Stabilization Of L$

Right, that is why I never understood your stance on pegging the currancy to a set amount that no one could get around. This just would not happen. For the most part, the big players have reasons not to dump on the markets, all they will cause is a devaluation of their own worth. I guess you lost me again, I am unsure of what you see as the solution. LL is the only one that can control the money supply, so they are the only ones that can influance how much supply there is.

Dnate, this is where you have to see the big picture.

A "big player" earns a bunch of L$ through land rentals/sales etc. Doesn't cost that player hardly anything to play with them. They hold MILLIONS of L$. So they place a few hundred thousand in small lots on GOM at cutthroat prices. This causes the market to fall as people get scared and start selling L$ now before the market falls lower. As some hold out, big player throws a few more in there at even lower prices. As other players start selling out at absurdly low prices, big player starts buying them up in vast quantities. No one sees this happen of course, because of the way GOM is structured; it all goes on annonymously.

This has nothing to do with the value of the L$. It has nothing to do with what buyers are willing to pay for the L$. It has to do with someone flooding the market because there are no regulations in place to curtail such activity. So once the market has bottomed out and once again slowly climbs back up to prior prices, big player starts selling out L$ at a significant profit.

This is called profiteering (I'm sure it goes by other names as well). It is making money based on the loss of others... loss caused by the person himself. If I'm right, in RL this can incurr some serious jail time... but it's not illegal on GOM or SL.

THAT is why I promote the concept of a stabilized L$ value. There is no reason NOT to stabilize the L$. All the reasons folks have presented here have been shown to be flawed. They're based on ethereal concepts of supposed "market freedom", supply/demand, buyer/seller control... when in actuality, none of these things are involved. Freedom involves someone working to make a living and being paid a price that is worth the effort spent (not side-swiped by someone flooding a flaky currency market). Market freedom has to do with a seller setting a price and the buyer deciding whether or not he's willing to pay that price-- not for the CURRENCY-- but for the PRODUCT. Buyer/seller control has to do with the freedom of buyers to pay a price or to demand a lower price if they feel warranted, and the merchant's right to set whatever price he wants-- to meet or refuse that demand as he wishes.

But when someone floods a market because the model is unstable, that removes everyone's freedom. Sellers no longer have the right to sell at prices they think reasonable-- they are emotionally FORCED to sell in what they perceive as a declining market. True freedom can only exist where there is a stable, reliable foundation. Without that foundation, freedom is impacted by external influence.

No one is suggesting that merchant prices be fixed. No one is suggesting that buyers not have any influence on the market. But that market should be in commodities, not the currency itself. An unstable currency does no one any good but the profiteers. All it does is line the pockets of those who know how to play the money market... and lessens the wealth of those who are caught in the headlights.

Ah, but if the L$ price is pegged and said lindenaire dumps a couple of million L$ into the market (remember, there's no motivation *not* to, since it won't affect exchange rates), then in-world prices would like need to be increased to absorb the extra currency suddenly put back into circulation.

Ok, but lets turn this around. Why are there not people that want to buy tons of L$? the market works both ways. If the market is on the rise then buyers will be FORCED to buy at a higher rate to get the better deal. A true market will work both ways, if the forces behind then are stable. If someone trys to depress a steady market, then there will be a lot more buyers cashing in on a good deal, so when the player pulls the money back off the market, the prices will shot back to where it was. All that has happened is the market depressor has sold lots of L$ below market value, and can't get the money back quick enough to make any more off of it.

There is also a key differance in definitions here. You keep staying you want a stable currancy, and I have yet to hear anyone disagree with you. What I am saying is that your methode of stablizing the L$ will not work. Also, is there a differance between the currancy value dropping verse prices dropping? If 4USD will get you 1kl$ to buy an object, then what is different if the price of the object drops to 500L$, or the price of the currancy drops to 2USD?

Uh... why?

Supply and demand.

Ricky, I think you mean the prices in world would have to DROP to absorb the extra linden, not increase. We are talking about a fixed exchange rate.

Edit: If the prices drop, then you get more bang for your buck, therefore making the L$ demand higher, thus allowing all the extra L$ to be sold off.

Sorry, I fail to see this even in the realm of possibility. The scenario makes no sense to me.



Dnate, no insult intended, but all I see here is a lot of IFs with no rational causation behind them. We can play the "what if" game all day long to no benefit. The question always is... what is the market LIKELY to do? With a stable L$ value, there would be no immediately discernable reason for merchants across the board to have to drop prices... so why even present that as a possibility-- much less base an argument on it? The "what if" game is endless and fruitless.

You're telling me that the way to achieve a stable currency is to destabilize the currency market (ie, put the value of the L$ in the hands of the market players). We've just seen that theory in all reality blown all to pieces. What's it take to get folks to wake up and face reality?

It's like those who claim that war is the way to end war. Any sensible mind can see that is a flawed concept from the very start. The ones that keep proffering that concept are those who profit from war... and people keep blindly buying in to it. The only way to stop war is to put an end to those who wield it... and the only way to stabilize currency is to remove the power from those who would destabilize it. You cannot do either while continuing to give them the tools in which they thrive.

Nope. I meant what I said.

Assume a supply of people wanting to buy L$. Assume also that I have some significant fraction of the available currency supply in my possession, unavailable to the economy at large. If I dump that pile of currency on the waiting buyers, I have redistributed my wealth across a bunch of people who would then be inclined to spend it. This has effectively increased the available monetary supply. In order to compensate for all the extra currency in circulation, prices would have to increase to absorb the currency glut.

Ok, you assume that the buyers will want to buy the entire dump, where I was assuming that the supply would then outstripe demand, and you would have to increse demand to absorb the supply.

Again I ask, why? The easily forseeable outcome is that merchants would sell more of what they have, which would not require them to raise prices at all. The only ones who would do so would be those who are trying to greedily take advantage of the buyer surge... but they'd be quickly defeated by those who just plain enjoy a good thing when it happens and keep their prices at the current rate... mainly because it's a royal pain in the tail for the average SL merchant to raise prices. I raised a price on just one item that I had initially underpriced-- and it took me two days to update all my vending systems.

Fact is... merchants on SL don't like to change prices. Once an item is set, it tends to stay set. So I really don't forsee a couple or three million stray L$ influencing market stability one bit.

Ok, fine, lets take it some statement at a time.

If 4USD will get you 1kl$ to buy an object, then what is different if the price of the object drops to 500L$, or the price of the currancy drops to 2USD?

Is there a differance here?

Dnate.. AGAIN... you're playing the WHAT IF game. What would cause the object to drop to 500L and what would drop the currency to $2/1000? It's fruitless conjecture.
You're presenting the unreasonable and unlikely scenario that the L$ would drop to $2/1000 and that merchant prices across the board would also drop in half. Waste of time.

If my supply outstrips the demand for L$, we still get the same effect -- just several times over a longer timescale. I'll be able to keep feeding the hungry masses with L$ longer if they don't take out all my supply at once, which has the potential to cause multiple smaller rounds of inflation.

Please, let me take a moment to back up and point out a simple concept that covers about the last half dozen posts:

AGAIN... Linden Labs has SINKS in place to remove excess L$ from the market. IF this ability is exercised properly, it will easily stabilize the L$... but only if that L$ is stabilized in the first place. If the L$ fluxuates due to an unstable and greed-fed market... then LL is constantly trying to play catch up.

So please, before you all start posting more of the same old "what happens when there are too many L$"... read this post again. Been there. Done that. Been there again. Done that again. And again. And again.

At that point, it becomes an optimization problem.

Let's say there's a big dump of L$ at your fixed rate. If a vendor sees an increase of 20% in business at her current price, then then first question she will ask herself (assuming a rudimentary economic or marketing background) is, "how many sales will I lose if I increase my prices by X%? Will I end up with more money from fewer sales?". We're then trying to solve the expression (newPrice*(sales-lostSales) > oldPrice*(sales)) -- i.e. finding the new higher price such that the extra money from each sale is greater than that lost from the sales she's missing due to having a higher price.

Then we don't disagree, that is what is confusing me so much! Just by having everyone say, from here on out, the price will be 4$/1k$ will not work The sinks that LL has are not enough to stablize the currancy at 4$/1kl$. IF LL can get the sinks to be the right amount, and have the sources also at the right amount, then the currancy will be stable again. Right now there are too many L$, and the market CLEARLY shows this to be the case. If you want a stablized market, tell LL to reduce the number of L$ flowing into the economy, don't place all the blame on GOM. GOM just showed what the market was, it did not control it.

Thanks Ricky, I understand it all a lot better now.

Exactly! Clearly the ability has *not* been exercised properly!

Hallelujah! We all agree! I see white smoke!

Wayfinder, do you remember the land boom of 2004, or was that mainly before you got here? During that time the price of the L$ shot WAY up. It peaked somewhere around $5 and change per 1kl$. You know what caused this jump up? What caused it was the opposite trend of what we see now. There were not enough L$ on the market to satify demand. So saying that downward pressure is the only thing that can effect the market is just false. If demand is greater then supply, then the price will rise.

Which might be the case if we were talking a RL retail store. We're not talking that. We're talking what is basically a game environment, in which most merchants are content--once their stock is created-- to set the price, sit back and collect the sales. I believe there are relatively few merchants on SL that tackle their sales like they would if they had a RL storefront. Whole different system... and I'd believe that what you propose here just simply won't happen on a widespread basis.

Ok, let's put to rest this "GOM isn't responsible" fairy tale that keeps getting mentioned over and over again.

First, agreed, there are too many L$ on the market. That *might* be blamed on LL. Or it might be blamed on overreaction to an unstable market which has been out of LL control for too long.

But to state that GOM has no control over the market-- while technically true-- ignores two very important facts:

1. GOM created the buy/sell model which allowed the market to go out of control
2. In a related issue: GOM basically created a stock market without any regulating controls, which is directly responsible for allowing the market to be manipulated.

So yes, GOM *is* at least in significant part responsible for what happened to the market. Sorry, but just calling a horse a horse. That responsibility may be shared by Linden Labs, and is also probably partially shared by the land barons who just stockpiled L$ rather than returning them back to the system, thus forcing Linden Lab to issue further L$ just to keep the economy going.

See, there is always more going on behind the scenes than a quick, casual glance reveals. You have to think this all through and look in the cracks.

But I'll tell you this: none of this would have been possible if from the start Linden Lab had handled all L$ transactions, setting the sell/buy price at $4/1000... and enforcing that through game control. And everyone would have benefited (except of course, for the market manipulators and land barons. LOL).

And that, Dnate, is EXACTLY why you should not be supporting an open market, because it is highly prone to fluxuations just like that.

No matter how many L$ Linden Lab releases or sinks, that is not going to control the land barons and high-level merchants who stockpile L$ just so they can use them to manipulate the market. The ONLY thing that will stop them from doing that is to enforce stabilization of the exchange rate, thus removing their power and motive for stockpiling. In that case, they WILL sell L$ as soon as they get them, because it will profit them more to sell them NOW and draw interest in their RL bank account than to hold them. When they sell them, that WILL return the L$ into circulation, thus allowing Linden Lab to ascertain the TRUE flow of L$ in the system, not some falsified flow created by some money-fiend stockpiling millions.

The GOM so-called "free trade" system was flawed from its very inception. GOM sponsored it, Linden Lab failed to stop it, and the market went spastic. And why folks cannot clearly see this frankly puzzles me, because to me it's like a big glaring, flashing light that says, "THIS DIDN'T WORK!".

WW I think the very fundimental problem is not one of money (in so far as the approaches you have presented to ppl who are bucking against you).

The whole thing boils down to the SL slogan: Your World, Your Imagination.

In a nut shell, to me, it means I can be a greedy SOB if I want, or I can be a socialist or a philantropist, or make a market to sell/buy in game cash, or make 100 box prims on my land a day....

What you are proposing are restrictions to how things are done, and in a system where a lot of people make real life money at this point.


am I saying its right? no. Its just the way it is.

I seriously do not think that your system of pegging the linden to anything (RL money/commodities) is going to work because the system is already too far deep into it NOT being pegged.

If LL woke up tommorow and said that's it, the $L is $4 US per 1000, most wouldn't complain at first because it currently is lower than that (in all markets).

But then you will have some people pissed off first because they have to go remark items that are now more US expensive relative to the $L.

Still more would complain about the "locking" of something that was once free to trade, thereby going against said slogan.

And more would not even care.

The three groups have now shifted from actually playing in the game where they used to be able to do anything, to hunting on forums and wirtting nasty emails and messages complaining (not that this doesn't happen now, but again we are talking what is and at what scale it is).

The elephant is out of the box, plan ahead for SL2.

I think you may be right Alexander. Very astute examination, in fact. Bottom line seems to be that no matter how reasonable a stablized currency might be, a lot of people are against it because they LIKE playing the money game. Regardless of the effect on the economy, regardless of the people it hurts, people want that personal control-- as you said-- right or wrong. That's a shame, because there is so much in SL... in fact, in RL... that would work so much better if people would simply give up a little bit of the fairy-tale freedom of "independence" (just who decides what is right/wrong, anyhow?) and work more toward the common goal of the betterment of society as a whole. Let's see, how was that put at one time... "Love your neighbor as yourself"?

Unfortuantely, society in general does not accept such utopian concepts. They give such thoughts lip service-- then readily stab their fellow in the back to gain an extra dollar. Sad, when one thinks about it.

The truth of the matter is this: freedom without control is not freedom-- it is chaotic anarchy. It deprives the average person of the true freedom of harmony and peace-- and gives undue power to the power-hungry and the "users". True freedom is only recognized within reasonable boundaries of contstraint.

Now that's an interesting couple of posts. LOL