Warning: Totally non-theological, non-biblical post ahead. Politics and economics.

I’m no economist, I’m a pastor. But I’ve read a lot about the markets and here’s my perspective on things. This post was prompted by the following.

From the New York Times:

Administration officials committed to flood the financial system with as much as $2.5 trillion — $350 billion of that coming from the bailout fund and the rest from private investors and the Federal Reserve, making use of its ability to print money.

…
Another centerpiece of the plan would stretch the last $350 billion that the Treasury has for the bailout by relying on the Federal Reserve’s ability to create money, in effect, out of thin air.

Inflation is worse when money floods the market that isn’t based on a standard. The more money thrown out there without something behind it, the less that money is worth. Supply and demand applies to currency as well as goods. For an extreme example, see Zimbabwe.

Creating money out of thin air is not, however, altogether new. This is essentially what the stock market does. (Credit cards can do something similar, but that’s for another time.) Real money does go into the market when people buy stock, but when the value of stock rises there is no actual currency rising with it. If 10 people buy 100 shares each of a stock at $5 a share, they have invested $5,000 into that particular company. If 10 more people buy another 100 shares but at $10 a share, they have invested $10,000 into that company. At this point there are 2,000 shares in the hands of shareholders and the value of each share is $10. Total market value of that company, then, is $20,000 even though only $15,000 was invested. In a ledger somewhere $5,000 has been created out of thin air. There is no currency to back most of the money in the market (in truth, there is no currency to back any of it – you only make money on your stock if someone out there is willing to buy it. This is what drives prices down when everyone is trying to dump their stock. No one is buying, so sellers keep lowering their price until someone finally buys some.).

This is why determining someone’s value based on their market assets is somewhat odd. The money is imaginary. It doesn’t exist. When the stock market crashed no one actually lost anything. Nothing changed except numbers on a ledger and in a computer. But those numbers are considered all-important by economists and investors.

This says something about what America really trusts in. Fundamentally, nothing has changed in America. To that end McCain was right during the election in his often maligned statement that the fundamentals of the economy are sound. We still have companies, we still have businesses, we still have citizens. We still have all the elements that should make for a thriving economy. What we don’t have is confidence. Those numbers on a paper have all dropped drastically so companies have cut jobs and services in an attempt to build their cash reserve in order to weather inflation. This creates a problem, though, since firing people means less people are able to spend money and creates a nasty catch-22.

Matt loses his job at company X so Matt is not able to buy the things he might normally buy from store Y. Store Y makes less money so they have to cut back on the kinds of things they put on their shelves. Namely, they decide they need less products from company X so they buy less from company X. Company X responds by firing Sally to protect themselves. On and on it goes. Declining sales means the loss of jobs which means an overall reduction in spending which means declining sales which means the loss of jobs which means…

The problem with bailouts and stimulus packages is they won’t do much when people are nervous. They might create a few extra projects here or there but at the end of the day companies are trying to protect themselves by building or preserving a cash reserve. If something the government does provides them extra cash, they are more likely to store it somewhere safe than use it to create more jobs.

What’s the solution? I have no idea. Where will this lead? I have no idea. But most of the solutions I’ve seen thrown out so far look more like desperate measures to try _something_ rather than well reasoned responses to a true economic crisis. The end result may well be greater and greater suffering and increased turmoil. Moving back to the sort of thing you usually see here, turmoil should not surprise Christians. We should expect it and be ready for it. The church thrives in hard times. God is most glorified in suffering Christians who continue to proclaim the wonder of the savior. I pray we will be those people if true suffering comes to America.

I may post some thoughts about the inauguration later. For now, John Piper has posted an excerpt from a sermon he preached in 1993, Being Pro-Life Christians Under a Pro-Choice President, with application to our new president. Below is the excerpt of the sermon found on the Desiring God page:

I closed with eight ways to honor a pro-choice president. The seventh was this:

We will honor you by expecting from you straightforward answers to straightforward questions. We would not expect this from a con-man, but we do expect it from an honorable man.

For example,

1. Are you willing to explain why a baby’s right not to be killed is less important than a woman’s right not to be pregnant?
2. Or are you willing to explain why most cities have laws forbidding cruelty to animals, but you oppose laws forbidding cruelty to human fetuses? Are they not at least living animals?
3. Or are you willing to explain why government is unwilling to take away the so-called right to abortion on demand even though it harms the unborn child; yet government is increasingly willing to take away the right to smoke, precisely because it harms innocent non-smokers, killing 3,000 non-smokers a year from cancer and as many as 40,000 non-smokers a year from other diseases?
4. And if you say that everything hangs on whether the fetus is a human child, are you willing to go before national television in the oval office and defend your support for the “Freedom of Choice Act” by holding in your hand a 21 week old fetus and explaining why this little one does not have the fundamental, moral, and constitutional right to life? Are you willing to say to parents in this church who lost a child at that age and held him in their hands, this being in your hands is not and was not a child with any rights of its own under God or under law?

Perhaps you have good answers to each of these questions. We will honor you by expecting you to defend your position forthrightly in the public eye.

You have immense power as President of the United States. To wield it against the protection of the unborn without giving a public accounting in view of moral and scientific reality would be dishonorable. We will honor you by expecting better.

First, a call for prayer.

As another conflict unfolds, pray for peace in Israel and Gaza. Jesus Christ is the only lasting hope for peace between God and man and between man and man but that does not mean we do not work for peace on earth. Pray, first, that people in Israel and Gaza will turn to Christ and instead of facing each other as enemies would be able to look at each other as brothers. Pray, second, for the fighting to stop, for the anger and hate and terrorism and bombings and retaliations to end. Pray, third, for the safety of people caught in the middle when conflict does break out.

Second, cautious political commentary.

I support Israel’s right to exist and I believe they have the right to defend themselves against attack. But too often Israel’s response is far too severe and accomplishes the opposite of what is intended. Rocket attacks from Hamas against Israel needed to stop but these kinds of responses by Israel do far too much damage and only stir the hate up even more. There are no true military objectives in the aggressive acts carried out by either side. There is only hatred and revenge. This is not about security or governance. It isn’t even really about ideology. It is about pride and wicked human hearts and wills trying to force their dominance over others – be it Gaza over Israel or Israel over Gaza.

I am not a pacifist. But war should never, ever be taken lightly. No human life should be casually regarded. It is far too easy for us in the west to read of (at this time) two hundred twenty-five dead, including children, and shrug it off by saying they deserved the response they received. Pray for peace. And if you have some way of doing so, work for peace. Seek to bring and end to bloodshed. Never regard it casually or lightly or push it to the back of your mind. Thank God for the safety and security you are blessed with and pray that he would extend that blessing to others.