Good morning everyone and welcome to the class. We just have Kennedy join it from all the online students. All of them are joining. We'll just wait. Can you meet them? We'll begin with a word of prayer. Can one of you please lead us in prayer please? Anyone? Can he does in prayer? Anyone like to lead us in prayer? Can you like to pray? Yes. Okay. Can you guys hear me? Yes. Heavenly Father we just thank you for this morning. Thank you for the class that we are going to be listening to. I thank you that you would just give us more revelation of your word and that you would help Buster to teach us accurately, God, and to lead us to know more about you, Jesus. Thank you for helping us, for guiding us, and for being there for us. And Jesus, thank you. Thank you. Okay. We were looking at studying Romans chapter 9. Okay, we came right up to verse 18. We were looking at the whole concept of predestination, the whole problem predestination. And we learned that, you know, God does not predestine or predetermine the choices that we make, but he knows beforehand the choices that we make. He has the foreknowledge and to his foreknowledge, he knows the choices that he makes. And sometimes he reveals, you know, the choices that, you know, that certain people are going to make, but irrespective of the choices that each one of us make, you know, God will can still unfold his plan and purposes that he has planned even before the creation of the world. Okay. So God can still go ahead with his plan and purposes irrespective of the choices that we make, even if our choices are not aligned or in will or in accordance with his plan and purpose, but yet he can still fulfill his plan and purpose. And we saw the example of Pharaoh, okay, and how God gave him up to heart and heart. And we saw that, you know, the scripture says that Pharaoh's heart was hardened. We also read that God hardened Pharaoh's heart, which does not mean that, you know, God really hardened his heart.  He let him make his own choices, let him do what he wanted to do.  It does not really mean that he hardened his heart, but he let him do whatever he chose. He let him choose to harden his heart against him and God let him do it. That's why what it means when it says in the scripture that God hardened Pharaoh's heart. As Pharaoh had the opportunity to choose, you know, whether to harden his heart or not, he chose to harden his heart, but it also became an opportunity for God to display his greatness and his power. Okay. And Paul, apostle Paul builds on it further in verses 19 to 24. So can somebody please read 19 to 24, please? Anyone? 19 to 24. Can somebody can read it slowly and clearly for us? No, did you unmute your mic? Your mic is not unmuted. Yeah, now it is. One minute. Are you able to hear Rasha? She's reading. Yes, no. The rest of you online students, can we have some response, please? Are you able to hear Rasha when she read? Okay, I wish she excels, yes. Okay, continue, Asha. I don't think they're able to hear you because Kennedy is saying no. Do you want to put your headset on and check for yourself? Can you check now? You can hear me? I don't think they're able to hear. Okay, can somebody else read, please? Can I ask some of you for one of our online students to please read? Formal chapter 9 verses 19 to 24. Anyone? Ma'am.  You will say to me then, why does he still find fault? For who can resist his will, but who are you, a man, to answer back to God? Will what his model say to its modeler? Why have you made me like this? Has the potter no right over the clay to make out the same lump, one vessel for honorable use, and another for dishonorable use? What if God desiring to show his wrath, to make known his power, has endured with much patience? Vessels of wrath, prepared for destruction, in order to make known the riches of his glory, were vessels of mercy which he has prepared beforehand for glory, even as when he has called not from the Jews, only but also from the Gentiles. As indeed he says in Hosea, those who were not my people, I will call my people, and her who was not billowed, I will call billowed, and in the very place where it was said to them, you are not my people, there they will be called sons of the living God. Ma'am, shall I proceed? Till verse 24. Okay, till 26 I have read ma'am. Okay, no worries. Okay, thank you Rupa. Okay, so here we see that Paul is developing his thought, and then he is asking another question in verse 19. Now these questions basically we know that he is asking, he is thinking what his audience will ask. Okay, so basically what he thinks that his audience will ask, he kind of mentions those questions, he writes those questions, so he says, you will say to me then, why does he still find fault? For who has resisted his will? Verse 19. So in the context he's saying that, so if we say that God hardened Pharaoh's heart, then God cannot find fault with Pharaoh, right? Because God himself who hardened Pharaoh's heart. So if God was doing it to Pharaoh, then Pharaoh will have no choice, he cannot resist the will of God. So this is an obvious question that people would ask if it was this way, you know, that things happened. But he says that, you know, but indeed, oh man, who are you to reply against God, will the thing that formed say to him who formed it, why have you made me like this? So Paul is basically saying that, you know, when you ask a question like this, you're basically showing how disrespectful such a question is. And he's saying that, you know, this question cannot even arise because we know that, you know, it was not God who makes the choice, it was Pharaoh's own choice, it was him who hardened his heart. And, you know, he uses and just a minute, somebody has used, you know, an example here of a potter, okay, he's using a picture of a potter and he explains this was in the next was using this, you know, the picture of a potter, a potter from the same lump of clay, you know, he can divide that lump of clay into two portions, one lump he can create or vessel for an honorable purpose, like, you know, a nice showpiece that will look very grand, or something that can be used, you know, for special occasions. The other lump he can take and make something very simple about from that something very ordinary, something like, you know, something that we can just keep some waste things or, you know, unusual items in that. Now, can you say, hey, you know, I want, I don't want to be made for honorable purpose, or I don't want to be made for a simple purpose, I want to be made for an honorable purpose. Well, the clay has no sink, okay. So in this sense, you know, God is, yes, going to unfold his plans and purposes to different individuals that he chooses in that sense.  So for example, he used Moses to show his glory, his might and his power, and he used Pharaoh to show his downfall. But this does not mean that, you know, in this example that he's using, you know, of course, a lump of clay has no say, but, you know, unlike the lump of clay, you know, we human beings have got three will to choose. And hence, you know, Moses chose, you know, Moses chose to be in an honorable position, and Pharaoh chose to be in a dishonorable position. And so based on their choices, God used one for an honorable use, and based on the other's choice, he used the other for a dishonorable purpose, okay. So it's not that God is predetermining or predestining who has to be doing honorable things and who has to be doing dishonorable things. But his purpose is one in the same for everybody. We know that he has his plans and purposes for us, good pleasing and perfect plans and purposes that will, you know, give us a hope and a good future. But, you know, knowing this about God, yet, you know, if we choose to go against God's will and plan and purpose, then we end up being destined according to what our choices are. So if we choose to do God's will and plan and purpose, then we're destined to do, you know, things that are honorable and bring glory and honor to God, to whom, to us, to whom is glory is being manifested. So here, there is a very interesting intersection or an interplay of God's predetermined plan and that's free will to choose. So for Pharaoh, you know, God already had a purpose that he's going to be the leader of Egypt. Pharaoh's going to be the leader of Egypt. Moses is going to be a leader through whom God is going to, you know, deliver his people out of bondage, out of slavery. So here we see that two leaders, but two of them making different choices. One choosing to be a leader, even though he was very hesitant, but now he's gotten to the shoes of being a leader. He's doing what God is asking him to do. The other one is hearting his heart. He's a leader, but he's hearting his heart. He doesn't want to submit, surrender to the God of the Israelites. And so here we see that, you know, God is displaying his power and glory and mighty works to the one that made the right choice, that is Moses. And he's showing his, you know, the, on the other hand, Pharaoh, who's making the wrong choice, who's hearting his heart, is the other receiving end of God's wrath on his judgment and, you know, no mercy and compassion from God because it's his choice. It's not that God has chosen some, chosen Pharaoh to bring about his blood and judgment. And he's chosen Moses to bring about his glory. You know, when we say that, if we say that God is partial and no way God is partial, but here it's, you know, on the choices that each one chooses, God is bringing about unveiling or revealing his plan and purposes. He's praying about his plan and purposes, that he's already predetermined in his mind. So here we see that God is using Moses to display his power and might. And he's using his Pharaoh to reveal his glory, his power and might, so that throughout the nations, you know, God's fame would be known and God would go about doing his plan and purpose of delivering his people. So this was God's plan and no one could stop it, no one, even Pharaoh, whether he heartens it heart or not, you know, he cannot stop God's plan and purpose. But yes, you know, it does not do away, God does not do away with the free will and the choice of either Moses or Pharaoh, but with the spectrum of whatever the choices was, you know, Pharaoh's choice was, Moses' choice was God still went ahead, fulfilled his plan, delivered his people as he had spoken and promised to Abraham. So we see that the more Pharaoh hearted his heart, the more it gave opportunity for the power of God to be displayed and the fame of God to be known throughout Egypt and throughout the nation surrounding Egypt because God had already purposed in his heart to deliver his people and his plan was being unfolded. So the election of God was there. The full knowledge and the predetermining will of his plan was at work. But yet Pharaoh had his own choice, whether to heart in his heart or not. So here this is the analogy of the quarter and clay. And there is a difference between the clay, which has to say, but you know, we as human beings, we have a say, we have a choice, we have a free model to choose. And based on our choices, you know, it predetermines whether the plan of God and purpose of God will come true in our lives, or whether we'll be on the receiving end of God's law or his judgment. So what Paul is saying in verse 21 is that our vessels for honor and vessels for dishonor, he's making a comparison between two vessels vessels of honor and vessels for dishonor. In verse 22, he's talking again, he's making a comparison of vessels of rock and vessels of mercy. And so here when he's talking about vessels, he's basically referring to people. So people end up receiving God's judgment, or people end up receiving his mercy. Okay.  Okay. So, and we see that God planned that there would be a judgment where, you know, people will receive his wrath, his destruction, for those who do not receive him.   No, he's not a God like that, please. But it says here in verse 22, that God endured with much long suffering, the vessels of wrath prepared for destruction. Okay. So, who endured with much long suffering here is talking about God. So God endured with much long suffering, the vessels of wrath prepared for destruction. So why did he endure? Why did God endure with long suffering? If there were already vessels who predetermined their own destruction, because, you know, they had made their own choices, and their choices led them to their own destruction. So why does God have to endure with these vessels of wrath that, you know, prepared for destruction? Why does he endure with long suffering? The fact that God, you know, was enduring with much long suffering is because he's waiting for these people to repent. He's waiting for these people to repent. But when they did not repent, even after God was waiting patiently for them to repent, you know, the only judgment for them is, you know, is destruction.  So here, this is the wrath, this is your judgment, take it, you'll be destroyed.  So here also we see that, you know, he endures with long suffering. That means he puts up with a lot of patience, though it's a suffering and a pain for him to see us in sin, going away from God, but he endures with the vessels of the people who are going against him defying him. But ultimately, when they choose and there is no more waiting time, their judgment is destruction. So by each vessel experiences, God's enduring mercy, the long suffering of God and God is extremely patient with each vessel. And they're still, you know, don't receive this mercy, they end up receiving what is for those who reject him and that is destruction. So God did not determine their choices that they would make, but God determined the judgment. Okay. Similarly, those who receive his mercy, God already determined their judgment. And what is their judgment? They would experience his glory like we read in verse 23. Verse 23 says that he might make known the riches of his glory on the vessels of mercy which he had prepared beforehand for glory. Okay. So those who receive God's mercy, they are on the receiving end of for his judgment, that is his judgment of for experiencing his glory, the riches of his glory, which he has prepared beforehand. So here we see that there is a sovereignty of God and the free will of man and both come together. Okay. So the sovereignty of God, God does what he wills, he plans, he chooses. And yet on the other hand, that is the free will of man. And we see both of them coming here together. How do we see both of this coming here together? Is we see that you know, Moses made the choice of being the leader of obeying God. And we see the sovereignty of God that God's plan and purposes is being fulfilled through Moses to lead the people, to bring them out of Egypt. And you know, Moses is experiencing the riches of God's glory. On the other hand, we see Pharaoh as an example. And here also again, we see the sovereignty of God and we see the free will of man to choose. So here we see the free will of Pharaoh. He chose to be hearthearted and stubborn. And we see the sovereignty of God that in spite of Pharaoh's heartheartedness and his stubbornness, we just still see that God goes ahead with his plan and his purpose. He does what his sovereign will is. So also the example that Paul mentioned that he saw on Wednesday, Jacob and Esau. There is a sovereignty of God. God continues to bring about the blessing from one generation to the other generation through the firstborn male in each family. So it was Esau, but Esau made his choice. The choice was that he did not want his birthright. He gave up his birthright for a bowl of soup. And it was Jacob who created for that spiritual blessing. We see that it is based on the choices, but God still fulfills his sovereign will of continuing the blessings from Abraham, Isaac. It's passed on to the next generation that is Jacob, not because he loved Jacob and hated Esau, but he loved Jacob for the spiritual choice that he made for choosing God. And he hated Esau's choice of just profiting his spiritual inheritance of thinking of it as an unworthy thing and just sold it for a bowl of soup. So here we see, you know, the sovereignty of God, the free will of man in every instance coming together. So even in our lives, there is a sovereignty of God. He has a plan and purpose for our lives, but we choose otherwise. You know, God can still use others to bring about his plan and purpose. He will still go ahead, bring about his plan and purpose irrespective of the choices that we make. So ultimately God's purpose is still fulfilled, you know, while still man goes ahead and makes his free will and his choice. And this is an amazing, you know, work or the amazing working of God's purpose of how he fulfills his plan and purpose in history to people irrespective of the choices that they make. Okay. So Mangi has a question. What about when God said he chose Jacob because before he was born? Yes. Like Mangi, I'm not sure if you were there in the class on Wednesday, but we said that, you know, this was God's, he says this as God's full knowledge. He already knew what Esau is going to choose and what Jacob is going to choose. He already knew for you. It's not that he predestined. Okay. It's not that he predestined Esau to give away his birthright and for Jacob to choose the birthright because it's not because God loved Jacob more than he loved Esau. No, when we say that we're saying God is partial. He can't be partial. He loves everybody. He's a God of love. He can't hate one and love the other. And so in that instance, when we look at it, how do we interpret it in the light of other scripture? We interpret it that, you know, God actually foreknew the plans and the purposes of the, sorry, he foreknew the choices that each one of them are going to make. He foreknew what Esau was going to choose and he also knew what Jacob was going to choose. And here, through his full knowledge, he's just basically revealing before time what each one of them are going to be making their choices. So this is his full knowledge that he is actually sharing here, but it's not his predetermined choice that God is making for both of them. No, he already knows the choice and it's just his full knowledge. He's revealing it beforehand. Did that help, Naingyi? Yes. Yes, Fastha. Thank you. Okay. Okay. So we'll continue. He was 24. It says, even us whom he called, not of the Jews only, but also of the Gentiles. Now, Paul is saying that everything that he has said so far is not only for the Jews, but also for the Gentiles. Okay. God's sovereign purpose is at work, not only among the Jews, but also for the Gentiles.  So Paul is going back to what he has been explaining, and God's purpose of what he has spoken to the Israelites is not void. Remember in in Romans chapter nine verse one, we said is all the promises that God made, the covenants he gave, the laws he gave, the forefathers was for the Jews, the priesthood came from the Jews. Now, he's forgotten about the Jews, so to say, in people's minds, because he's chosen the church, because the church is whom he's transforming to be the image of his son, to be like his son Jesus Christ. So he's saying, you know, in this light, we're saying that all the promises, the covenants, and everything that the laws that God gave to the Jews is void. Doesn't mean that it's no more of any use, it's baseless, it stands, it does not stand anymore. So, you know, Paul is saying, no, no, it does stand. And he's speaking of the children of promise. And remember, he says in the first few verses, it's not the children of promise are not those who are the natural inheritance or natural born of the Jews. But he's saying these children of promise that he makes to Abraham and to Sarah and to Isaac, the children of promise are not the ones who are born in the lineage of Jews or to Jewish parents, but these children of promise are those who are becoming children by faith. You know, by faith, they receive righteousness. By faith, they say yes to God. By faith, they receive the inheritance of receiving the promises that God made to Abraham, okay, and to Isaac.  But he was speaking of those of the promise and he was speaking of his predetermined purpose that God would fulfill or that would take place in both the Jews and Gentiles. And to everyone who say yes to God's call or to receiving God's mercy, what is the receiving end of his mercy and his grace. So, he's put both of these together side by side. So, what God was speaking to Abraham was not speaking to the natural children, but to the children of promise. And his purpose is being fulfilled in both the Jews and Gentiles who say yes to him and receive his mercy, believe in him by faith. So, the next set of verses that we will be reading, Paul shows from the Old Testament scripture that God had already planned and purpose to bring the Gentiles in and God's plan and purpose was not only for the Jews, but also for the Gentiles that he calls from Hossiah, from the prophet Hossiah and from the prophet Isaiah. So, can somebody read verses 25 to 29 please? Anyone can read 25 to 29 please? Yes, Master. As he said also in OC, I will call them my people which were not my people and their beloved which was not beloved. And it shall come to pass that in place where it was said unto them, you are not my people, there shall they be called the children of the living God. Yes, Isaiah also cryeth concerning Israel, though the numbers of the children of Israel be as the sand of the sea, your remnant shall be saved, for he will finish the work and cut his shot in righteousness because his short work will the Lord make upon the earth. And Isaiah said before, except the Lord of Sabbath had left us a seed, we had been as Sodomar and been made like unto Gomorrah. Thank you, Master. Thank you, Srikumar. Paul is quoting here from both Hossiah, the prophet Hossiah and Isaiah. He's quoting from Hossiah chapter 25 and sorry, he's quoting about Hossiah in verses 25 and 26. God has already spoken that those who are not called as my people, God says I will call them my people and he's referring to the Gentiles. You know the chosen people whom God called as his own and his own people, we know I would choose, but God here to say, those who are not called as my people, I will call them my people and he's referring to the Gentiles to show that God and why is Paul quoting Hossiah here is to show that God had only purpose of predetermined in his heart to the sovereign will that the Gentiles would be called his people and they would be called his beloved and there would be his sons and daughters. There would be the sons and daughters of the most high God. Just as he had spoken ahead of time about Jacob and Esau, just as he had spoken ahead of time that he would set his people free from Egypt, the same way he's spoken ahead of time that the Gentiles would also be ones that he would call and his own people and there would be his sons and daughters. And he says at the same time concerning his own people, Jews, Paul quotes on Hossiah the thought that though the number of the children of Israel be as a sand to the sea, the remnant will be saved. And verse 28 says, for he will finish the work and cut it short in righteousness because the Lord will make a short work upon the earth. So it says here that though the number of the children of Israel be as a sand to the sea, the remnant will be saved. So he says though there are numerous Jews and innumerable countless and many of them have not accepted God, have not accepted Jesus as the Savior, as the Messiah, who was to come. They have not accepted the plan and the purpose of God through Jesus and what he accomplished on the cross. Yet there is a remnant.  And he says that, you know, thank God that not all of them are being destroyed like Sodom and Gomorrah. So there are a lot of Jews who have not accepted Christ, but there is a few remnant who have accepted. And these, you know, God has called them as his own, as his own people. And he has justified them, those he's called, he's justified them, and he has made them righteous. Now to understand this whole phrase, you know, for him to finish to work and cut it short in righteousness, because the Lord will make short work upon the earth. So just reading from the Passion Translation says, for the Lord will act and carry out his word on the earth and waste no time to accomplish it. So God is irrespective of whether the Jews choose them or not. Yes, there are people, a few of them who's, you know, a remnant of them who've chosen him. And, you know, God is still going to continue, you know, to fulfill his sovereign will and purpose and plan of the other Jews to come into faith and also to Gentiles. We grafted into the Tree of Life, grafted into, you know, the promises that God had made to Abraham. So here he's presenting two contrasting thoughts. One is the Gentiles, you know, for the sake, we never thought God had anything for the Gentiles, but actually, you know, he had already predestined, he'd already planned and spoken that they too will be his sons and daughters. And then on the other side, we have his own people to choose the Israelites. God had actually, you know, had to do a rescue act to rescue some of them, to cut short his words, but some of them can be saved and be with him, and not all of them will be destroyed like Sodom and Gomorrah. So what Paul is saying here is God is already spoken about it through the prophets earlier. It's revealed in the Old Testament to the prophets and God's purposes are being fulfilled. We can see it being fulfilled and continue to be fulfilled. So then what is the conclusion? Paul is coming to say, okay, what is the conclusion now? So what is happening to the Jews? So that's what he mentions the conclusion and what is happening to the Jews in verses 30 to 33. So again, one of you please read Romans chapter 9 verses 30 to 33, please. So what some of you said then, the Gentiles who did not pursue righteousness, have attained righteousness, even the righteousness of faith, but Israel pursuing the law of righteousness has not attained to the law of righteousness. Why? Because they did not see it by faith, but as it is with, by the work of the law, for they stumbled at that stumbling stone. As it is written, behold, I lay in Zion and stumbling stone and draw up offense, and whoever believes on him will not be put to sin. Thank you, Abinas. So here Paul is coming to a conclusion. Again, he's asking a question. He's saying, what shall we say then that the Gentiles did not pursue righteousness, have attained to righteousness, even the righteousness of faith? So he's saying here that the Gentiles, they have received their righteousness, they have a right standing of grace through faith was because of their faith in God, because they've chosen to put their faith in God, and because they've chosen to put their faith in God, they have a right standing of grace through faith.  And so Paul is saying that they cannot and they, they cannot, you know, come to faith by just keeping the law and by the sign of the covenant, which is circumcision, they cannot come to faith. And hence, because they continue to keep the law and, you know, the circumcision ritual, what is the result of it? The result is they are actually, you know, they are stumbling over Christ. Okay. We know that it is written that, you know, Christ is a cornerstone, he's a chief cornerstone, and it's written, behold, I lay in Zion a stumbling stone and a rock of a fence and whoever believes on him will not be put to shape. So, you know, Christ is the stone and he's the rock. And, you know, he's saying that, you know, by overlooking him, they're actually stumbling over Christ, because they want to keep the law, they can't keep the law, you know, they want to fulfill the sign of the covenant, which is circumcision, and that is not going to make them anyway righteous. They're not going to have a right standing by Christ, because it's not through the law, it's not through the circumcision, but it's through faith. And because of that, you know, they are stumbling over Christ, they're overlooking what Christ has done. They're not seeing the significance of Christ. And hence, they're missing out that he's the Messiah, came to set them free from sin and the dominion of sin and the power of sin.  He says, you know, in the first few chapters, he says, you know, verse two, he says, you know, I have great sorrow and continual grief for them. And he says, I wish I could even go to him, you know, if my people, you know, they accept and they believe in Jesus Christ, they put their faith in Jesus Christ.  They had the forefathers, Abraham, Isaac and Jacob, to them also came the, you know, the priesthood. But, you know, but, you know, we see that the promise that God was actually speaking was not through the natural generation, not through the natural born descendants, but the seeds of promise. And he says, you know, the seeds of promise here is not those who are born to Jewish race or to Jewish parents, but the seeds of faith, seeds of promise are those people who receive God by faith. And once they receive God by faith, you know, they become vessels of honor, they become vessels of his mercy, while they're experiencing his glory. But, you know, if they, you know, even after or enduring through wrongs have been patiently waiting for them, even after that, if they don't receive him, they harden their hearts, they don't believe in him, they don't put faith in him, then they come to the receiving end of God's judgment, that is his love. But God is patient, he's patiently waiting on them. And he says that, you know, actually what God was, you know, showing through the prophets in the Old Testament is that, you know, the promise is of, you know, of blessing is for both for the Jews and Gentiles. And it's not only for the Jewish race. And he says that, you know, God is not partial. He's not choosing people based on partiality, but he's choosing them based on their choices. Based on their choices, pre-determines what is their judgment or what is their end result. So they call upon it themselves based on their choices. So God has his sovereign will, he does what he wills, but at the same time, man has his free will to choose. Yes, Mindy. Thank you, Pastor. Thank you. This is a topic is a little bit challenging, because we read that in the gift of, of a gift of holy spirit and calling God gives to the whosoever he wills. So how can we reconcile him choosing us based on our choices that we're going to make? And based on, and the scripture we read that he chooses, give gifts to whosoever he wills, so that his church might be glorified and his kingdom might go forward. Thank you, Pastor. Good question. Thank you, Mindy. We always need to interpret scripture in the light of other scripture. So even in that context, when he says that, you know, God gives gifts to those he wills, the holy spirit gives to those who will and chooses, it's not that he does not give all of the nine gifts to everyone who desires. You know, he gives it to everybody who's, you know, who have faith in Christ Jesus and who's one of him, the holy spirit comes and dwells in them. And when we desire the gifts of the holy spirit, we receive all the nine gifts of the holy spirit. But in the context that is written, it says, you know, God, the holy spirit desires, which gives to give is in that context, you know, the holy spirit will know which is the best gifts to be released in that time for that situation to help that person. So for example, if a person is sick with cancer, then you know, the person, what is the best gift at that time? It's not just prophecy or word of wisdom or knowledge, but yes, all that is important, but it is the working of a miracle. Okay. So that is the gift that will be activated at that time. So the holy spirit knows which of the nine gifts, among the nine gifts, which is the most important gift that needs to be activated at that time for that person in that situation to bring about, you know, the glory of God to be revealed or bring about the miracle or the sign and wonder that has happened. So in all instances, you know, all the nine gifts don't operate. You know, there are few that gives that are important, but the holy spirit chooses which gift to give to that person to release to say your mind to your brain for somebody else, you know, they come to you with a problem, a distressing problem. So what you need at that time is a word of wisdom or a word of knowledge to know what is their situation, what is their future, or even a word of prophecy to encourage them and strengthen them. So the holy spirit will release the appropriate gifts, among the nine gifts of the spirit, the appropriate gift at that situation to be released in and through, so that you can minister that person, but that person will experience, you know, the answer or the presence of God, the love of God, and this is the glory of God. That is the context that it's written that, you know, the holy spirit will release the specific, the gifts at that time. So we need to always interpret scripture in the light of other scripture. All the nine gifts is given to everybody, to all of them who ask, but in a specific situation, what is it gives that is required, the holy spirit will release it at that time, in and through us. It's not that the other gifts are not functioning, it's functioning, what is important at that time will be released. I hope that answered your question, Manri. Yes, yes, I'm asking some questions. The calling of God, because for example, Paul was called specific by God to preach. John the Baptist, John was called and his father was told that the child was not that alcohol or things. What about those people, Pastor? Thank you. Yeah, good question again. Again, you all may know that the new judgment that, you know, there are specific offices of a possible prophet teacher, you know, that, you know, God calls us into that with determined by God, by the holy spirit, yes, and is given to a few. That does not mean that again, it's based on a partiality, but we know that God's word says that God is not a partial God. It's also a God knows beforehand who is going to use that gift that anointing in the in the right way. They're going to tell, he already knows that they are vessels that have chosen themselves to be vessels of honor and not for, you know, just for ordinary simple use. So these people, he already knows that, you know, these people are already preparing themselves to be that vessels of honor and not simple people. So it's not that God is, you know, making a biased choice, but he already knows who is going to be fitting for which goal and the choices that they have already made, which we can't see, you know, how they're preparing themselves, how they're training themselves, how they are desiring themselves, their walk with the Lord, their intimacy with the Lord and, you know, God, you know, pours out his anointing upon him. He does not pour his anointing upon vessels that are broken because he knows that broken vessels will waste away the anointing. So, you know, of course, God's, you know, plan and purpose is fulfilled in it to us, but we need to cooperate with God. Okay, the extent we cooperate with God is the extent that, you know, we will flow with his anointing, with his power, with his authority, and to the extent that he takes us to. Okay, so when he chooses, whether he chooses David compared to his other brothers or Joseph compared to his other brothers, we can also see from scripture why God made those choices because you can see the attitude of the brothers, you know, David's brothers, you see his attitude, just looking at scripture one or two verses that talks about their attitude, even Joseph's brothers, but you see Joseph's attitude.  It's not that he chose that, but it's according to what we choose. We want to be chosen, we chose to be vessels of honor, we become that. We want to be simple, you know, we get some, because God does not override the free will of man or the choices that they make. Does that help, Mangi? But all of us are called. Yes, but it also depends on us how we partner with God. Even we see that Jesus, even though he was human, he partnered with God, right? He was constantly in tune with his father. That's why he said, I will always say what my father says, I will always do what my father does, even when he goes to the pool of Bethesda, there were so many sick people, that he left me one, but he used only one. Why is what his father showed him? He just did that. So the greater level of anointing flew, he had anointing beyond measure, the power of the Holy Spirit beyond measure, because that is how, you know, Jesus brought himself to that position. And it's important that we do that. And when we do that, you know, God pulls out his anointing in his power, because he knows it will not be wasted. We know that we will do what he requires of us. Okay. Yes, Mangi, you have another question.  Oh, that's what it is. Sorry, it was a mistake. Sorry. Thank you very much for answering. Thank you, Mangi. Anyone else has any questions? Okay. There's no questions then. We'll end class here. Okay. Thank you, everyone, for joining class. And I'll see you on Bethesda. Have a blessed and a refreshing weekend. Thank you. Thank you, Pastor.


Views of home, presented by Science at NASA. In 1968, Apollo 8 placed humans into lunar orbit for the first time. As the astronauts in their spacecraft emerged from behind the moon, they were surprised and enchanted by an amazing view of Earth rising over the lunar horizon. Bill Anders quickly snapped a picture of the spectacular Earthrise. Humankind viewed their planet and saw not a jigsaw puzzle of states and countries on an uninspiring flat map, but rather a whole planet uninterrupted by boundaries, a sphere of dazzling beauty floating alone in the void. Cameras on NASA spacecraft have treated us to intriguing perspectives of our home planet from various locales. The Deep Space Climate Observatory, or Discover mission, was launched to monitor the solar wind in real time, but it has also delivered these wondrous images of every continent peeking out from misty shrouds blanketing our ultramarine oceans. Since mid-2015, Discover has been snapping images like these of the fully lit Earth most days every one to two hours, from a stable point between the Earth and the Sun that is about a million miles or 1.6 million kilometers away. On Valentine's Day 1990, the Voyager spacecraft captured this photo of our planet from the amazing distance of 3.7 billion miles or 6 billion kilometers. This pale blue dot image, requested by Carl Sagan of the Voyager imaging team, showed the Earth as a single pixel and inspired Sagan's book of the same name. As Sagan wrote, the Earth is a very small stage in a vast cosmic arena. This distant image of our tiny world underscores our responsibility to preserve and cherish the pale blue dot, the only home we've ever known. A number of spacecraft have taken the opportunity to capture images and videos of Earth and the Moon when flying by Earth for gravity assist to far off bodies in our solar system. Galileo did so in 1992 on its way to Jupiter, as did Juno nearly two decades later. In 2005, Messenger took these beautiful images of our home, then look back again just before entering Mercury's orbit five years later. Messenger isn't the only spacecraft to look back at home from its destination across the solar system. On July 19, 2013, NASA's Cassini spacecraft slipped into Saturn's shadow and turned to image the planet, seven of its moons, its inner rings, and in the background, our home planet. NASA's Lunar Reconnaissance Orbiter, LRO, has collected a treasure trove of data and discoveries about the Moon. LRO's camera also treated us to spectacular views of our planet from lunar orbit. Here's one such image taken in October 2015. Images of home have come back to us from Mars orbit and from the surface of Mars itself. The High Resolution Imaging Science Experiment, or HiRISE, on NASA's Mars Reconnaissance Orbiter took this picture of our planet and its moon on November 20, 2016 when Mars was 127 million miles or about 200 million kilometers away from Earth. This image, captured by NASA's Curiosity Mars rover from the surface of Mars on January 31, 2014, showed evening star Earth shining more brightly than any star in the Martian night sky. From the vantage point of Mars, Earth is visible either in the early evening or early morning, just as Venus is from the vantage point of Earth. What might the caption be when a human stands on the surface of Mars and focuses the camera back on home? For more views of Earth from both near and far, visit science.nasa.gov.


It is about 600 BC in the wilderness outside of Jerusalem. God gives the prophet Lehi a vision filled with symbolism. It brings him great joy, but it also causes him to fear for his sons, Laman and Lemuel. Based on actual events as recorded in the Book of Mormon, another testament of Jesus Christ. My sons, I have dreamed a dream. Or in other words, I have seen a vision. And because of the thing I have seen, I have reason to rejoice in the Lord because of Nephi and also of Sam. I have reason to suppose that they and also many of their seed will be saved in Lemuel. I fear exceedingly because I saw in my dream a dark and dreary wilderness. Come with me. As I partook of the fruit, it filled my soul with exceedingly great joy. Wherefore I began to be desirous that my family should partake of it also. For I knew that it was desirable above all other fruit. And as I cast my eyes round about that, perhaps I might discover my family also. I beheld a river of water. Saraya! Sam! Nephi! Partake of the fruit! It was desirable above all other. They would not come unto me and partake of the fruit. And I beheld a rod of iron, and it extended along the bank of the river and led to the tree by which I stood. And I also beheld a straight and narrow path which came along by the rod of iron even to the tree by which I stood. And it also led by the head of the fountain unto a large and spacious field as if it had been a world. And I saw a numberless concourses of people, many of whom were pressing forward that they might obtain a path which led unto the tree. And it came to pass that there arose a mist of darkness. They, even in exceedingly great mist of darkness, insomuch that they who had commenced on the path did lose their way, that they wandered off and were lost. I beheld others pressing forward, and they came forth and caught hold of the end of the rod of iron. And they did press forward through the mist of darkness, clinging to the rod of iron, even until they did come forth and partake of the fruit of the tree. I beheld on the other side of the river of water a great and spacious building. And it stood as it were in the air, high above the earth. And it was filled with people, both old and young, both male and female. And their manner of dress was exceedingly fine. And they were in the attitude of mocking and pointing their fingers towards those who had come at and were partaking of the fruit. And after they had partaken of the fruit of the tree, they did cast their eyes about as if they were ashamed because of those that were scoffing at them, and they fell away into forbidden paths and were lost. I saw other multitudes pressing forward, and they came and caught hold of the end of the rod of iron. And they did press their way forward, continually holding fast to the rod of iron, until they came forth and fell down and partook of the fruit of the tree. Many were drowned in the depths of the fountain, and many were lost from view, wandering in strange roads. And great was the multitude that did enter into that strange building. And after they did enter into that building, they did point the finger of scorn at me and those that were partaking of the fruit also. But we heeded them not, for as many as heeded them had fallen away. Laman and Lemuel partook not of the fruit.  Keep the commandments of the Lord.


I had introduced my lecture yesterday on banking with a bit of an oddity. And the oddity was, if everybody remembers, that to talk about banks is a little bit strange because we don't talk about other businesses. We don't really talk about other industries and economics, but then we center out banks. And the reason why we have lecturers devoted and studies directly devoted to banking is that banks control the money supply, at least partially. Private banks through their control of the deposits and central banks through their control of currency and reserves. And money, since it permeates through the economy, has very systematic effects. And so the banking system is very important to understand in order to understand the supply of money. And money is important to understand so that you can understand systematic effects on the general economy. Austrian business cycle theory is a theory that deals with one of those systematic effects in particular. And so just to begin, I want to define a business cycle in fairly general terms. And Murray Rothbard in America's Great Depression, he refers to clusters of errors. And he asked the question, why is it that under normal times, of course, some entrepreneurs, some business people make mistakes. You see some businesses earning losses or going out of business, having bankruptcy. But then periodically, you seem to have surges where all businesses seem to suffer at the exact same time. And it's a little bit of an oddity, because we understand since we don't have perfect foresight that companies and businesses and entrepreneurs will make errors. Of course, if we had perfect foresight about the future, we wouldn't have to worry about this. But then every so often, there seem to be periods of time, like recessions or crises or busts, whatever you want to call them, where everybody seems to make mistakes at the exact same time. Or everybody's mistakes become apparent at the exact same time. And so when we speak about the business cycle, really what we're referring to are clusters of errors. And we're trying to find one reason why it is that all entrepreneurs are making errors at the exact same time. Now, in answering that question, of course, you could look at different factors and try to find the link that connects everybody together. But the obvious one should be money, because money is the medium of exchange. It's one half of every exchange that takes place has got money on one side of it. And so changes to the money supply are one of the few goods that has the possibility to have systematic or far-reaching effects throughout the whole economy. So as subsidiary questions, we could ask, what do these clusters of errors actually signify? When you have a period of time or you see a scenario where everybody's making errors at the same time, what does that actually mean? And that's what we refer to as the bust phase of the business cycle or even the business cycle in general. And then also we can add to that, what's the common link between these clusters of errors? What is the process through which these error cycles seem to repeat themselves over and over? And then of course, how could we stop or avoid those clusters of errors from happening again? Now, if you've taken an economics class before, or if you're an economic student, you'll see something which is a little bit strange about Austrian economics. Actually, we're the normal ones and other economics is a little bit strange. And that is, you will start your studies in normal mainstream economics taking principles of microeconomics, principles of macroeconomics. You'll move up to intermediate microeconomics, intermediate macroeconomics. There's always this distinction between micro and macro and there's not this same distinction in Austrian economics. It's, I take it quite personally because students come to me and they ask quite frequently, is it necessary for me to take intermediate micro before intermediate macro? Some question like that. And of course, in mainstream econ, there's very little link between the two so one doesn't hinge critically on the other. Of course, in Austrian economics, the two are integrated into a whole so you don't have to make this clear distinction. And really what we can get at is what's the proper level of aggregation by which we should speak about different economic phenomenon. Macroeconomics, the macro prefix, suggests that we're dealing with some level of aggregation. If we're dealing with business cycles in general, of course, we're dealing with some level of aggregation. We're not talking about specific errors made by an entrepreneur or business person. We're speaking about economy-wide errors. So the level of aggregation must matter. And I just wanna do a brief contrast with a couple of other business cycle theories. So first we'll start with Keynesian since that would be the one that most people are familiar with. And of course, in Keynesian macroeconomic theory, you deal with the national income account statement, you deal with GDP and the determinants thereof. And you've got a level of aggregation which is sufficiently high that you can't see the trees for the forest, so to speak. You can't see what the individual problems are. All you know is what this broad mass aggregate of investment expenditures or consumption expenditures are doing. All you know is that income is going up or down, but you don't really know what's going on within that massive income. So Keynes aggregates at this high level which makes it very difficult, if not impossible, to really tease out the problems of the business cycle. And then if you wanted to look at the monetists, Friedman aggregates at an even higher level because the monetists start with the equation of exchange. So that doesn't even deal with the specific components of GDP, like consumption or investment expenditures. It's just about GDP as a whole. So they don't fare any better than Keynesian theory does in this respect. And when we speak about aggregation, it's important not to aggregate at too high a level because if you do so, then you're not really able to see relative price adjustments. For example, during a business cycle, we know that some of the prices are getting out of whack or being misaligned with other prices. Housing prices are booming, stock prices are booming, but if you over aggregate, you're not able to see these differences in relative or specific prices actually changing. And furthermore, you can't see changes in the quantities of specific goods that are being bought and sold or the industries that are really booming or busting. And in the Austrian theory, we don't overly aggregate and so we have what we can refer to as different orders of goods. We don't just have investment goods in general, we have different types of investment goods, different orders of investment goods, but we'll refer more to that in a couple of minutes. Now, when Ludwig von Mises lays the groundwork for Austrian business cycle theory, he does it in his 1912 book, The Theory of Money and Credit. And Mises at the time is really laying a foundation for what we may refer to as a monetary theory of the business cycle. And he builds off the currency school economists of the 19th century who were trying to understand why it was that there was a new type of business cycle, a series of booms and busts that emerged in the 19th century that didn't seem to exist in previous periods of time. And if you look back in the 19th century, there was this more or less regularity to booms and busts where every 10 years you had a boom and then a bust that followed and another decade later you'd have another boom peaking and a bust so on and so forth. And the currency school economists were trying to understand why this happened. And I don't wanna get too much into the currency school economists because it's a little bit of a separate discussion. But their main emphasis was on bank notes. Yesterday in my banking lecture, I referred to the fact that modern fractional reserve banks can issue deposits without having to back them fully by reserves. That's the essence of the fractional reserve bank. The currency school focused more on private banks issuing notes and not backing them fully by gold or reserves, if you will. And this led them to understand that the over issuance of bank notes not completely backed by gold at the time led to a series of bank runs. People would realize that the banks don't have enough gold to honor all of the notes that they've issued. Periodically, people would run to the banks in mass, do withdrawal requests. The banks would run out of reserves, would run out of golds in order to honor those requests. And a crisis, a banking crisis would pursue. And what the currency school economists achieved was that they more or less identified a specific type of business cycle. The downside was that they focused narrowly on the banking system. They weren't able to elaborate it to systematic economy-wide effects. It was much more limited to one specific industry, the banking industry, and some loosely associated industries as well. And Mises in the theory of money and credit is able to expand on this general idea but to focus on the economy as a whole, not just the banking system, but that was the core of his understanding of how it is that the general economy, the real economy, was able to enter into this boom and bust phase. And in doing so, what he does is shifting the focus, not on banking crises in particular, but on intertemporal desequilibrium. And by intertemporal desequilibrium, what we're referring to is a mismatch that's happening over time between our plans, our consumption plans, and our production plans, where everything is not synchronized in a way where our plans can be successfully completed. So investors are starting production plans or projects that are not able to be completed because there's not a synchronization over time with other investors' projects or plans, and consumers are facing the exact same problem. And in trying to search for a reason of why it is that there's this intertemporal desequilibrium, which has been created, Mises focuses on the role of credit creation and its effect on the interest rate. And of course, the interest rate, if you listen to Dr. Herbner's lecture this morning on the rate of interest, the interest rate is impacted by the creation of credit. A greater supply of credit increases the supply of present goods, depressing the market rate of interest. And as the market rate of interest is depressed, it also has knock-on effects disrupting or changing, at least consumption and production plans. And so Mises uses the banking system, he springs from the currency schools focus on the banking system and the over issuance of bank notes to see the effects that this has on the rate of interest and then uses the rate of interest to understand the effects that that will have on the economy as a whole. Now, before I go further into describing more thoroughly what an Austrian business cycle theory is, I wanna lay out what it's not. Because over the last couple of years, and especially since the crisis, there's been a real revival in interest among some mainstream economists to Austrian business cycle theory. Good thing, the unfortunate part is it's often mischaracterized in very simplistic terms. And the most frequent way that it's mischaracterized is as an over-investment theory. It gets described as a theory that explains why it is that there seems to be too much investment, too many people buying houses, too many entrepreneurs building factories or building cars or whatever on the eve of the boom turning to bust. And so the theory, one theory characterizes Austrian business cycle theory as too much investment, it overheats the economy, we've got too many goods and well it's just got a bust and we have to get rid of this oversupply these excess inventories of goods. So that's one mischaracterization of Austrian business cycle theory. A related mischaracterization is that it's just naturally occurring. Like some people believe that the economy just booms and busts and there's not much that we can really do about it. And that it's just that entrepreneurs every now and again do too much investment and that's the way that they are. That's not especially helpful by the way in understanding any business cycle theory. And that's also not what Austrian business cycle theory is about at its core. And yet another way to interpret it or misinterpret it rather is that entrepreneurs are led to make market failures. They're led to make mistakes or they're prone to make mistakes which have to get solved out by the recession or which are exposed by the recession. And so these are ways that the Austrian business cycle theory has been characterized over the last couple of years especially since the crisis but it doesn't accurately describe what it is. So when we speak of an Austrian business cycle we need a couple of components. There's a couple of elements that you've already learned over several lectures between yesterday and today which are necessary to describe it. So first we have to go back to Karl Manger and Manger is focused on defining what a good is and what are the differences between different types of goods. And of course Karl Manger was able to establish that there's not just goods in general there's what we can refer to as different orders of goods higher order goods and lower order goods. And a lower order good would be well the lowest order would be a consumption good something that's ready for you to consume right now. And of course that consumption good just didn't come from nowhere. It had to be made by higher order goods. These are the necessary input factors. And so one example that Rothbard uses in man economy and state is the production of a ham sandwich. And when you're finally ready to eat it that's the lowest order good. But of course in order to eat it you needed to have bread and ham and you needed a knife and you needed input factors and these are all higher order goods that we can talk about. And earlier today in Professor Rittenauer's lecture on capital structure or capital theory he also referred to different orders of goods different orders of capital goods. You have some capital goods that are closer to final output producing consumption goods than you have higher order capital goods which are less directly related to the production of consumption goods. And then we have Bombovork and his theories on the rate of interest which Professor Herbner talked about in his lecture this morning. And we understand that the rate of interest is a naturally occurring phenomenon which we can represent or we can describe as being the value spread between want satisfaction today and want satisfaction in the future. So to the extent that you value satisfaction the present more highly than the future we have a positive rate of interest which expresses this value differential. And then finally we've got Mises' attention or focus to inter-temporal coordination. And when Mises ties together when he discusses inter-temporal coordination really what he's doing is weaving together the different orders of goods that Karl Menger described and the role that the rate of interest that Bombovork has elaborated on to make it a consistent theory. And when we refer to inter-temporal coordination we refer to two things at the same time. On the one hand we need production plans to be synchronized with consumption plans. What we produce needs to be what people are wanting to consume. And at the same time production is not just one specific stage. Production involves many different orders of capital goods and they all need to be synchronized with one another. You can only make your ham sandwich if somebody previously made ham. Not gonna get into the details of that. And you can only make your ham sandwich if somebody previously made a knife. And the knife manufacturer can only make the knife if somebody previously refined metal or so on and so forth. And so inter-temporal coordination requires consumption and production plans being in sync with one another. Now the most succinct way that you can summarize or characterize an Austrian business cycle is by its two components. The first one is what we can call overconsumption. And overconsumption is the idea that during a boom phase people have a tendency to consume more than would otherwise be the case. And not only that, they consume more than is sustainable given savings patterns elsewhere in the economy. And so during a boom, and I will elaborate this as we give some examples later on in the lecture, we should be able to see that there is this overconsumption component to it. And then at the same time, and perhaps more importantly the component in Austrian business cycle theory which is most unique is the idea of mal-investment. Now when I a moment ago told you about the mischaracterization of Austrian business cycle theory and this revive somewhat revival that it's had in the mainstream since the crisis, I was referring to the fact that many mainstream economists construe it as being an overinvestment theory that investors are just doing too much and that's what needs to be cooled off later on during the recession. It is true in a way that investors are being led to take on more investments that would otherwise be the case, but that's not really the story and it's a subsidiary story, if anything. The important thing is what we call mal-investment. It's the temporal ordering of all the investments that investors have been making. And what's necessary is that we have a consistent pattern of production plans that feed into one another so that every stage of the production process has the inputs which are necessary for the entrepreneur to complete his or her plans. And what's important is that we don't start unsustainable investment projects. We don't start plans that can't be finished or completed fully. And so this mal-investment refers to the structuring of capital, the structuring of higher order goods, not necessarily the absolute level of it. Now, if mal-investment can refer to unsustainable investment projects, it's important to understand what we mean by unsustainable. And the Austrians are very good at defining the difference between sustainable and unsustainable growth because we should recognize that not every boom is going to be unsustainable, not every boom necessarily needs to lead to a bust, right? You can have secular economic growth, you can have boom phases which are there for good reasons and predicated on good, positive, sustainable factors. But not all of them are so, and to that extent we need to understand what is it that would define an unsustainable growth phase. Now, sustainable in this sense means backed by real savings. A sustainable investment is one where the resources enabled, the resources being used in that investment process have been freed up by somebody not consuming them or somebody else in the economy not using those resources. So the only way you can build a house is if somebody decides to not use the bricks for some other purpose, right? Two people can't use the same bricks at the same time. The only way that you can build a ham sandwich is if somebody else decides not to use that ham, right? If they restrain from eating that ham, it's available for you to use. The same thing must hold true for money, right? The only way that you can use money in a production process in a sustainable way is if somebody else restrains themselves from spending that money. And so we define sustainable growth as growth which is built off the back of real savings. Savings here defined as not consuming. People don't consume, we accumulate savings and then we can invest sustainably. Now that begs the question of what we refer to by unsustainable growth. And there's two forms that I'll refer to. The one form is unsustainable growth which is built on the back of credit which has been created by the central bank. Yesterday in my banking lecture, I referred to the primary means through which the central bank can increase the money supply, it's open market operations. One means is that it can create currency and issue currency out of thin air. All it has to do is print up currency which is not very expensive by bonds from banks and issue the currency into the system. And of course entrepreneurs could use that currency to start investment projects but it's not going to be predicated on anybody not consuming or anybody saving ahead of time. It's just going to be built on the back of the central bank's whims. Or perhaps more importantly, we can focus on the fractional reserve banking system because the fractional reserve banking system's essence is an ability to issue loans against deposits and in effect create deposits out of thin air. And so if either of these phenomenon occur, central banks issue in credit or fractional reserve banking system issue in credit, we have the ability to finance entrepreneurial ventures without anybody constraining themselves from consuming. And that's what we can define as unsustainable growth or that's what will lead later to unsustainable growth. One final thing before I go into the nuts and bolts of Austrian business cycle theory, I want to introduce what I call Hayek's maxim. It's a great little quote I think. Increasingly I think it's more and more important in an article he wrote in 1937, Hayek writes, before we can meaningfully ask what might go wrong, we should first understand how things could ever go right. I like it because of course it makes sense. Before you start analyzing problems, you should understand why would the problem even exist in the first place? Why should things go right? And you can't just dive into a problem without first understanding how things would go right. I take it to heart because increasingly as I teach introductory economics, I see young students coming in and they care about the problems of the world, global warming or whatever have you and they want solutions right away but they don't want to go through all the work to understand how things go right. They just want to dive into solving the problems. And unless you do that critical step of understanding how it is that things go right, form a consistent theory to understand how plans would actually work out. You can't very well understand why things are going wrong. So Hayek's maxim is a good dictum to have in the back of your mind. So I want to introduce Austrian business cycle theory by way of two analogies. And the two analogies are going to allow us to tease out the difference between sustainable and unsustainable economic growth. The first one is a Robinson Crusoe analogy. Robinson Crusoe washes up on a desert island. Doesn't have anything to his name, right? He doesn't even have clothes, let's assume. He washes up on the desert island and the first thing that he does when he gets his act together is realizes he's hungry and he looks for something to eat.  The only problem with picking berries to try to stay alive is you probably have to work every waking moment of your life to get enough calories to stay alive. So Robinson Crusoe spends his whole days picking berries. It's not a very productive way to produce berries but it gets the job done. Now the only way he can grow economically, have economic growth, is if he becomes better at picking berries, becomes more productive at picking berries. The only problem right now is Robinson Crusoe needs to spend all of his time picking berries to stay alive that he doesn't have much scope for that. But he thinks about things and he looks around and he notices that the top of the trees are much more densely populated by berries than the bottom branches. And if only there's a way that he could reach the top branches, he would be much more productive, right, instead of picking all these little berries at the bottom, he could get the big ones at the top. And he thinks about it and he says, well, the easiest way I could get at the top berries is if I had a suitable branch in order to do it. The only thing is there's no suitable branch right where I am and I need to go out and find one. But if I go and find one that means that I'm not able to pick berries and if I don't pick berries then I'm not gonna be able to stay alive because I need to eat. And so Robinson Crusoe has a bit of a problem. If he wants to improve his lot, if he wants to grow economically he needs to become more productive. If he wants to become more productive he needs to make an investment. The investment is he needs to build a stick or find a stick. In order to find the stick he needs to not work but if he's not working he doesn't have any food in order to eat so he's gonna die or go hungry or be uncomfortable. And so Robinson Crusoe comes up with a solution and the solution is he's going to restrain his consumption. He'll set aside some berries every single day and make a stockpile.  So for a week he saves a couple of berries every day and he builds a little stockpile. And that stockpile by the way is savings. It's unconsumed resources. He withheld his desire to eat, got a stockpile of berries, savings and he sets out into the wilderness. And he eats the berries along the way.  And then when he gets back there he starts using the stick and he reaches all the berries on the upper branches and all of a sudden he's much more productive and his lot has been improved. And we can analogize this by saying he's experienced economic growth, right? He's better off than he was previously. And maybe you could extend the example. You could say, well, if you wanted to have even more economic growth maybe he needs to have a spear to catch fish or something like that. But of course to find a spear or to build fire he needs to take even more time off producing berries. So he would have to set aside more berries, which by the way is a little bit easier now given that he's more productive. Set aside more berries, then go out on the task of building fire, finding a spear or producing a spear, so on and so forth. And that's how economic growth happens. Now in the simple analogy there's a couple of steps that he's gone through that lead to sustainable what we refer to as sustainable economic growth. The first step is that we can understand that savings were prerequisite and a necessary prerequisite for the growth to happen. If Robinson Crusoe did not constrain from eating berries initially he wouldn't have been able to sustain himself while he partook in the time consuming production process of finding a suitable stick. So the saved berries were necessary for him to actually do the investment later on. If he wanted more growth he would have to do more or better investments but that would just necessitate more savings. He would have to save up more berries, restrain his consumption habits even further in order to free up enough berries to pursue a longer production process or a more intensive production process. And then finally we can understand the relationship between savings and consumption. The only way Robinson Crusoe can save more is if he consumes less. He can consume more that's fine but if he does so he won't have savings available and if he doesn't have savings he can't partake in production processes. You can summarize this by saying that growth goes right in the sense that it's sustainable when savings and consumption patterns are consistent. Robinson Crusoe's growth was fully consistent and fully sustainable because his savings habits were consistent with his consumption habits. Now that's a simple example but we can expand on it a little bit and we can modify it to see how things might go wrong. So Mises in Human Action introduces another simple analogy which you can call the master builder example. And the master builder is imagine that you have a home builder who sets out to construct a whole bunch of homes and normally of course if you wanna build homes you need resources to do so and where do those resources come from? They have to be freed up from somebody else. So somebody will have to not consume some resources or not use some resources. So the master builder has bricks and cement and shingles, et cetera, et cetera to complete the houses. But then imagine a scenario where something fools the master builder into thinking there's a greater supply of bricks available than is an actual fact. And the builder starts by building 10 houses but there's only enough bricks for seven, let's say. And you don't know when you just start building houses, you know, they're halfway completed, you don't know, you have a big pile of bricks there, it looks sufficient to finish the job but it only has the illusion of looking sufficient to finish the job. And so the master builder keeps building the houses a little bit higher, a little bit higher and eventually you would imagine you would get to a point where your pile of bricks is not looking sufficiently large to finish all these projects. And so the illusion that he had more bricks than was needed to complete these houses led him to start more investment projects, more building projects than would be sustainable and now he's faced with a tough decision which is what do I do? I started 10 houses but I only have enough bricks for seven. So he's got a couple of options, abandon the project completely. There's better options than that. Tear down two of the houses, that would free up some bricks to use to complete the other uncompleted houses. But what we've got here is an example of an unsustainable investment project. He has undertaken an investment that was not backed by a sufficient amount of savings and then it became obvious later on, or when it became obvious rather later on that the savings were insufficient, he had to change his investment plans and pursue a second best option. And from this analogy, we can tease out a couple of important facts. The first is that the mere illusion of savings can encourage investment. Or even if you lied to the master builder about how many bricks were in existence or just skewed his expectations of how many were in existence, you can imagine he would start taking on more investments, build more houses than would otherwise be the case. And second fact we can tease out is that the lack of resources did not enable him to finish all these projects. Unless you have enough bricks, you can't build all of the houses that you immediately set out to. And so the solution to that was that some of his investment projects had to be abandoned, salvage the best that they could be, so you tear them down, take the bricks out so that you can complete the other investment projects. And the lesson from Misi's master builder analogy is that growth goes wrong or growth is unsustainable when savings and consumption patterns are inconsistent with one another. In this story, the savings are inconsistent, are insufficient to complete the investments, why not? The savings would be insufficient because people's consumption habits were not reduced to a low enough state that freed up the savings for the investment. So then we try to understand well what's the relationship between the illusion or where it's the cause of the illusion that there's more savings available than is actually the case? And we can focus maybe most specifically on the Fraction Reserve Banking System because as we went through in the lecture yesterday on banking, the Fraction Reserve Banking System allows savings to be created, or I shouldn't say savings, but the illusion of savings to be created without anybody renunciating consumption. Now the whole point to real savings is that somebody doesn't consume a good and that frees it up for somebody else to use. But in Fraction Reserve Banking that's not the case at all. Somebody can make a deposit and the bank can only hold a fraction of it on reserve and issue a loan for the remainder. And that loan of course gets deposited in other banks, so on and so forth. And through this whole process we can create a supply of credit which is available for people to use, but it's not created by anybody restraining their consumption habits to begin with. And through this process there's a couple of effects that stem from it. The first is that credit creation by the Fraction Reserve Banking System allows for a greater quantity of investments to be undertaken than would otherwise be the fact, otherwise be true. But more importantly we see that the decrease in the rate of interest due to the credit creation alters what we call the time structure of production. It skews the types of investments that investors are actually doing. And in particular if favor is longer dated or more distant investment projects at the expense of shorter dated investment projects. Now, at the same time that lower rate of interest has a real effect on people's consumption habits. The real effect on people's consumption habits is that it actually motivates them to consume more. As the rate of interest falls you would have a lower propensity to save money and you would wanna go out and start consuming more. Buy more furniture for your house or buy new accessories for your car or go on another vacation, so on and so forth. And so at this very time where people start taking on more investments which would normally require a greater amount of savings the lower rate of interest demotivates savings by the hand of consumers. And so we have a complete disconnect between the needs of the producers or the needs of the investors and the resources and the desires of consumers and their savings habits, saving habits. Because it's important and I feel very strongly about this mischaracterization of Austrian business cycle theory as a theory of over investment I wanna just make a brief comment about it. Because it's easy to see from what I just said that you could construe the theory as being one of over investment. In fact, my exact words were the lower rate of interest induces a greater amount of investment that would otherwise be the case. But that's not where all the action is. The action is in the mall investment, the skewing of the time structure of production. What does it even mean to say that too much investment is taking place if you think about it? Investment is just doing something today so that you can get a payoff in the future. To say that there's too much investment going on is to say or taking place today is to say that there's gonna be too much activity or too much wealth created in the future as a result. It's not a sensible position to have. The problem isn't that there's too much investment taking place, it's that the investment is taking place along lines or in patterns which doesn't lead itself to being sustainable or the investments are not going to be able to be completed to fruition. The better way to characterize what's going on is to focus on mall investment. And in particular, we will say that the structure of production has been upset by credit creation by the banking system and the lowering of the rate of interest. And when I refer to the structure of production, what I'm specifically referring to is the ordering of all of the capital goods or industries that are necessary to produce a consumer good.  The car could only be produced by putting together tires and engines and metal components, et cetera, et cetera. And the tires could only be produced by somebody producing rubber, vulcanizing rubber. And the rubber can only be produced by a plantation over in Malaysia farming rubber trees, so on and so forth. So we have a structure of production where all of these steps along the way are all linked together and they're all dependent on one another. So when I say the structure of production has been upset and that's what mall investment is, there's two ways that I'm referring to. The first way is what you can call a drive demand effect. The drive demand effect is that the lowering of the rate of interest has caused people to want to consume more than would otherwise be the case. And of course, entrepreneurs respond to this increase in consumption habits by focusing their attention on these areas of the structure of production, those which are most closely related to the consumer goods industry.  And entrepreneurs respond by opening up more big box stores, more retail outlets. That's at that very far end of the structure of production and it's necessary in order to meet this drive demand that people have from their increased consumption habits. And then at the same time, there's an interest rate effect. As the interest rate falls, longer dated investments are favored over shorter dated investments. And so we see a temporal restructuring of the structure of production. A long dated investment by the way would be something like R&D. Pharmacy investments might take 30 years in order to break even, if they ever break even. That's a very long dated investment. Lower rates of interest stimulate those types of investment projects. A short dated investment project might be, oh, I don't know, repaving the parking lot of your store to attract more customers or an advertising campaign to attract more customers. And so this interest rate effect favors investment in the higher stages of production or the earlier stages of production, those further from final consumption. And what we see is that a tug of war develops because in the structure of production, where you have stages closest to final consumption and stages farther from final consumption, you have resources being pulled to the far stages and resources being pulled to the early stages and not much attention paid to the middle stages. The easiest way to understand this, Hayek in prices and production introduces what we now call a Hayekian triangle. And a Hayekian triangle is a simple way to understand the linking between all these different stages of production. This diagram, by the way, if you're interested, is taken from Roger Garrison's book, Time and Money. It's probably the best book for a higher level understanding or look at the business cycle. And what we see on this structure of production or this Hayekian triangle is that on the Y axis, we have the total value of consumer goods which is being produced. Cars, vacations, food, et cetera. But of course, those consumer goods are only produced through this time-consuming process that links together all the different stages of production. Retail stage is the one closest to final output. You go to the store to buy the good, but the goods only got to the store through the distribution channel. That's a different stage of production. And higher up from that, the goods were only available because they were manufactured. The goods were only able to be manufactured because raw resources had been, raw materials had been refined and they were only refined because previously they'd been mined. They were only mined because there was R&D in order to do so if you wanted to add another stage on this. And so all of these stages are linked together to produce a final amount of consumer goods. And when I talked of the derived demand effect, what I was referring to was that since people are over-consuming and have increased their consumption demands, business investment moves into these late stages. This is my analogies of big box stores and bigger expenditures on retail spaces. And at the same time, the interest rate effect is motivating investors to make investments down here at the very early stages, mining and R&D in our example. And the tug of war that exists can be illustrated like this. And the early stages of the structure here, we have a boom phase which is going on. That's the malinvestment, the shifting of capital goods earlier into production. And the over consumption phase can be illustrated in this. Capital is being reallocated into the late stages of production to meet this derived demand effect. And meanwhile, in the very middle here, the tug of war is getting tense. Resources are not being dedicated there. But of course, for the structure of production to be consistent, there needs to be a steady flow of goods that flow from the far stages to the later stages. And so this dearth of investment in the middle here is going to create problems later on. Now, before I get to the problem, I just wanna focus a little bit on what the boom of an Austrian business cycle actually looks like. And so Dr. Klein, I called her Klein the beautiful, I think, as opposed to Klein the elder to make the distinction yesterday. Dr. Klein talked about Cantillon effects. What we refer to as Cantillon effects in her lecture on money. And a Cantillon effect is the recognition that, yes, when we increase the supply of money, prices are going to increase also. But the Cantillon effect is the recognition that it's not a uniform increase in prices. We can speak of it as being a wave that money always gets injected into specific industries or specific investment projects. And that creates income for people involved in those industries. And as they spend that increase in income, that pushes up prices in those areas that they spend money on. And we can think of a wave of price inflation permeating out from the original spot where money is injected. For example, during a boom, since one of the places where you would see money injected initially into the economy is through the real estate sector. After all, fractional reserve banks issue loans primarily for mortgages. And people get their mortgages and they buy houses. So of course, you see housing prices and real estate prices and land prices especially start increasing. And that increases the income of builders and people own land who sell it.   And then we'll see the price of trucks go up. And then there's people who produce trucks and they have a higher income now. And then they turn around and they sell it.  And so the vacation industry starts seeing prices go up. And we'll see this wave emitting from the origin of where money was injected into the economy. And so the boom can be described as following that wave of money. And it should be no surprise if you think about it in these terms that when you look at a boom, the real estate sector is typically the focal point. Or big cities where a lot of credit is injected initially, especially New York City, is a focal point in many booms. Now, when the bust comes, we can describe it in a couple of different ways. The easiest way to understand why the bust actually had to happen was that we're facing a resource constraint. And entrepreneurs are realizing that there's an insufficient amount of resources available to complete all the projects that they've previously undertaken. That's like MISI's master builder example. A different way that you can understand this is to recognize that as this wave of inflation permeates out from the original investment, prices start increasing. And prices are also increasing because of the growing scarcity, scarcity which is caused by more investments taking place and there are resources available to complete them. And as these market rates of interest, as these increases in prices force market rates of interest higher, they make marginal profits unprofitable and people abandon them. This could be a housing project, which is abandoned, this could be an R&D venture which has been abandoned. And once these projects are abandoned, people lose jobs, the bust starts to set in. To take it one step further, MISIS writes in human action of what he refers to as a crack-up boom. A crack-up boom is the logical conclusion of a central bank increasing supplies of money to ward off this recession, to ward off the bust and ending up with a hyperinflationary recession as prices keep spiraling out of control. Now in that sense, when Austrian speak about the bust or the recession phase were completely different from mainstream economists because the bust for us is actually quite a healthy phenomenon. All it's doing is exposing all of the errors that were done in the past. It's not a problem in and of itself, the problem was actually the unsustainable boom and all the investments that took place over the preceding years that shouldn't have taken place. And so the bust or the recession is just allowing consumers and producers to reassert their preferences in a sustainable way. And all it's trying to do is allow previously undertaken but ultimately unprofitable or unnecessary projects to be abandoned so that the resources can be freed up to pursue something else. In MISIS Master Builder example, this would be a bust could be the exposing of some home builders who didn't have enough bricks to finish their projects. And of course, those houses need to be torn down. Those projects need to be abandoned to free up bricks so that other houses can be completed. But that's not the problem in and of itself. The initial problem was too many home builders started building too many homes at the same time. The recession is just trying to clean up the mess that was previously undertaken. And the final note that I'll say is that delaying a recession in this way doesn't allow the structure of production to return to normalcy, which is important. We need to have a structure of production which is consistent so that all of our production plans can be linked together to produce consumer goods. To the extent that the boom misallocates capital along the structure of production, it creates problems that need to be resolved, which is exactly what the recession is trying to do. Any effort to try to stop the recession prematurely or any effort that tries to halt this reallocation of capital along the structure of production is only going to serve to delay the recovery rather longer than would otherwise be the case. If anybody has any questions because I know it's a complex topic, we can talk about them afterwards here because I've run out of time, or otherwise you can ask me during office hours later today. Thank you.