t sit well at all with the concept of Christendom (which is usually seen to be inherently compromised by formalism). This fits together well with…

5. credo-only church w/ credo-only sacraments: Egalitarianism presupposes maturity in thought and capabilities (e.g., small children and the mentally handicapped cannot vote, preach the gospel, privately interpret Scripture). Therefore, the immature are not members of the Church in any significant way (at least not formally) and the sacraments do not belong to them. Moreover, since egalitarianism rejects any concept of representation, the biblical concept of household circumcision/baptism is quite foreign.

6. para-Church focused: In American Protestantism, a significant amount of teaching comes from para-Church organizations and/or itinerant preachers that have little or no accountability to a Church hierarchy. Significant teaching also comes from small group Bible studies that do not have ministerial oversight. Compare this to how teaching is normally conducted in the Bible.

7. imprimatur process: This is nonexistent in the American Protestant world.

American P.I.E. IV

2006-09-21T21:36:00.001-05:00

Part I
Part II
Part III
Part V

This is part four of the American P.I.E. series. Part one provided an introduction to the series and an overview of the material to be covered. Part two focused on pietism in general. Part three focused on the rationalistic form of pietism. This part will focus on the experiential form of pietism. It will not be as developed as the rest of the series because I’m just not at home with experiential pietism. With the other parts of this series, I think I can study what I’m describing “from the inside.” But with experientialism, I must look at it from the outside (and I haven’t really been looking at it for a long period of time).

Experientialism
Individualism runs throughout. The overwhelming focus is placed on the individual’s experiences and emotions.

Held most strongly by: holiness movement and Pentecostal churches, Charismatic churches, some General Baptists, some non-denominational churches, some “generic evangelicals”

The great concerns of experientialism are: a cold, impersonal doctrinalism and moral laxity in the realm of personal behavior (two varieties of what experientialists see as formalism). Experientialism is largely a reaction against these foes.

Core Assumptions:

1. epistemological subjectivism: God is known primarily through the experiences of the individual (e.g., “feel/see the Spirit move” in one’s life and circumstances)

2. nature of experience: Experience is an emotional phenomenon, not a mental phenomenon (i.e., meeting God and having a relationship with him via Bible study is rare or nonexistent) and only secondarily is it a social phenomenon. Above all, it constitutes an immediate relationship with God. Functionally, it can often be a separate form of revelation in addition to the Bible. It may occasionally be an explicit revelatory experience (e.g., “a word from the Lord”) but it is usually more indirect and “fuzzy” and resembles an emotional state of some kind.

3. authority of experience: It is often infallible or at least unassailable in practice though it is not usually so in theory. A healthy skepticism of such experience rarely seems to exist.

4. routine and ritual: These are identical to “dead formalism.”

Some Effects:

1. doctrinal development: The theological understanding of experiential pietists is often quite underdeveloped. They don’t usually progress very far beyond the basics of Christian doctrine.

2. adding to the law (ethical subjectivism): It is often the case that underdeveloped doctrine and a relatively weak emphasis on the authority of the Bible combine with a strong emphasis on personal behavior to produce many “house rules.” These rules (e.g., don’t drink, don’t smoke, don’t dance) usually have little or no biblical support but they often become important moral requirements which distinguish the holy from the carnal.

3. schism: Perfectionism and the search for authentic experience leads to many denominations and much church hopping.

4. privatization: Holiness is often understood in a way that would make Christendom impossible.

5. low view of the Church: Experience trumps the “formalism” and “cold doctrine” of a Church that has any real necessity or authority.

6. ecclesiastical order: The high authority of experience with respect to the Bible and the Church produces many para-Church ministries headed by those without formal calls, much biblical education, or much pastoral experience. They see their calls as immediate (i.e., directly from God), and often enough, their ministries take on a ‘cult of personality’ feel.

7. worship music: The importance of music is usually stressed. Worship music often consists of simple, “contemporary” songs and choruses sung repetitively. Any hymns generally date from the 19th century onward. The overwhelming focus of the songs is the individual’s personal relationship with God.

American P.I.E. III

2006-09-17T19:28:00.001-05:00

Part I
Part II
Part IV
Part V

This third post in the American P.I.E. series will summarize the rationalistic brand of pietism. This is a subset of pietism in general and for the most part, it describes the epistemological tendencies of some pietists.

Rationalism
Individualism runs throughout. The overwhelming focus is the individual thinking mind with much less importance given to the person living and doing within a community of people and relationships.

Held most strongly by: Particular Baptists, many General Baptists (though less strongly than the Particular Baptists), some Reformed churches (especially those who identify with 17th and 18th century English and Scottish Puritanism), Restoration movement churches, many Bible churches, some non-denominational churches

The great concern of rationalism is: doctrinal impurity, especially the kind that comes from theological liberalism or relativism. Rationalism is largely a reaction against this foe.

Core Assumptions:

1. modernist epistemology: Which basically tries to transcend the world of space, time, and creaturely finitude.

1.1 epistemological basics: Holds to an impersonal theory of truth (e.g., correspondence or coherence theories of truth) instead of seeing truth first and foremost as a Person (cf. John 14:6). Also typically holds to a foundationalist view of epistemology whereby some ideas are self evident, indubitable, and self-justifying. All other beliefs are justified in a linear fashion by either direct or indirect reference to this foundation. Additionally, a strong subject-object dichotomy is posited whereby neither the subject nor the knowing process is significantly affected by the external world. This appears as follows…

1.2 Knowing subject: The knowing subject is Descartes’ “I am,” the isolated, mature, and self-sufficient thinker (cf. the understanding of personal identity under the general description of pietism). The project of knowing begins with him and he is the final reference point for prediction.

1.3 objects of knowledge: The objects of knowledge are abstract, impersonal propositions as they reflect, in a mirror-like way, the external world. Gaining knowledge is all about propositions, evidence, and proofs. It is an impersonal, nonphysical, nonaesthetic, and abstract exercise. Personal relationships are secondary at best even though the Bible regularly uses the word ‘know’ in this personal, relational sense.

1.4 methodology and goals/results: The only truly legitimate models for thought are the mathematician (“rationalistic rationalism”) and/or the Baconian scientist (“empirical rationalism”). These are the only ways whereby a significant amount of true knowledge may be obtained (e.g., personal relationships or poetry are not thought of as good/primary models of knowledge). The knowing subject is to study the world in a detached, objective manner. The goals are to obtain objective, immediate knowledge and avoid/eliminate uncertainty and imprecision. Knowledge must be immediate and certain if it is truly to be knowledge.

2. systematization: Systematization (and systematic theology in particular) is the paramount and controlling principle of organization. The Bible as poetic narrative, typology, and/or history is given much less focus. Almost all of the important terms are abstract, systematic terms (e.g., election, regeneration, justification, sanctification) and almost all of the important debates are debates over systematic categories (e.g., individual salvation, free will, efficacy of the sacraments). Historical context, temporal flow, poetry, and typology all take a small backseat while (sometimes logic-chopping) discussions of an ahistorical, individualistic ordo salutis are ubiquitous.

Some Effects:

1. rationalistic hermeneutic: The mechanics of the text are everything. The basic methodology is that of a scientist who must analyze the raw terms and syntax of the text and arrange the bits of biblical data into a systematic whole. Commonsense realism and Baconianism are the epistemological drivers. The poetry, story, and historical flow of the text often become secondary or tertiary. The vast majority of the Bible was explicitly written as narrative history and poetry, but it is usually read “mechanically,” systematically, and more or less atemporally – as if it were a textbook (or perhaps a jigsaw puzzle, with the various proof texts functioning as pieces to be arranged in the proper order). Moreover, this hermeneutic tends to be minimalistic in how it addresses things like typology and allusions to previous scripture. This is in opposition to the typological way in which the NT regularly quotes/alludes to the OT. This flows from and fits in well with the existentialism that characterizes pietism in general.

2. abstractionism: Some facets or aspects of the Christian life that should be lived out can be turned into abstractions (e.g., justification by trust in a Person can functionally – though never officially of course – become justification by belief in the doctrine of justification by faith). It seems to be commonly assumed that Christians are known by their doctrine whereas Jesus’ statement in John 13:35 gets little emphasis.

3. definition of faith: This follows from pietistic views of personal identity and relationships as well as the views of truth and knowledge just mentioned. Cognitive assent to propositions is the heart of faith. Personal trust is usually seen as an aspect of faith but it is rarely focused on or considered to be the core aspect. Mature intellectual thought is the sine qua non of faith. The view that faith could be trust in a person apart from well-developed thoughts about that person is rejected as irrational.

4. credo-only Church w/ credo-only sacraments: Church membership is defined on the basis of mature thought and confession. At least one and often both of the sacraments are for mature thinkers and confessors alone. This point ties in with the fact that...

5. ritual: Is almost completely useless and in many cases is actually a detriment to be feared. A strong emphasis is placed on thinking and comprehending as they are abstracted and separated from bodily action. The idea that rituals are important or effectual is often met with the charge of “formalism” or with the idea that such rituals must then be viewed as being magical. One’s profession and especially one’s understanding of the propositions and logical connections that make up the ordo salutis (or the system as a whole such as dispensationalism or “the five points of Calvinism”) are what really matters. Thus, the sacraments are usually little more than symbols that function as individual declarations and/or mental reminders of something else.

6. assurance of salvation: Is a significant issue/problem in some circles. This seems to correlate well with the broader problem of epistemological certainly that has characterized modernist epistemology. And just as the modernist ultimately tries to finds certainty by grounding the knowing process in himself and his methodology, so also the rationalistic pietist who focuses on this issue tends to find certainty by turning inward. Certainty (or, often enough, doubt) tends to come from an inspection of one’s sincerity of belief and/or one’s good deeds.

7. daily behavior: Having the correct doctrines and system are critical. The importance of proper interpersonal behavior is sometimes downplayed or neglected. Arrogance and a lack of kindness/grace/courtesy can be overlooked because purity of doctrine is what matters. Because the paradigm is centered around and focused on that which is impersonal, sensitivity to actual flesh and blood persons sometimes suffers.

The Importance of Marketing

2006-09-16T16:31:00.000-05:00

This cat definitely needs a new marketing strategy.

(end of post; ignore continue reading statement below)

American P.I.E. II

2006-09-15T06:57:00.001-05:00

Part I
Part III
Part IV
Part V

Continuing from part one of this series, this post will summarize pietism, the first main presupposition of American P.I.E. Following this sketch of pietism in general, the next two posts will take up what I see as the main forms of pietism: rationalism and experientialism.

Pietism
Individualism runs throughout. The overwhelming focus is on the individual’s unmediated salvific relationship. Everything else is unnecessary and can easily be dismissed (or at least downplayed so that it is unimportant in practice). What really matters is the individual’s immediate (i.e., not mediated), internalized relationship with God.

Held most strongly by: General and Particular Baptists, Restoration movement churches (e.g., Disciples of Christ, Christian churches), some Reformed churches (especially those who identify with 17th and 18th century English and Scottish Puritanism), Bible churches, non-denominational churches, holiness movement and Pentecostal churches, Charismatic churches, vast majority of “generic evangelicals”

The great concern of pietism is: formalism. Pietism is largely a reaction against this foe.

Core Assumptions:

1. internal-spiritual: A false dichotomy is set up between what is internal or “spiritual” (often erroneously defined as “non-physical”) and what is external or physical. The two realms are separated so that they don’t have much to do with one another. Moreover, the internal-spiritual realm is the important one and it is not accessed via the external-physical to any significant degree. Thus, the dichotomy means that the external-physical is of little or no importance. What matters is what happens “in your heart.” Without this dichotomy, formalism is thought to be inevitable. This flows into a certain understanding of personal identity and relationships.

2. personal identity: personhood is understood in terms of the Cartesian “I am.” The individual is seen as a self-contained unit that is defined without reference to anything or anyone external to him. This unit may then interact with the external world, but neither the world nor his interaction with it has any significant part to play in the formation of his personal identity. Even the pietist’s own physical body is not essential; it is assumed to be a container that holds the real person – the immaterial, Cartesian soul. This view meshes well with…

3. unmediated salvation and relationship w/ God: A “personal relationship with Jesus” (or something functionally similar) is the only significant, salvific relationship, and it is interpreted to be a direct, unmediated relationship. Relationships and the physical world are separate things, and relationships exist and are complete apart from that which is physical. In other words, any “physical manifestations” are simply epiphenomena of the relationship, and the relationship would still exist and be fully defined apart from those physical manifestations. Thus, the created order isn’t really important because secondary, mediating causes are at best unnecessary and are often problematic. This produces a low view of the Church as God’s means of grace/salvation (therefore a low view of sacraments, liturgy, etc.).

4. perfectionism: This can take various forms. Combined with rationalism, it tends to produce a pedantic, overly exact doctrinalism. When behavior is a major focus (e.g., the holiness movement), it often produces draconian and legalistic “house rules” (e.g., don’t drink, don’t smoke, don’t dance, rock music is necessarily bad). Perfectionism has major consequences for ecclesiology (see effects 7, 8, and 9 below).

5. existentialism: Past history is of little or no importance (past councils, creeds, and theologians mean little) and future earthly history is relatively unimportant (multi-generational thinking is rare; pessimism regarding the future is common; there is no meaningful concept of Christendom; “we’re just pilgrims passing through this land”). What really matters is the now (“getting saved” is a present moment, punctiliar event) and a timeless eternity in heaven.

Some Effects:

1. existential hermeneutic: Timeless and individualistic reading of the Bible where every passage is addressed directly to me today. The redemptive-historical flow of the text is missed as is the original context and audience. Moreover, sola Scriptura is twisted to teach that each individual is the final interpretive standard. Authoritative councils are out. Proper and definitive interpretation does not belong to the community as a whole. It belongs to the individual (the so called doctrine of “private interpretation”).

2. nature-grace dichotomy: Flowing from the spiritual-physical dichotomy, salvation refers to what happens to individuals only. There is almost never any meaningful focus on God’s salvation and restoration of the created order as a whole or the consequences of such. Nature (the created order) and grace/salvation are distinct and one doesn’t have much to do with the other. So while the temporary and weak old covenant may have had some “fleshy” accoutrements, this baggage was discarded in favor of the much more “spiritual” and much less physical new covenant.

3. sacred-secular dichotomy (privatization): Christendom is out of the question in any meaningful sense and the world is viewed as secular territory. With this sacred-secular dichotomy, faith is essentially private and only peripherally public (e.g., we will fight hard for a Ten Commandments monument while our civil laws are blatantly unbiblical).

4. pietistic gospel: The core of Christianity is “the gospel,” and this is defined in a pietistic manner. In Arminian circles, the gospel is the offer of salvation that is given to the individual. The gospel is the offer to each individual that he can be saved from his sins and “go to heaven.” In Particular Baptist and Reformed circles, the gospel is the doctrine of justification by faith alone. It is the doctrine that defines justification (as imputed righteousness) and states the relationship between it, faith (as the sufficient and efficient cause), and works (which are no cause or basis of justification). But while these views are generally true enough (though sometimes they need to be “tweaked” a bit), they are not what the Bible means by “the gospel.” At best, they are significantly truncated and individualistic versions of the true gospel.

5. ritual: Is almost completely useless and in many cases is actually a detriment to be feared. What matters is what happens in your heart. Ritual is basically equated with formalism despite the fact that it is impossible to be ritual-less (being without ritual/routine is the definition of chaos). The result is that a false dichotomy is set up between piety (conceived in modern evangelical terms) and ritualism/formalism. But in practice, pietism just creates its own rituals as it must to avoid chaos. By doing this, it fails to avoid the possibility of formalism while at the same time it downplays effectual biblical rituals (e.g., the sacraments) and distances itself from the historic Church.

6. born-againism: Milder forms see the 1st generation Christian (who was an adult covert) as the standard and norm for conversion. The idea of being a Christian from birth/infancy makes little sense. Each person must mature to some level (usually adolescence) and then go through the same conversion process (which is not necessarily traumatic) as a 1st generation, 1st century gentile from a pagan family. In stronger forms, the conversion process requires an explicit “conversion experience.” In both forms, very strong emphasis is placed on regeneration as a punctiliar, non-repeatable, non-reversible event. A rite of passage must exist and it must take place after a significant amount of maturation has occurred in order to avoid formalism.

7. pure Church: The purity of the Church is paramount. The pietist will usually acknowledge in theory that the Church before the consummation will never be completely pure with all of its members completely faithful and sanctified (i.e., it is not the same as the Church after the consummation). But in practice, he tries to erase this gap by, for example, requiring “true” faith or a conversion experience for church membership. Moreover, the pietist is quite sensitive to impurities in the Church. The rationalistic pietist will fight, die, and split over doctrinal issues at the drop of a hat while the experiential pietist will do the same with respect to issues of behavior and personal holiness. This fits in well with born-againism and usually leads to...

8. sectarianism: In a number of sub-groups within American Protestantism, a schismatic and sectarian spirit has prevailed. And even where the “party spirit” is not grossly obvious, factionalism is still a functional norm. This has produced some 30,000 Protestant denominations including many “non-denominational” denominations. The perfectionist search for the absolutely really true Church cannot help but produce this.

9. credo-only Church w/ credo-only sacraments: Whether pietism is rationalistic, experiential, or some combination, it presupposes maturity. Only a non-mentally handicapped adolescent or adult can have the kind of unmediated, “heartfelt” relationship with God that characterizes pietism. And since the sacraments are viewed as testimonies or reminders of that relationship, they only belong to those who are mentally mature.

10. exaggerated focus on evangelism: Especially common in Arminian circles, an exaggerated focus is placed on “getting saved” with salvation defined as an individualistic, punctiliar event. Evangelism, not worship, is the raison d’etre of the Church. Everything else is a means toward this end (e.g., seeker-sensitive worship). A long-term vision of inter-generational growth leading to a strong Christendom is usually lacking.

11. introspectionism: Undue emphasis is often placed on finding assurance of salvation by looking at oneself (e.g., constantly and minutely inspecting one’s outward behavior or one’s faith to see if it is good enough) instead of looking to Christ.

American P.I.E. I

2006-09-13T07:43:00.001-05:00

Part II
Part III
Part IV
Part V

In the spirit of Weird Al Jancovich meeting Augustine, here is a spoof of Don McLean’s classic American Pie in order to introduce the subject matter of this post series.

A long, long time ago
I can still remember
how the ol’ time gospel made me smile.

And with revival’s message tell
how regeneration made me well;
unmediated grace saved me from hell.

But Vantil’s postmils made me think
and from the ancients I did drink.
“Good news” I could see
was about much more than me.

The Anglo-puritan banner had
lost its luster, now I’m glad,
and I knew that I’d been gifted
the day my paradigm shifted.

So bye-bye, Miss American P.I.E.
Had my doctrine in a system but the system was dry.
And the Reformers were drinkin’ whiskey and rye
singin’, it’s about time you came nigh.
It’s about time you came nigh.

Did you make profession yet,
and is salvation immediate,
if Charles Spurgeon tells you so?

Is immaterial bliss the goal,
can gnosticism save your soul,
and should your child regenerate when old?

Well, I know you’re egalitarian
‘cause you think hierarchy is a sin.
Complete churches made us wince.
Man, we downplayed those sacraments.

I was a feisty five point, logic gifted
with a perfect ordo, the Church I sifted.
But modernity’s fog was lifted
the day my paradigm shifted.

I started singin’,
bye-bye, Miss American P.I.E.
Had my doctrine in a system but the system was dry.
And the Reformers were drinkin’ whiskey and rye
singin’, it’s about time you came nigh.
It’s about time you came nigh.

Now for some years I’ve been moving to
the Nicene catholic point of view,
but that’s not how it used to be.

When the preacher taught for the congregation
the systematics of justification
with a voice that shuddered you and me.

Oh, but while the preacher panned sacraments,
Calvin reformed my “common sense.”
My viewpoint was adjourned;
the ancient truth returned.

And while I found a federal vision,
the purists practiced endless schism,
and I sang dirges to pietism
the day my paradigm shifted.

I was singing,
bye-bye, Miss American P.I.E.
Had my doctrine in a system but the system was dry.
And the Reformers were drinkin’ whiskey and rye
singin’, it’s about time you came nigh.
It’s about time you came nigh.

Drums were beating in a pastor’s meeting.
The H-word flew, civility fleeting.
Controversy’s strong and spreading fast.

Some cried foul for the rancor vast.
The pastors tried to invoke the past.
The Baptists in attendance were aghast.

Now the aftermath was fear endowed
with the Southern Pres. tradition loud.
We all tried to explain,
Oh, but the tempest strength it gained!

‘Cause the pastors jumped from the frying pan,
and Machen’s heirs the flames to fan.
Do you recall how it began
The day my paradigm shifted?

I started singing,
bye-bye, Miss American P.I.E.
Had my doctrine in a system but the system was dry.
And the Reformers were drinkin’ whiskey and rye
singin’, it’s about time you came nigh.
It’s about time you came nigh.

Oh, and there we were at the chapel door,
a generation needing more,
with no hope for revivalism’s mend.

So come on: with objective grace endowed,
united sing Te Deum loud
‘cause bitter schism is the devil’s friend.

Oh, and as our covenant is renewed,
individualism is hewed.
Pietism’s concerns,
they are addressed in turn.

And with the ancient faith in sight
we joined in sacramental rite.
I saw angels smile with delight
the day my paradigm shifted.

They were singing,
bye-bye, Miss American P.I.E.
Had his doctrine in a system but the system was dry.
And the Reformers were drinkin’ whiskey and rye
singin’, it’s about time he came nigh.
It’s about time he came nigh.

I met a girl with American views
and defined for her the full “good news,”
But that fullness nearly made her reel.

I saw the old church one more time
where I’d learned my former paradigm,
but the teaching there lost much of its appeal.

And the children needed maturity
before they could come near and feed.
Despite the true words spoken,
modernity was broken.

And the pastors of the years to come
had seen enough to make them numb.
We caught the train to Christendom
the day our paradigm shifted.

And we were singing,
bye-bye, Miss American P.I.E.
Had our doctrine in a system but the system was dry.
And the Reformers were drinkin’ whiskey and rye
singin’, it’s about time you came nigh.

So now that we’ve had a little fun, I wanted to write a few posts summarizing what I sometimes refer to as “Americanized Protestantism.” What is this? It is what I’ll call the American P.I.E. paradigm – the worldview that defines the credenda/agenda (the fundamental beliefs and actions) for the majority of conservative American Protestants. I exclude from American P.I.E. the “non-American” denominations such as the Episcopalians and Lutherans. I include the denominations that either began in the US and/or, because of the nature of American society, had their most significant growth here.

So what is American P.I.E.? I think the core presuppositions of Americanized Protestantism are:

1) Pietism: Within pietism, I see two basic forms – rationalistic pietism and experiential pietism.

2) Individualism: This is right in the middle of the P.I.E. It is the uber-presupposition from which everything else flows.

3) Egalitarianism

The American P.I.E. is the web of pietistic, individualistic, and egalitarian presuppositions that forms the glasses through which Americanized Protestants view theology. (How’s that for a mixed metaphor?)

I plan to have four more posts in this series. This introduction will be followed by posts on:

Pietism in general
Rationalism (as a subspecies of pietism)
Experientialism (as a subspecies of pietism)
Egalitarianism

Individualism will not have a separate post. Since it weaves its way through all of the other presuppositions, it will more or less be defined by them.

The upcoming posts will be organized as follows:

1) Presupposition being addressed
2) A brief statement of how it relates to individualism.
3) Which denominations/communities tend to hold it.
4) The central concerns that it is supposed to address.
5) Core assumptions of the presupposition.
6) Some effects of the presupposition.

Although these posts will contain a few counterpoints here and there and some quick pokes at what I think are problematic features, the point of the posts will not be to argue against American P.I.E. Such an argument, in order to be anywhere near sufficient, would need to be book-length. Instead, I will simply seek to summarize the paradigm. Using some broad and some narrow brush strokes, I will aim to paint a fairly comprehensive and organized picture of Americanized Protestantism – from its core assumptions to a number of its significant effects. This exercise has helped me to become “epistemologically self-conscious” about the theological air I’ve been breathing for years, and I hope I can relay some of that awareness to you.

As always, when dealing with matters like these, there are exceptions to the generalizations. Categories are never air-tight. So for example, some Christians hold views that tend to combine aspects of rationalistic and experiential pietism in a rather dualistic way while others would fall somewhere between the two (i.e., the two poles are blended together in a kind of “middle ground”). But in general, this two-category scheme does seem to capture a good bit of the pietist picture. Moreover, denominations that I refer to for any given concept may not hold to all of the specifics of that concept. There is also variation within the various denominations. So these are generalizations, but they’ve been pretty accurate as far as I can tell.

Additionally, this series is not meant to imply that someone is theologically incompetent or heretical because they hold to the views being described. There are many intelligent and godly people who hold to the general paradigm that I’ll be describing. And I’m not willing to bluntly describe or critique others without giving myself the once over as well. Significant chunks of this series could well be autobiographical (describing previous held views/assumptions as well as current behavioral tendencies). Moreover, I should probably point out what may well be obvious – I’m not much of a diplomat. So especially in a forum like this, my views can seem pretty blunt. But when I use terms like ‘pietism’ and ‘rationalism’ for example, they are being used as descriptions defined by the content of the series. They are not being used as epithets. Like I said, a good bit of this stuff applies to me in some form.

I should also point out that the problems (e.g., “formalism”) that the American P.I.E. paradigm was supposed to solve are real problems. The concerns of Americanized Protestants are quite legitimate and deserve attention from those who hold a different paradigm.

Finally, I would say that this is a work in progress. It started out as really rough notes that I would make over time as I read through American Christian history, visited the worship services and activities of various denominations, etc. So these posts will hardly be polished essays. They will basically be extended outlines and can grow or change as needed.

A Grave Man

2006-09-07T18:20:00.000-05:00

I may need to order one of these. The shirt would have been complete if they had included Mercutio's pun somewhere on it (the back perhaps).

Romeo: Courage man; the hurt cannot be much.

Mercutio: No, 'tis not so deep as a well, nor so wide as a church door;
but 'tis enough, 'twill serve. Ask for me to-morrow, and you
shall find me a grave man.

Ah, good stuff.

(end of post; ignore continue reading statement below)

The Scream

2006-09-05T16:35:00.000-05:00

I’m sure we all breathed a sigh of relief last week when Edvard Munch’s painting “The Scream” was recovered after being stolen two years ago. But the really good news is that you can own your own Scream. No, it’s not THE Scream. It’s the Cat Scream.

(end of post; ignore continue reading statement below)