L$ Falling Like a Cheap Ho After a Night Out!

What is difference between cut stipends by 50% and let L$ value drop 50%? The only difference I see is that you make current businesses and L$ holders loose big time if you devalue currency. For somebody who in one year has one SL account it won't matter wether he get 500 L$ worth 50 cents (at 2 US$ rate) or if he get 250 L$ worth 50 cents (at 4 US$ rate). If L$ drop then rentals, content prices etc will also raise. So accepting inflation to solve problem is just people fool themselves. The bitter truth may be that one way or the other, in one year you simply won't get the same value in stipends as now.

I appreciate there may be a few people trying this, but I don't quite recognise your numbers. Isn't the premium stipend L$500 per week, L$2173 per month ? And what is this $5 subscription ? This is even lower than the $6 per month if you pay annually.

Never mind, maybe that is nitpicking, changes the numbers a bit but not the principle.
I think the main snag with doing this, Andy, and why I don't believe it is happening on any significant scale, is the need for the in-advance annual subscription to make it even vaguely worth all the effort.

Particularly if you are accumulating new alts each month. The economics of this calculation could shift against you at any time, leaving you with these useless prepaid accounts at US$72 each, on which no refund is possible.

Your calculation pretends that each new alt costs you $5 (6 ?) more, paid monthly. In fact, it is an immediate non-returnable disbursement of US$72.

Which can be rendered instantly worthless if LL cut the stipend, or progressively worth less as the L$ drifts down.

If we recognise exactly when the subscription cash is in fact paid out, and stop disguising it as a much-later monthly instalment, then we see your proposal more clearly.

In my view it is not a financially viable proposition. With great respect, I doubt you are actually doing it, and there is some hint in your phrasing that this may indeed be the case.

On this basis, I consider that your conclusions on the "true value" of the L$ are invalid.

If everyone suddenly went to an annual subscription, LL too would have future receipts moved (though reduced) back into the present. How valuable this would be to them, and how they would act, would depend on their need for and current cost of, borrowing.

My guess is, it would force them to change something, further invalidating your attempt to base an L$ value on such an assumption.

Nevertheless, you have reminded us just how willing LL is to hand us highly subsidised packets of currency, if we pay far enough in advance, and this is, I think, a worthwhile reminder.

Absolutely correct.

In some western countries, inflation was at one time almost welcomed, because it effectively took wealth from retired older people on fixed incomes and fixed value investments and cash, and transferred it to the youngsters who were living hand to mouth on salaries keeping up with inflation. It can be a mechanism for forcible transfer of wealth between differently circumstanced groups in society. Something of that is occurring here. If only because the prices of different commodities suffer differing feedback delays, and some are slower to track inflation upwards than others, and/or are price capped for other reasons (eg SL land).

Those here who see inflation as good are in a temporary cloud cuckoo land. Due I think to the fact that not all SL sellers have networked vendor systems allowing instant and easy across-the-board price increases. Once the majority of sellers bite the bullet and move those prices up, the reality will become clearer. Worse, for those sellers who face a laborious task to achieve it, it will be only natural for them to go a bit higher to overcompensate, so that they can delay the moment when they may have to do it again.

Admittedly, we need to distinguish inworld price inflation from exchange rate fall, but because all our successful business people are effectively residents of another country (RL) the two become almost inextricably linked. Because the big gainers need ultimately to export their well-gotten gains to these "overseas homes" where the US$ prevails.

I just noticed this bit on the end, Andy.

I cant understand that you think there is a parallel here. The people at GOM decide nothing. They have no power to "set it down by" anything, or to "kill it fast". They just watch passively while their customers sort out what the rate should be between themselves.

GOM just takes a commission. Which, incidentally, is I believe based on the L$ amount, not the US$. So changes in the rate don't even effect their earnings, except perhaps by a secondary affect on volume of trades. None of it need worry them, or even interest them, otherwise at all.

Please try to eliminate this serious misunderstanding from your thinking, about GOM having Greenspan-like power. It is liable to render any suggestions you may make pretty incomprehensible, to say the least.

Sam, I think the root cause of all this is LL's corporate view of the L$.

To minimise their potential exposure to litigation, at some point the decision was made to give the L$ - and any created in-world content- zero value.

That is the core decision that is crippling their thinking. Having assigned the L$ zero value it becomes pitifully easy to hand them out freely to customers. Which is exactly what they do.

Firstly a stipend to basic customers. Then as stipend to premium customers. Then in the form of various bonuses paid to customers. Even as prizes and awards.

And with every 'payment' they are remorselessly increasing the money supply. To the point where SL is awash with currency - currency which, because supply is far in excess of demand, is rapidly decreasing in value.

The 'sinks' in SL are laughable compared to the volume of L$ being poured in on a weekly basis. And cutting back on some payments is a classic case of 'bolting the stable door...', the L$ are out there now, and slightly reducing the rate at which LL continues to pour them in is going to have no noticeable effect on the current situation.

'All' LL need do, can do in fact, to improve the situation (and I don't have figures to back this, it's just gut instinct, which rarely fails me) is, firstly, to start accepting L$ for tier payment - at the current GOM exchange rate at the time of payment.

OK, for a month or so they'd take a hit as they absorbed the excess $L they have so recklessly dumped into the economy, but when they'd absorbed the excess - indicated by GOM breaking through $4.00 say - they could begin turning their L$ into US$ by feeding them, carefully, back into the market.

If that means holding onto a few billion L$ for six months or a year, so be it - they created the situation, they'll just have to suck it up.

Secondly they need to carefully balance the numbers, real numbers, not the fantasy numbers we get fed either, monitoring new customers and the types of account they have, land sales, tier payments, and so on and, putting economic stability before greed for easy profit, maintain a healthy exchange rate.

The notion they can keep draining US$ from SL while pouring limitless L$ in to pay to their customers is a delusion. My solution would make their eyes water a little - but that seems just - considering it is LL's childishly greedy economic 'policy' that has created the current situation.

OK, I'm not an economist. But I'm widely read and have seen many examples of the sort of mess that occurs when governments 'print money'. And in every case I know of the solution has come down to regaining control of the money supply. And only one entity can do that - Linden Lab.

*creeps away listening for the howls of derision*

*Votes Doc join Nexus Nash's Reserve*

I'm not going to deride you as I personally agree with you fully. The Financial Officer for the "other" virtual world was berated non stop for his applying a real world value to their currency and effectively using it as a budget tool for the company. Again, people fought the idea of a "fake currency" but in effect he was using this as a means to directly tie revenue generated by members to the companies expansion goals.

Despite opinions that said they would go belly up, they didn't. They may still go belly up as compared to SL, they are extremely limited in content, but it won't be because of a weak or declining economy/exchange rate.

LL needs to pull their head out of the sand and set a value on their own currency and accept it in trade for services by members that earn it. Else we will see a change over to direct USD/euro payments for goods and services and the linden dollar will just be abandoned by the member base. Much the way some high profile scripters and land owners do now.

If you saw your time and talent as valuble who wouldn't want to exchange it for something considered equally valuble? At the rate we are going the Linden is losing its percieved value, and I'm afraid we may lose the talents of some of the best content producers that see no reason to apply their talents here when there are more lucritive markets elsewhere.

-Taylor

You interest me, Taylor. I don't understand how this would work, how things are different in There. I don't understand the true significance and implications for SL if the Lindens adopted this change of viewpoint. And what it would mean for Lindens real world income/expenditure. Could I ask you to explain some of these details, please ?

Hello Ellie,

Trust me, it took me many conversations as well as listening to his presentation at the first Real Life Gathering. *no I wasn't there, heard it via webcast.*

Effectively the Therebuck was a marker as to the companies own internal budget for monies brought into the company via members only. In otherwords, this separated it from venture capital spending.

The overall goal was to make THERE self sufficient based on member usage only. That means all content, salaries, upkeep and server maint, etc would be supported by member generated dollars. I'm sure this is the goal of SL as well.

Housing as a content example was priced based not just on the demand aspect but on whether or not if releaseing them was cost effective to do so and maintain.

So in a nut shell they .. he that is, set a value on the therebuck. The "allowance" they later came up with was not a hand out, it was a rebate on the monthly fee of x percent. So if I paid 10 bucks a month...some small percentage of that translated to therebucks would be paid back to my account.

The direct purchase of therebucks was a true currency exchange and represented revenue back to the company. Members used these therebucks to trade for goods amongst themselves as well as pay back for rent on pazes and houses. I guess the best way to look at it would be like a gift certificate for redemption at anytime. It also allowed the company to track the buying/spending habits and I'm sure the relative importance of certain features. The "fake currency" was actually backed by the USD held and budgeted inside the company, but with the caveat that should the company fail, that money was lost to you. Close to, but not like the guarenteed funds of US banks.

Somewhere during beta, this officer in his off duty time, saw an opportunity to create a "sell/buy" website which gave a little bit better return on purchases and a slightly smaller devaluation on sell backs. He made a small profit by facilitating the buying and selling of Therebucks. Later, many successful content creators, created their own website doing the exact same thing. Offering a fixed rate to purchase and sell Therebucks. They are still quite actively in business at http://www.tbux.com/home.php

THERE never supported these 3rd party transactions, much to GOM's chagrin even though THERE's finacial officer promoted their service. But instead THERE chose to not get involved legally with it.

That said, by setting an internal value, third parties were constrained to work with in those rates, effectively keeping the price from running away much like the Linden is doing now.

I'm prolly over simplifying this. The creator of this system is an extremely brilliant economist who specialiazed in currency markets and studied for many years in Japan. Sadly, for all his brilliance he's a lousy communicator and much of the angst that occurred with the membership base came from his inability to get his ideas out there to them without stirring up a lot of uncertainty. Also, because of the inherient inflexibility for development with the THERE platform, many felt left out of the wealth picture as only texture artists and 3D modelers seemed to benefit by this system. Everyone else was left to supplement via purchases of Therebucks as opposed to the direct earning of them. Hence again the reason for Tbux.com's longevity.

He did in fact have a debate with Cory Ondrejka over his ideas for virtual world economies, following this wired news article about GOM. Virtual Cash Breeds Real Greed.

I believe he saw the "therebuck" as becoming a unifiying world currency for companies that operated within cyber space. It at one time was a goal of the company to create private worlds for global business to conduct their operations without the need to travel. Netmeeting meets "Toon Disney."



-Taylor