Stabilization Of L$

An interesting RL fact, though, isn't it? The stabilized Chinese economy seems to be working for them, whereas our unstable US economy is having problems.

And frankly, we haven't even started to see the real problems yet. Wait until the $3/gallon gas prices filter back to the cost of food. We think people are screaming now...

You're saying that the rapid devaluation of the L$ on GOM and the closing of that board is due to Linden lack of control?

Just what about GOM was LL able to control at all? GOM set up the "game". They put together a stock market without regulations. They allowed their game to be manipulated and from reports, couldn't make enough money at what they did to be worthwhile. LL has nothing to do with that. If anything, the setup of GOM tended to make it very difficult for LL to keep the L$ market stable... which in my mind, is likely one of the #1 reasons LL decided to open their own system. However, I do fear that LL is going to make the mistake of putting together a system worse than GOMs. I hate to say it, but that would be par for the course. SL is full of brilliant ideas that are only partially or badly realized.

Ok, that is the differance in the games. If LL set it so you could both buy and sell to them, then they could set the price to wherever they wanted. But since SL does not buy or sell L$, this will not work here. There is works because you have unlimited supply, and an unlimited demand.

LL controlled the supply. That is how they could control GOM.

LL also put GOM out of business, so again they controlled GOM.

Actually Dnate... it's your claim that I haven't proven it that is exasperating. I (and others) have already presented the scenario-- multiple times as one user pointed out-- and you have not been able to sink it. You challenged my scenario, I blew holes in your challenge. If you haven't recognized that by this point, I can't do anything about that.

You keep presenting the same concept over and over: there will be more sellers than buyers and the market will stagnate. I've admitted that is a possibility-- but only if the system is badly managed. A properly managed system would keep things flowing. But you ignore that fact and come back with the same statement again. So what more can I say? If you ignore already existing scenarios-- no sense in me presenting them again.

The system is NOT managed well, that IS the issue. If it was well managed, the market would stablize at 4.00/1kL$. That is what is wrong with your system, the market needs to be better managed to get your system to work, but if it was better managed, then it would stablize itself.

Yes Hair, and you bring up one additional potential problem in a controlled stable market: the game owners OVERLY controlling the market. Ie, if Linden Lab decided to severely limit the amount of L$ on the market, that could have a severe impact on the game.

However, there are counters to such a thing that would (if LL is at all sensible) prevent LL from doing this:

1. Users would abandon the game. This is already a problem on SL... one that LL would surely not want to exacerbate.

2. Buyers would stop buying. Unlike other games, LL content is not essential to playing the game. I played my first three weeks here without spending a dime. So likely buyers wouldn't stand for it.

3. Sellers would tell LL to go jump in a lake. Land owners would abandon land, merchants would stop renting space and go do something else more fun.

That's the difference in SL; especially with the new "free membership"... people don't HAVE to spend anything to use SL. That singular, unique fact is the market's strongest anti-LL-taking-over leverage tool.

I agree with you there to an extent. The point I've presented however (many times) is that a stabilized economy is more manageable that an open market system. If one totally removes the greed factor (ie, the market players) then there really is no reason the market shouldn't be stabilized.

By your own argument... if the system is NOT managed well... and the system has been operated under the concepts that you continue to support, then it is NOT GOING TO BE managed well, and the same problems will continue. I noticed on Secondlife.com today that LL is charging an arm and a leg in PayPal service fees-- more than anyone else on the market. sigh. Just more problems a-brewing.

Dante, you're standing on the bridge of a sinking ship and declaring it's the best ship in the line. Can't anyone see that it just may be time to redesign an outdated-and-already-failed model? I mean chee... GOM folds up and people still insist their business model was the best one? DOH....

I must have missed the part where it was determined that the GOM model didn't work.

I did. You never responded.

That is like blaming the ship for the torpedo that hits it.

There is no difference between market and fixed price based on what you are saying. LL did not manage the economy well, and GOM just REFLECTED this. The only way your model can work is if LL sells at a fixed price, and LL also has to buy at a fixed price. Thus you have unlimited supply matched with unlimited demand, allowing the market to balance itself.

GOM is dead. The L$ deflated to as low as $3.23/1000 and GOM closed shop. I lable that not working.

Interestingly, in my country the price of cigarettes was heavily increased last year. A direct result is that official sales have fallen by 25%, but smoking has progressed by 0.1% nonetheless...

... contraband cigarettes sell like hotcakes

Indeed it is a big difference, but it shows an alternative concept as it were to the SL approach. As with everything there are advantages and disadvantages and Project Entropia takes the other extreme of a fixed pegged currency.

The strong common theme that both games have is the requirement of strong monetary policy set either through the Gold Standard approach in Project Entropia or the sinks in Second Life. FX Risk is something that has to be minimise to ensure business stability. I already have enough FX Risk because I have to convert US$ to GBP and that takes another hit to any income I make.

If we presume the markets is a representation of the success of the monetary policy, then at the moment LL has some way to go to ensuring that stability.

The question therefore is how to engage LL and the various groups in a way to ensure good monetary policy? Or do we start to develop market tools that enable FX Risk to be minimise like hedging?

As for not being able to find it, I know you did, and it is a little weird they didn't tell everyone straight off but had relied on others to do so....

as to point #1, its direct peer to peer. I can list my money on there now, that is who is on the selling list. The only thing they lack is an ASK side, bid works fine.

bought a few over the last few days, listed a few, only had one time where I couldn't get it to work (in the beta day). Not sure what the problem is though I do find their system a little weird and lengthy.

I label that LL not controlling the economy. GOM closed because of the actions that LL took to cut them out of the loop. That and all the SL bugs that were causing communication issues. Why would GOM care if the value dropped to .01/1kl$? They would have still gotten $.02 per trade, at lease.

The L$ "deflating" and GOM closing shop are two completely unrelated facts. They have nothing whatever to do with each other.

Some people think that making it easier for noobs to buy $L will create demand for them, which will help the exchange rate. I think that making it easier to sell $L will have an offsetting opposite effect, perhaps an even greater effect. So I predict the exchange rate will resume its downward trend, and may even accelerate. Despite the ratings change, despite more noobs buying $L. Down down down, because of the fundamentals. Not because of the business model of the exchange.

An exchange merely reflects the underlying value. A more efficient exchange (which LindeX will be, because of the broader participation) will merely reflect the underlying value more efficiently. So the $L will fall more efficiently now. That's my prediction.

Buster

I was speaking of course, of US economy. Don't know what they do in other lands. I'm sure there's always an exception to the rule.

Point made, was that despite the existence of black market cigarrettes... cigarette sales are heavily regulated in this country. So although there is a black market (even in this country) it doesn't influence main market sales hardly at all.

If the L$ system were properly managed and regulated, the same would likely happen. I'm by no means recommending controlling the economy. I'm recommending controlling the currency on which that economy is based, so that the free-market economy can regulate itself without unnecessary hassles and worries.

You may be right. I see no flaws in that prediction, based on the current LindeX model. I hope you're wrong, but fear you're correct.

That's why I've been recommending stabilizing the L$ and using LL sinks to remove excess L$ from the market. Apparenly, as some have pointed out, LL has placed too many L$ into the marketplace and not "sunk" enough. This allowed some players to stockpile L$ and then flood/manipulate the market, with significant damage to every landholder and merchant out here. LL needs to get a grip on this and fast. Otherwise, the scenario you've presented is a real possibility.

I would like to know from the horse's mouth the reason GOM did close shop. Just as a matter of curiosity. It might help others avoid the same result.

You may be right; could be GOM just decided to not compete with LL. But there were alternatives to closing shop. For example, GOM could have foreseen the possiblity that LL would mess up their sales system and have dissatisfied customers, and catch folks on the rebound. Or GOM could have devised a better business model than LL and still given LL a run for the money. All moot of course (except that GOM could STILL do so). But I know they can't do so based on their current model, so maybe they just didn't want to mess with it any more. All conjecture at this point.

Just curious WW, but are you a socialist? Your ideas are all from a socialist point of view, so just curious...

Welcome to my side This is what I have been saying all along, the amount of money in the system is what the free market is really based on. The economy will regulate itself, if the money supply in correctly controlled.

We will see what GOM desides to do, they have not closed up business all together, but they are no longer trading in the L$. I am sure they have more ideas that they are going to be working on, and they even hinted that they may come back to SL.

Ah, wondered when this would come up.

If you'll ask any economist, (at least this is what I was taught in college)... the US economy itself is based on a socialist concept... despite common belief to the contrary.

Forms of government and economy are two different things. As I subscribe to no politico-economic system, it cannot be said I am a socialist. I don't subscribe to any form of government currently being exercised, mainly because they are all messed up.

What I am for is man treating man decently. That means not finding ways to take your fellow-man's wealth for unjust personal gain. I am for an economy that is balanced. Right now in the US, we have people that have so much money they coudn't burn it fast enough, while other people are literally starving to death. While I have nothing against personal wealth, this should not be at the expense of ones neighbor. The most abused economic class in this country is the lower-middle income; they have the majority financial burden, to the point they are just above poverty levels and not doing as well materially as those who are at poverty level and getting all kinds of government support as a result-- whereas the truly wealthy have all kinds of tax breaks to reduce their wealth sinks. The stock market is based on a greed system rather than a fair gains system. The social security system is going down the tubes because the rich and powerful have abused it, the common man being unable to do anything about that. Anyone tell me how all this is a good thing.

I often meet people who say,"Oh, things aren't so bad. Society is improving." And I just shake my head in amazement that people can be that blind so that they ignore the suffering of their fellow man and the dangerous situation to which modern society is bringing this planet.

There, that's me answer.

No amount of control is going to prevent the market-savvy from stockpiling L$ and controlling the market. Anshe Chung could any time she wanted to, exert her control and play the market like a fiddle (although she strikes me as being too smart and to an extent, ethical to do so). A stable market can only be manipulated by the money supplier-- in which case, we know who to hang from a rope. That is the primary difference in our economic models.