It's Official...Runaway inflation in the L$

Not that there haven't been enough posts about this event already...but...in the past week, the situation of the Lindex has gone from bad to catastrophic.

Why are so many selling and so few buying? Are major players liquidating and leaving? Has someone found a way to "dupe" Linden? Or has the "make money" advertising angle lead to a lot of "entreprenuers" (though nearly everyone in SL seems to have/want a business) who want no part of spending in the economy, only taking from it?

Regardless...I've finally been forced to understand that my L$ are no better than junk bonds today. LL MUST step in to help control this economy or we're gonna see things just spiral out of control.

Honestly though...I'm willing to bet quite a bit of money that if the Lindex defaulted to sell Linden at a rate of 1 L$ HIGHER than the lowest rate instead of the current method (at or 1 L$ lower than the lowest rate), we'd actually be somewhere around 230/1. (yes, I do believe most sellers are that ignorant).

Currency markets fluctuate. When the exchange rate fluctuates down too far, people start buying. The L$ value has dropped about 5% in the last month, which doesn't amount to rampant inflation... the USD has fallen about 3% against the Euro and the Pound in the same amount of time.

The Linden like most markets fluctuates regularly. We've seen this before and we'll see it again. It all seems very cyclical.

A land glut often goes hand in hand with a drop in the $L. Several things are at play here. First off there were the land auctions (causing people to spend USD which they ultimately get $L for when they sell parcels). They then convert $L back to USD through selling. Making it possible to buy auction land for $L would take $L out of the economy, and should be considered. That, or put less land on the market at once.

Also, due to the DI announcement, some places are quietly selling off land and getting out of the business, leaving their clubs in the hands of those who get them for "deals" on the basis of current income. I'd be willing to bet that these would-be entrepreneurs don't know what DI is, let alone that it is being phased out.

It's true that the $L value fluctuates cyclically, but it seems connected to land availability.

While it is true that markets do fluctuate, I would hardly classify what the LindeX has done since its inception as "fluctuating."

When the LindeX was first implemented the linden promptly stabilized at $L250/$1.00 for a moment. It has since done nothing but steadily slide without even a hint of a rebound.

One can argue that the LindeX hasnt been in existence very long and therefore hasnt had the chance to form a cycle and/or fluctuate, but that would be pure speculation at this point.

What is known is that, to date, there has been no evidence or signs of any "fluctuation" on the LindeX. It can only be accurately described as a slow but steady sustained decline.

At this point, I'd consider it an over reaction if anyone was experiencing a full blown panic attack over this.

I would not however, blame anyone if they were begining to hyper-ventilate a lil bit over it

On October 3rd, the exchange rate was $3.47 per 1000L. I think that was at GOM. It then peaked at $3.98 per 1000 on Oct 29, which I think is a Lindex quote.

Now it's back to $3.57. So that's a 15% rise in one month, followed by a 10% drop over 3 months. While 3 months is a long time to wait for the price to rise, it seems healthy to me.

This whole cycle may be part of a cycle, and it is true that cycles can take a good amount of time to turn around...however...

...it is true that since the LINDEX (not GOM) has been around, it has seen nothing but a steady decline.

It is interesting to note the land-glut + low Linden value correlation. I've noticed, however, that people still want higher prices for their land than they wanted 3 months ago.

That...and I really do think it would help to change the default sell price to 1 L$ higher than the current low. That would allow the less knowledgable to retain a stable market and the more knowledgeable to choose to sell cheap if they want.

In the interest of fairness and accuracy, you should not factor the price that the $L was at GOM into your calculation as this does not reflect an accurate LindeX market fluctuation, but fluctuation from two combined markets.

I would also refrain from factoring that October 15% increase on the LindeX market into your calculation as part of your fluctuating pattern or cycle, as this could only be described as that momentary rebound caused by the postive psychological effect of the change to the LindeX from the fast declining GOM market.

Many people held off selling their linden at the time in an effort to garner a better exchange. This can be substantiated by the fact that as soon as the market hit the desired $L250/$1.00 on the LindeX, the market quickly began selling off and it has not rebounded since then.

Your findings of a 10% drop over the past three months however, is accurate and undisputable.

It reflects a slow but decisive steady decline of the $L on the LindeX lacking of any evidence of a rebound or market fluctuation for a markedly sustained period of time.

The L$ stick at 280L$ since some days.
But, again, some ppl have fun selling at 285 or higher. (i saw 300L$/US$)

There is no real inflation, only ppl in panic when they see this *$@#!% kind of post on the forum.

Stop crying and just wait please ...

The volume of L$ per day is over 5.000.000L$ and there is only 4M over 274L$/US$ ...
Just stop selling low price like a crazy for one day.
Just find the funny guy that sell at 285, 290, 300L$/US$ and shutdown his computer for one day.
And everything will be back to a "better normality".

The issue is that more than 5mil is coming into the market for sale every day. The "funny guy" really doesn't matter. What you'd need to do for this to work, and stop the decline for one day, is to shut down EVERYONE'S computer for one day. But of course, if you shut down all of our computers, we won't have anything to spend L$ on, so the buying volume will be near 0 for that day.

This situation really isn't a problem though, and I don't know why everyone sees it as such. Where the problem comes in is that we're seeing DEVALUATION on the exchange (due to the welfare state in which we live our virtual lives) WITHOUT much corresponding INFLATION in in-world pricing (due to people valuing their own work). In other words, as the L$ loses value, business owners continue to allow customers to purchase the SAME amount of whatever they're offering for LESS.

What residents must do if they wish to preserve the USD value of their work is simply raise their selling prices. Everything is actually just fine, whether we can get L$285 for a dollar or L$2850 for a dollar. We must simply charge 10 times as much for everything in the second situation if we're concerned with USD conversion ratios.

I can already hear the cries of, "Oh but if I raise my prices then people who live on stipend won't be able to afford my stuff!" In this situation, you must decide if it's more important to you that those who don't value your product enough to pay for it still be able to "buy" it with their welfare check, or if preserving the USD value of your work is more important. If your product is of value, people will pay for a few L$ to buy it. This is undeniably true, as L$5,000,000 bought every day CAN'T be wrong! Just rez up a LindeX terminal next to your vendors.

It's up to you individually to decide whether you value your work enough to charge for it. If so, adjust your prices to reflect current exchange rates. If not, why not just make it a freebie? That way EVERYONE can afford it. Personally, I know I'll always adjust my pricing to reflect current exchange rates.

You're completely right in that we SHOULD be adjusting our prices to reflect the current L$/USD value fluctuations...but...

15 items
+ Same 15 Items on SL Exchange
+ Same 15 Items on SL Boutique

= 45 price changes and possibly 15 texture uploads (150 L$...for pricing updates) every time the L$ makes a significant change (which occurs at least monthly at this point in time).

Sure...if you're runnin' your SL life like a business, spending the hour or so this'll take might be worth it. For the rest of us, it's easier to complain. Imagine the difficulty of price changing for a large store (esp. garment stores) where there are 50 + items for sale. We're talkin' a day-long endeavor just to keep up with inflation that may be the result of a money glut...but is also almost certainly a result of Lindex Seller Irresponsibility.

DEMAND eCommerce solutions which read LindeX and adjust your prices accordingly if you specify this option. If a site won't to it, pull your items from the site and tell them why. If a vendor won't do it, don't buy the vendor and tell them why. Content creators who wish to specify pricing in USD terms should be entitled to automatic and instantanious repricing any time the LindeX moves even a point.

This would also be a great feature for land now that LL has the currency exchange in-house. Land that reprices itself. I like it.

Hmmm...interesting idea for auto-adjusting vendors Shaun...

I am a scripter btw. If I made it, would anyone use it? I'd love to get together with a group of content sellers and learn what features you'd require in a vendor. Also, I have a friend who is working on a vendor package. I will pass the auto-adjustment feature suggestion on to him as well.

I wouldn't use it. It's needless, and would piss my customers off.

It gets even more complex with content creators who's local currency is not USD. (Like: Euro, etc.) Though land tiers have to be paid in USD's, but the 'profit' -- it there's such a need -- will always be realized in local currency.

Though stated a bit stronger than I might like, I have to agree with this sentiment.

Pricing is a delicate balance at the best of times, adding in the complexity of shifting exchange rates would probably harm rather than help the bottom line.

bet it leads to even more people 'gaming' the exchange too! pop some money up at a high price and voila! insta price rise on all your vendors! Ludicrously high money gets bought... make out like a bandit.

I would probably use it if I could set a threshold and time period. Like once a week or even just once a month, check the overall trend and adjust accordingly. Responding every time the price changes would be bad for me and my customers.

You are aware, that the widespread adoption of such an auto-adjusting vendor (auto-adjusting to the current exchange rate on LindeX) would be a kind of afterburner for the slightest inflationary tendency in an economy?

If what you mean to say is that it would be an instant inflationary or deflationary economic reaction to the slightest monetary valuation changes then yes I'm aware. The problem itself is wildly swinging monetary valuations WITHOUT corresponding inflation and deflation to any noticable extent. I don't really see it as that big of an issue to the consumer though. Even a 10% change in valuation (which would be pretty radical to happen overnight) would only result in an L$100 item becomming L$90 or L$110. I don't think consumers will notice the difference. I think content creators WOULD, though. All of these L$10's will add up to preserving the value of their work as we all ride the Linden Lab economic roller coaster.

I'll admit that the best solution is for LL to simply do nothing at all, and let the exchange rate stabalize wherever it should be. I don't see this happening though, as they seem to enjoy tinkering too much. In light of this, I think it is up to residents who do care about preserving the value of their work to act. Complaining on some forum thread in hopes that Linden will put an end to the economic roller coaster seems futile.

I'm sure that anyone creating such a vendor would want to include a lot of configuration options and implement as many potential user suggestions possible. Is there anything else you can think of that may make an economy-concious vendor a good fit for your perticular business?

But keep in mind that all this cheap L$ would likely sell faster than the repriced content. A better way to accomplish the same thing without going broke in the process would simply be to raise prices without gaming the exchange rate and letting your vendor do it for you. At least, I think so.. I'll admit that I'm no expert in gaming the exchange rates. Are you experienced at this?

Maybe the pricing engine that delivers quotes to the vendors could also monitor differences in real currency valuations and price according to your local currency, if not USD.

Honestly, I dont understand this "letting the exchange rate stabilize were it should be" thing you speak of Shaun.

An economy is meant to be "tinkered" with. This is what the Federal Reserve does when it increases and decreases the interest rate.

LL has a vested interest in making the SL economy stable. Why would they simply sit idly by and adopt such a lackadaisacal "let the chips fall where they may" type attitude, at the expense of the SL community? That would be irresponsible.

IMHO, its a good thing that the SL currency have a barometer to be gauged by, which has historically been known to be $L250/$1.00.

How about we not tinker with that, lest we wander into an unknown from which there my be no manageable recovery.