Verses 1-7
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This chapter speaks to what would be the exiled people of Israel, encouraging them to take heart because God would deliver them and pardon their sins. If we apply it to our own lives, we learn about God's love for us:
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Verses 1 & 7. God has created/formed us new (Ephesians 2:10, 2 Corinthians 5:17), in Christ, and purchased us with the blood of Christ. Remember that you belong to God, so use your life for His glory—to honor Him (1 Corinthians 6:20).
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Verse 2. Remember that we will go through waters and fires—hardships of various kinds—but God will be with us and will keep us from total destruction. Accept your hardships knowing that all will work for your growth and God's glory(Romans 8:28).
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Verses 3-4. In order for Israel to be delivered, other nations suffered...Egypt, Assyria, and eventually Babylon. These nations did have sins of their own for which they deserved their destruction. However, the point of this passage is that Israel's salvation cost much and required works of God in many other nations besides their own. Ultimately, our salvation cost the life of Jesus Christ, who was crucified for us; He is the one Man given for us. Aside from Christ, many others have suffered hardships in order to bring about plans of God that were for our salvation.
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Always remember that your salvation was very costly. Be thankful for the one Life that was given for you, and be thankful for God's works in many other lives and nations that made your salvation possible. Also, readily accept loss and suffering in your own life, for the benefit of others. Your life ought to be spent for the salvation of others (2 Corinthians 12:15a).
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Verses 8-13
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In the previous chapter, God exposed that His people were blinded by their idolatry (Isaiah 42:19-20). Now He challenges these same people to come to Him and see/experience that He is the One true God.
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Notice that God says, “You are My witnesses...My servant whom I have chosen” (verse 10). As believers, we are witnesses for Christ (Acts 1:8), and we are called to preach what we have seen and heard about Christ (Acts 4:20, Acts 22:14-15). As Isaiah says here, we are chosen to know God, believe God, understand that He is God alone, and that He alone saves us from sin.
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Being a servant of God and a witness for Him is really quite simple. We are not told to pursue eccentric or profound knowledge, nor seek to obtain miraculous power, nor understand all the mysteries of the spiritual realm...being effective for God isn't about any of this. Simply focus on knowing God through relationship with Him, and focus on believing/obeying His word, and this will make you into living proof of God's presence and power.
Verses 14-21
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Verses 14-17. Here God prophesies, long before it happened, that Babylon would eventually be destroyed. Although Israel would suffer captivity in Babylon for seventy years first, afterwards they would be freed and Babylon extinguished.
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Verses 18-21. Then, Israel was to be delivered out of the clutches of Babylon. Here God instructs them, for this day, that they were to forget the past and focus on this new work of deliverance that God was accomplishing for them.
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Verses 19-20. God promises that He would make a way for them to travel back to Israel through the wilderness, and even protect them from both natural and unnatural beasts. This is similar to what God did in the past in bringing the Israelites out of Egypt, when He also made a way for them through the Red Sea.
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Application: The future that God says is possible for you, as a believer, may seem impossible. A life of freedom, holiness, faith, joy...these, for many, seem like a standard too great to obtain. One thing limits you; so there's one thing you must do: Forget the past—yesterday's doubts and failures—and press forward to what lies ahead (Philippians 3:12-14). Pursue a Christ-like life, and believe God that He will make a way for you to overcome through any hardship and protect you from any danger.
Verses 22-28
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God changes gears here to something more solemn. God promises to do all these great things for Israel even though they continued in their sins. Why?
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Verse 25 is the key: “I, even I, am He who blots out your transgressions for My own sake, and I will not remember your sins.”
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After their judgment under the sword of Babylon was complete, God promised to blot out Israel's sins and give them a fresh start. In Israel's case, other nations would doubt and disrespect the God of Israel if God hadn't restored them. So God delivered Israel in order to prevent His name from being dishonored (see Exodus 32:12, Deuteronomy 32:26-27, and Ezekiel 36:18-25 for examples of this).
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In other words, God forgives us of our sin and shows us grace not because we deserve it, but because showing grace brings Him glory and honor. Remember this; and do everything out of the desire to glorify God, not out of any desire for personal advantage.

