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The Stone of Daniel 2:35 is first Jesus Christ Himself. It is to grind its opposition to powder, as Jesus confirmed in Matt. 21:44. In the same context, Jesus linked that Stone to the one that the builders rejected (Matt. 21:42), which is a direct reference to Jesus, who was rejected as the Messiah.
The nation of Judah held the keys of the kingdom in those days. But because of their rejection of the Messiah that was sent, Jesus said in Matt. 21:43,
43 Therefore I say to you, the kingdom of God will be taken away from you, and be given to a nation producing the fruit of it.
The chief priests and Pharisees then understood that He was speaking about them (vs. 45), because they were the leaders that induced the rest of the nation to reject Jesus.
We see in this that the kingdom mandate was transferable. That is a key concept, because there are many who think that once called, always called, regardless of their behavior. The fact is, that the entire story of Christ's rejection as the Messiah-King was prophesied a thousand years earlier in the time of King David.
David was overthrown by his son Absalom with the help of Ahithophel, David's friend and counselor (2 Sam. 15:12). This prophetic story was replayed in the New Testament, when Jesus came as the Son of David. He was rejected by the chief priests playing the role of Absalom. They were helped by Judas, who was Jesus' "friend" (Matt. 26:50), playing the role of Ahithophel.
I discovered this in the 1990's after seeing how Peter applied the psalms about Ahithophel to the disciple Judas (Acts 1:20, quoted from Ps. 69:25 and 109:8). Both Ahithophel and Judas hanged themselves as well.
When David returned to the throne (after an unknown time period), Absalom was killed. This pictures the second coming of Christ. The Absalom group are not destined to become part of Christ's government, although many Bible teachers today would disagree, not knowing the Scriptures.
This entire question (and conflict) can be traced back to the book of Genesis in the conflict between Joseph and Judah. It was Judah's idea to betray his brother Joseph and to sell him as a slave for 20 pieces of silver. (See Gen. 37:26-28.) At that time, Judah played a dual role in prophecy. First, he played the part of the tribe named after him; secondly, he played the part of Judas, who betrayed Jesus and sold him for 30 pieces of silver (Matt. 26:15).
In later years, when Jacob blessed his 12 sons, he gave the Scepter to Judah but gave the Birthright to Joseph (1 Chron. 5:1, 2). But there is an important detail in Gen. 49: that many have missed.
10 The scepter shall not depart from Judah, nor the ruler's staff from between his feet, until Shiloh comes, and to him ["Shiloh"] shall be the obedience of the peoples.
This tells us that the tribe of Judah was given the Scepter only temporarily. At some point he would have to turn it over to "Shiloh." So who is Shiloh? We see in later years that this was a town in the tribe of Ephraim, son of Joseph. It was where the tabernacle of Moses was first set up (Joshua 18:1). Shiloh was essentially a prophetic name for Ephraim (or Joseph).
Joseph had two prophetic dreams at the age of 17, where he saw his brothers bowing to him (Gen. 37:5-10). Though his father rebuked his son, he also put it in the back of his mind for future reference (vs. 10). As it turned out, the family--including Judah--did indeed bow to Joseph. This, then, is the real basis of the prophecy that Judah would have to give way to Joseph. In the end, Joseph would have not only the Birthright, but also the Scepter.
This is primarily fulfilled in Christ Himself, but secondarily in the tribe of Joseph, or Ephraim.
Scripture shows us, however, that there would be a conflict along the way. Judah would envy Joseph (Gen. 37:11). Judah would betray Joseph in order to obtain the Scepter for himself. The plan would appear to succeed, but in the end, Judah would have to give back the Scepter when Shiloh came.
Jesus' first coming was through the tribe of Judah, for He had to be born of the seed of David, to whom the Scepter had been given. In that first coming, the leaders of Judah succeeded in usurping the throne for themselves, even as Absalom had succeeded for a time. But the second coming of Christ puts an end to the plan of all usurpers.
In recent years, the usurpers have attempted to unite the Scepter and Birthright apart from Jesus Christ. After all, what good is a Scepter without the Birthright? Hence, in 1948 the same group usurped the Birthright, stealing the Birthright name Israel, which had been given to the sons of Joseph (Gen. 48:16).
They did this with the help of modern Ahithophel, that is, Judas. This group consists of "friends" of Jesus, His disciples who really disagree with the divine plan. Modern Judas is a portion of the Church known as Christian Zionism. Like Judas, they have sided with the usurpers. If they had lived in the time of David, they would have played the role of Ahithophel. In either case, they will regret their actions, even as Ahithophel and Judas both had regrets afterward and hanged themselves.
The point is that the nation calling itself "Israel" is not the one called to lead the way into the Kingdom. Its role is certainly prophesied in Scripture, but it will go the way of Absalom, not David. It is written. This knowledge is vital so Christians today may avoid playing the part of Judas.
Who, then, is the real Israel today? We have already seen that there are many nations descended from the "lost" Israelites in dispersion. They were lost, mainly because God stripped them of their name and hid them under other names. Essentially, they have followed the prophetic pattern originally set by Joseph himself. Joseph, too, was "lost" in Egypt, and even after he was elevated to the throne under Pharaoh, his family did not recognize him. Why? First, because Joseph made no effort to contact them. Secondly, Joseph had been given another name, Zaphnath-paaneah (Gen. 41:45). The name can be translated "treasury of the glorious rest," or "hidden treasure."
Joseph's story prophesied of the future of his descendants. Like Joseph, his descendants would be hidden in the world, and Jesus would have to find them and purchase them. In His pursuit of this hidden treasure, He would be required by law to purchase the whole "field," which is the world. So Jesus tells us in Matt. 13:44,
44 The kingdom of heaven is like a treasure hidden in the field, which a man found and hid; and from joy over it, he goes and sells all that he has, and buys that field.
This is a summary of the divine plan in this regard. God hid the Israelites in the world, even as a farmer scatters and sows seed in the field (as Hosea prophesies). The divine purpose was to reap a great harvest in the end, not only natural Israelites, but also others, as Isaiah 56:8 says,
8 The Lord God, who gathers the dispersed of Israel, declares, "Yet others I will gather to them, to those already gathered."
The plan called for Jesus to purchase the entire "field" in order to gain possession of the treasure hidden in it. If He had simply taken the treasure when He found it, He would have been a thief, according to the law. No, He had to first hide it and then do whatever it took to buy the field. Only then could He lay claim to the treasure hidden there.
He purchased both individual people and whole nations. And in this series, we are discussing the nations in prophecy.