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OK. So Luther did not encourage anyone to sin but he gave hope of salvation to those who do, and the hope was worded perhaps too provocatively for my prudish Catholic ears.

Luther was often provocative and overboard in some of his commentary. He once remarked that he had no hope of salvation in Zwingli after a debate. Of course, he didnt' really mean that looking at what Luther believed about salvation. However, he said it because he was aggravated with the debate itself and like to shoot off his mouth at times.

The question arises, given that good works are merely a visible reflection of the election, why would such an occasional sinner still show bad works?

Because our sanctification is an already but not yet process. Positionally, we are justified, sanctified, and glorified already.

# Romans 8:30 Moreover whom he did predestinate, them he also called: and whom he called, them he also justified: and whom he justified, them he also glorified.
Hebrews 10:10 By the which will we are sanctified through the offering of the body of Jesus Christ once for all.

However, it's also not yet because we are in the process of being sanctified as well...

# 1 Thessalonians 5:23
And the very God of peace sanctify you wholly; and I pray God your whole spirit and soul and body be preserved blameless unto the coming of our Lord Jesus Christ.

So that, in this life, we WILL sin. We are in the process of becoming Christ-like, but arent' there quite yet...

Paul put it this way... "I find then a law, that, when I would do good, evil is present with me. For I delight in the law of God after the inward man: But I see another law in my members, warring against the law of my mind, and bringing me into captivity to the law of sin which is in my members (Romans 7:21-23).

And James speaks of our struggles even with the small parts of our body through sin..."2We all stumble in many ways. If anyone is never at fault in what he says, he is a perfect man, able to keep his whole body in check. 3When we put bits into the mouths of horses to make them obey us, we can turn the whole animal. 4Or take ships as an example. Although they are so large and are driven by strong winds, they are steered by a very small rudder wherever the pilot wants to go. 5Likewise the tongue is a small part of the body, but it makes great boasts. Consider what a great forest is set on fire by a small spark."

So...none of us are perfect, yet. But positionally we are. We have been justified so that we can boldly approach the throne crying Abba, Father. We couldn't have done that before Christ, because none of our righteousness is good enough. We stand justified because we stand in Christ. It's His blood which justifies us once and for all.