Stabilization Of L$

As I read the forum posts from the summer of 2004, and the October 1, 2004 Town Hall transcript, it doesn't appear that the rising price of the L$ came from anyone -- land baron, high level merchant, money fiend, or otherwise -- stockpiling L$ to manipulate the market.
I wasn't around then either, but if I read the data trail correctly, it apparently came from LL not creating enough land that summer to support demand; which drove up the price of land and consequently the price of the L$.

From where are you getting your facts that the rise was a result of hoarding?

Well-known fact, gathered from heavy amounts of L$ that flooded the GOM market within the last month or two, as well as from other data. Surprises me anyone would ask about this; pretty much a recognized fact among those who have been following what's been going on. IGE right now has so many excess L$ they've closed down their buying market.

Myself... I'd have to wonder how LL not creating enough land would drive up the price of the L$... since land cannot be paid for in L$... unless you're speaking of renting land... in which case that might be a valid concept. I'd still find it interesting to believe that the value of the L$ increased just because land was scarce. Maybe it's because it's 3:30am here and my brain has quit working LOL, but I don't see the correlation.

One thing that perhaps should be noted is that Linden Labs is getting a huge about of marketing currency by highlighting the fact that you can do business in SL and make real money. It seems most of the articles I've seen about SL is to do with this business aspects.

It means that there is going to be a newer generation of players who I suspect will be seeing SL as a business or investment, so will be bringing in more business orientated skills and marketing. In effect making SL more corporate in some measure.

As you probably can guess Project Entropia is the other game I play And I've seen that happen. You get several trailblazers who bring in new business concepts and constructs. They are then successful and inevitably people have to follow to compete.

I think this is what makes it interesting. We tend to us RL constructs to try and model what will happen in the world. This modelling is inaccurate to say the least and I think part of the reason is that each one of us have different ideas and experiences.

Now I can sense that when people talk about capitalism and economics they actually mean American Capitalism, which is just one form of capitalism. It is in no bad thing to use it as the yardstick, at the same time I don't think we can shoehorn the SL into this model, rather I suspect that it will develop its own flavour based on the prevalent trends and social pressures in the world.

HUH? ok sorry maybe your are tired or/and I am tired but HUH?

wouldnt you think of someone has too many Lindens they would try to get rid of it rather than close the buying market?....

it is 4am here so i am soooo sorry if i am getting this wrong, but in a nut shell did u just say that?? (goes to bed)

They have too many Linden in stock, so they are not buying from players, they are still selling to players.

You confuse me.

In post # 331, top of this page, Dnate asks if you know of the land boom in 2004, during which the price of the L$ rose to over $5 p/1000.

Your response to him in post #334 attributes the rise in price at that time to people hoarding L$. I quote this in post #337, and ask from where you're getting those facts, because forum posts from last year appear to attribute it to a different cause.

Your answer to me, above, is that you're surprised I would ask, since it's a well-known fact that heavy amounts of L$ flooded GOM within the last month or two.

I don't follow the relationship you're trying to establish between falling GOM prices in September 2005 and the rising ones from 14 months ago as an answer to the question.

Of course not, LL would have to have unlimited supply along with unlimited demand. That really goes without saying.


Lets not put this "GOM isn't responsible" "fairytale" to rest. Again, you are blaming the market because of what LL has done. Land is bought with L$. Until recently, the auctions were a mix of L$ auctions and USD auctions for new land sales. People would buy this land, use it, sell it, or what ever they wanted to do. To buy land in game from another player, you pay L$. This created a huge demand for the L$. This is also a time before most of what you would call “land barons” really had a foothold in the market place.

There is a shortage of land, and at the same time, you could not just buy a mainland sim at auction. There was unexpectedly high demand for land, causing the price of land to skyrocket. Some land was going for 20L$/sqm! This causes people to want to buy L$. Now the demand for the L$ was extremely high. Prices jumped form $4/1kL$ to 5.20ish$/1kL$. Then the snow sims came to be. Now there is a much more land then there is demand. Prices start to fall. Both the land and the L$ start declining in value. The value of land stabilized when LL started selling sims at auction for a fixed price of 1000USD/sim. Now the supply is there at a set price. As demand increases, it becomes worth while to buy a sim and resell it for a profit.

Now the L$ has not had any stabilizing factor involved with it. Basic economics states that if you decrease the supply of an item, the price of the item will increase because demand will be greater the supply. An exchange like GOM does not control this market. GOM is not even the only place to sell or buy from. If the price of GOM would drop too far, then other exchange sites would be there, offering a better buy price, to take the excess L$ off the market. Thus GOM would not drop much below the buying rate of the other exchanges.

The steady decline in the market shows that it is not people “manipulating” the market, but the true price of the market. If people were just “manipulating” the market, then you would be seeing a constant rise and fall of the market, hovering around the true value of the market.

I don't want to be unkind, Wayfinder, but I come back to this thread after a long absence to find that you are still exploring, in multiple posts, the inadequacies of your own understanding of things financial. Are you aware that you are being quoted, on the more financially savvy GOM forums, as the epitome of naivity in relation to the currency market, and a reason not to post here at all on such things ?

Why are you so implacably determined to become an authority on a topic of which you know so little ? You mainly lead others astray. We are all learning, but it is better not to push others backward.

All I can do is repeat my post here of long ago. As valid now as then.
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lmfao told ya it was 4am and i was tired doh!

Well I've been trading on GOM for the last year or so in L$, even since they shut down the other currencies. And the trend ever since the Land Bubble that cause the spike has been a steady decline of value.

Whilst there has been some question about the occasional blip, the market has proved particularly resistent. I've yet to understand how a falling L$ can be manipulated to somebody's advanatage. Unless they were feeling particularly vindictive and willing to waste US$ buying up expensive L$ and selling them cheap, especially as there's no ability to do shorting.

The market was able to soak up large sales by those cashing out. You would see a large sale go in, but the market rebounded back to the usual prices. Same goes on the buy side, large buy would occur the price would then rebound back to the original norm. This however, dosen't stop the underlying trend which was one of a steady decline and only LL's monetary policy is going to stop that.

It implies that LL's monetary policy was starting to take effect but much like steering a supertanker it takes a while for the ship to start turning.

LL may be getting ready to put major policy down regarding 3rd party exchanges if they can do it. As you see on the LL exchange they are only allowing you to sell something like 20 u.s. dollars worth of lindens per day trying to put in a factor to effect the equation of making it more difficult sell, the problem is; one can go to another exchange and sell alot more. If LL eliminates the other exchanges via some kind of monetary policy that no other company can exchange lindens, then; they can control the L$ better by only allowing a certain amount to be sold per day, however; they will have to increase that limit a bit more drastically if they put in exchange policies or SL will go into major recession and alot will go out of business because no one wants to work for pennies accept for the liberal yellers that believe things are currently overpriced as it is and can afford to have a hobby or either they get land rental for dirt cheap. That is probably one reason LL implemented a considerable down payment to buy an Island for like $850.00 u.s. dollars. The next step would be to control their own L$ through supply and demand along with realstate prices/tiers fees.

GOM is gone, don't doubt that others will follow..there's a reason LL wants them gone.
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I see no evedence that LL "wants them gone". They still LINK to them. If LL wanted them gone they wouldn't be linking to them. The last line of the currency page (https://secondlife.com/currency/index.php) is a link to other sites -- if LL had anything against other exchanges, why would they be providing links to them?

LL wanted to have a built-in exchange. That's all.

Buster

While it is a well-known fact that L$ volume increased over time, and even spiked from time to time, the idea that this was due to market manipulation is just a theory. (And one that I do not agree with.) The number of residents also increased over time, and especially the number of private islands and rentals, there was the change in the auctions, and the controversy and rumors about LindeX. Big players left the game (or shut down their businesses). There were a lot of factors that were changing at the same time. Who can say what effect all these things have on people's willingness to sit on $L instead of selling them for US$?

I have no doubt that some players try to manipulate the market. But that is not responsible for the large scale trend. It costs way too much to do that.

Buster

In anycase, GOM claims they were used. I don't know facts, I only know what was said by a GOM rep if in fact the typing and name was valid. Research the threads.

I don't think LL really wanted GOM gone, but they really just did not care one way or the other. THe wanted what GOM had, so they made it themselves. They could have just as easily made a fixed price market.

That got me thinking... why didn't LL just impose a fixed market? They could have told everyone if you want to sell with the SL interface, you will sell at 4.00USD/1KL$. The buyers would have to buy for the seller to get the money, but the price would be fixed also. This would have been a lot less of a pain for all involved.

Oh I've seen and commented. Nobody from GOM ever said "LL is intentionally shutting us down". What they said was that they completely disagree with the direction LL wants to go, and that there is no sense staying open if LL goes in that direction.

They couldn't come to terms with LL on any kind of partnership. In itself, that doesn't make either side right or wrong.

Buster

You see, there is this law called "supply and demand". The cure would be much worse than the disease.

For example, if LL fixed the price, then you wouldn't be able to sell. You'd have to wait until somebody wants to buy, and you'd have to wait in line. You might have to wait so long that it may as well be forever. Or, if there was a shortage of $L, then you wouldn't be able to buy. You'd have to wait in line to buy.

At all times, one side or the other would have to wait in line. Both situations are bad. If buyers have to wait, the impulse passes and SL merchants lose sales. If sellers have to wait, especially if they have to wait a long time, then that means they have to float the real money. In effect, merchants would be loaning their product to customers between the time of a sale and the time they can convert the $L to US$.

A market means that sellers can always sell, and buyers can always buy. That's more important than what the price is. And its self correcting. Its called "The Invisible Hand", and it works.

Buster

I just got this picture of Soviet-era avatars waiting in line for their weekly ration of L$ and prims, dreaming of a day when plywood cubes would be in plentiful supply for *everyone*.

That I understand, but if their SOLE goal is to allow newbies to buy before they can figure out a better way, then this would work. Most sane people would goto GOM to buy and sell, or maybe IGE, or AC. This would have made everyone happy. If they kept it simple, then everyone would have been happy in the end.

I understand supply and demand, have you not read what I have been posting? I just think that maybe LL is not just wanting to make it easier for newbies, but wants to have more control over the market with stupid limits.

LOL. Well, since it was 3am here, one of us is gooby.

Actually though, what I said is they they've shut down their buying market... ie.. at that particular time, they had so many L$ on hand, they weren't buying any more. 'Course their SELLING market is still open.

No sorry, I'm afraid my post was misunderstood. I wasn't around in the "land boom in 2004" so I have no idea what happened there or the causation factors. Since I'm getting tired of having to repeat prior statements in this thread, please don't be offended if I don't go back and re-read/rehash. I think when it comes to this argument and 17+ pages of comments, pretty much all that could be argued in the issue has been argued and re-argued. So unless someone brings up somthing totally new for consideration, at this time I'm just floating.

I really don't have a response to this. I don't know what LL did during the first 3 quarters of 2004, but by the time I joined in November, anyone who wanted sizeable land could just hand LL several hundred dollars and open their own sim. No problem. And if someone couldn't afford the entire sim on their own, they either formed land groups or rented out parcels to pay for sim fees. If there was a time this was not in place, I am totally unacqainted with such and to be honest-- based on the claims I've seen in this thread of times I *am* acquainted with-- I can't really credit 3rd party information as accurate observation of the actual situation (no offense intended).



This is the old claim of "gun makers aren't responsible for what people do with guns". After all, they didn't force people to pull the triggers, did they? Or more pointedly, the modern-day argument that cigarette companies shouldn't be liable for the death of smokers. After all, they didn't force people to smoke, did they?

When a company makes a hunting rifle or a handgun, they know those may be used in hunting or even in self-defense. But when they make an AK-47 or a semi-automatic attack pistol, I think it's hard to argue that they're blameless when such are used in criminal activity. They may not have pulled the trigger, but they sure provided the tool for someone else to do so.

The cigarette companies may not have forced people to smoke-- but they sure provided the means and situation by which people could get addicted. They are responsible for so many deaths they can never be excused for their actions.

GOM had no such bad intentions. They were just playing a money game and thought they were offering a service. But in reality, they set up a stock-market model without regulations. History proved what happens in such a situation: the stock market crash of 1929 should have been a very memorable lesson. But rather than learn from that, GOM provided an unregulated tool by which L$-- although a fictitious "monopoly" currency-- gained RL value, and was vastly open to market manipulation. By continuing to promote this tool without inserting the necessary systems to prevent unjust market manipulation, they provided the "gun" by which knowledgeable players could manipulate the market for personal profit.

So no, GOM did not directly influence severe market fluxuations. They just provided others with the tools to do so. GOM didn't personally pull the trigger. They just made the attack rifle and gave it to every trigger happy person on the block. To be totally fair, they didn't mean to. They apparently had nothing but good intentions. But the results are established fact.

And to add the the mess, rather than waiting for LL to establish its trading system and at least letting the market limp along until some form of replacement could be devised... GOM pulls out early, leaving folks like IGE to sell unimpeded at whatever price they want to sell, low-bid on L$ purchases and basically hold the market at their mercy. Sellers can't sell for reasonable amounts, I've seen the L$ as high as $4.45/1000 (depending on what day you visit) and GOMs clients are left in the dust.

This is another one of those "not good" things.

[correction edit: apparently LindeX is up and running--if on a somewhat limited basis. We'll see what comes of that. Initially discussed, it was supposed to be an "in-game" exchange. Now it appears it's just another website selling L$. At first glance it seems just more GOM under another name. Maybe, maybe not. Have to check it out and see; give it a fair shake.]

It looks as thou this whole friggin thread (all 24 plus pages that I just read) was a waste of everyones' time WW.

As of 4:30 Central time, the exchange on LindeX is back up to 273L$ per 1$ US (from 296L$). This is an increase of 23L$ since the LindeX started three days ago (increase in the GOM sense, as this translates to $3.66 US per 1000L$, and it was around $3.37 US per 1000L$ at the start). It looks as thought it could continue to climb. Also FYI, since yesterday it looks like the LindeX is trading at less than 1/3 the average daily volume of GOM, so this exchange has a way to go yet to get the word out to the broader community.

I have been a GOM using merchant (to sell L$ for US$ only) for 16+ months (I will miss you guys at GOM, best of luck in your next endeavors), and I make a respectable 3 figure US$ income per month from SL. I do adjust my prices from time to time, for sales and the rare swing in L$ value, and I monitor what is happening in the market to be able to adjust as things change.

I (and I believe most of those reading this thread) know that GOM had nothing to do with the recent 'slide' in L$ value. While LL is the only entity that can 'fix' (if it needs it) the economy of SL, they have done a pretty damn good job overall. This is a new and fledgling economy that is growing in fits and spurts. The FACT that LL has been able to keep the L$ close to your 'golden' $4 per 1000L$ over the past couple years is a testament to their astute ability to manage the system properly.

Yes, we had a rise to over 5$per 1000 last year, and yes we have just had a dip to below $3.50 per 1000. But in all the months (over 22?) that we have been able to convert L$ into US$ the vast MAJORITY of the time the rate of exchange has been at or very near (+/- 10 cents) the 4$ level. I do not want a fixed rate L$. If the L$ falls, it is less expensive for people to buy L$ and therefore my goods, so I sell more items. If the L$ rises, I get a better exchange rate for the L$ I have and therefore I earn more per sale. FYI, I keep a low balance in my AV, so I do not fear rate fluxuations. It is the smart way to make $ in SL.

So, what does this tell us about WW and his/her reason for starting this thread...

That WW (like most failing business markets in the US) wants the government to prop them up so that they dont lose the real US$ value that they spent/invested in the LAND that they have bought. Being a land baron/landlord and providing rental properties is a low margin and volitle business in any market. To keep making good money in that kind of business requires hard work and true innovation. While I have no doubt that WW excells at the latter of the two, the hard work is still necessary. Business is all about taking and managing risks, and the hard work that your not doing, is managing your business (yes that means raising and lowering prices as needed, when needed).

The use of an open exchange like GOM or LindeX will always allow the value of the L$ to find the 'right level' faster than any measures that LL could impose. It is all about what the users of SL/L$ perceive the content they will spend L$ on to be worth.

I have products that sell for 125L$ and products that sell for 3000L$. Guess which I sell more of. You probably would think the 125L$ item, nope, I sell many more of my 3000L$ items, than my least expensive. This is because the value the customer places on my expensive items is much higher than the others, they are getting more per L$ in the high priced items than the less expensive items.

As long as we are all on the same playing field, working within the same set of rules (and yes our few elite Lindenaires are here with us at the same level), we each have the same potential as each other. It is what you make of your time and effort and finding.making goods/services that people want that will make the difference in being successful or failing as a business in SL. The only other scenario (which has been mentioned here before), are those who use/work/play at SL for pure entertainment value, where making money is not an object of their game, and thats fine too.

We live in a free market economy, both in-world and in real life, so get over it. Maybe your in the wrong business in SL.

As a hard working and mildly successful (by some SL standards) business merchant, I have no simpathy for you WW.

Lmao yeah I know, at 4 am I can be pretty ditzy and there is alot of post here making me cross eyed.
I ran into that prob with IGE before.

I have to say though without sifting through all these post, the lower the sell value goes, the higher in game prices will get. Because many including myself are trying to cover the overhead cost. I prob won't raise my current prices or old stuff, but anything new will probably end up being slightly higher. The way the market is these days it is kinda forcing designers and land sellers to do that. Have to have Balance somewhere or businesses will start shutting down.

Don't you think that's just a wee bit arrogant and insulting? That's Ok, we've all been there, myself included (alas. We all work to be better people eventually...)

First of all, I'm by no means a "failing business market that's looking for the government to prop me up". If you had any idea as to what I do on SL, you'd know better than to make such a comment. What I am right now is a businessman that's read a post from another businessman who seems to think that his opinions are etched in marble and anyone else voicing their opinions is a waste of time. I may have my opinions on what the market should do... but that doesn't mean you're absolutely wrong-- nor absolutely right. Frankly, I'd have given your post a little more credit and validity if it had been a little less insistant and pithy.

As for the rest of your message, I'll give it the attention it deserves.