But you ask how it can be the fact that faith alone justifies, and affords without works so great a treasure of good things, when so many works, ceremonies, and laws are prescribed to us in the Scriptures?
I answer, before all things bear in mind what I have said: that faith alone without works justifies, sets free, and saves, as I shall show more clearly below.
Meanwhile it is to be noted that the whole Scripture of God is divided into two parts: precepts and promises. The precepts certainly teach us what is good, but what they teach is not instantly done. For they show us what we ought to do, but do not give us the power to do it. They were ordained, however, for the purpose of showing man to himself, that through them he may learn his own impotence for good and may despair of his own strength. For this reason they are called the Old Testament, and are so.
For example, “Thou shalt not covet,” is a precept by which we are all convicted of sin, since no man can help coveting, whatever efforts to the contrary he may make. In order therefore that he may fulfil the precept, and not covet, he is constrained to despair of himself and to seek elsewhere and through another the help which he cannot find in himself; as it is said, “O Israel, thou hast destroyed thyself; but in Me is thine help” (Hosea 13:9). Now what is done by this one precept is done by all; for all are equally impossible of fulfilment by us.
Now when a man has through the precepts been taught his own impotence, and become anxious by what means he may satisfy the law–for the law must be satisfied, so that no jot or tittle of it may pass away, otherwise he must be hopelessly condemned—then, being truly humbled and brought to nothing in his own eyes, he finds in himself no resource for justification and salvation.
Then comes in that other part of Scripture, the promises of God, which declare the glory of God, and say, “If you wish to fulfil the law, and, as the law requires, not to covet, lo! Believe in Christ, in whom are promised to you grace, justification, peace, and liberty.” All these things you shall have, if you believe, and shall be without them if you do not believe. For what is impossible for you by all the works of the law, which are many and yet useless, you shall fulfil in an easy and summary way through faith, because God the Father has made everything to depend on faith, so that whosoever has it has all things, and he who has it not has nothing. “For God hath concluded them all in unbelief, that He might have mercy upon all” (Rom. 9:32).
Thus the promises of God give that which the precepts exact, and fulfil what the law commands; so that all is of God alone, both the precepts and their fulfilment. He alone commands; He alone also fulfils. Hence the promises of God belong to the New Testament; nay, are the New Testament.
This is an excerpt from Martin Luther’s “Concerning Christian Liberty.” It was edited for clarity.