Stabilization Of L$

Buy! Buy! Buy!

It has to be that smaller IGE account. The way they are selling, in huge blocks of a million L$ or more, seems kind of dumb as it will seriously drag down the value of the L$. They must have decided that all that matters is dumping their holdings of L$ for whatever they can get for it.

Perhaps IGE heard something about when LL will be unleashing their own trading system.

Dnate, no offense, but I don't think you've been following the conversation. ; )

Yeah Gabrielle that was the point I was getting at.
Someone has X amount of L$. They didn't have to pay for them... they sold things on SL to make them. So they put them on the market at a really lowball price, sell them super cheap. The market gets scared and everyone starts selling lowball.. at even lower prices. Smart Mr/Ms X buys all the L$ s/he can at those absurdly low prices and waits for the hopeful rise in the market (which almost always happens). Then they sell that huge bunch of L$ they just bought to a renewed market at a major profit.

Yep. That's how it would work.

I'd have to agree Smiley. IGE may be aware that LL is getting ready to take over the market, and has decided to get out while they can.

That would be a stupid move though. Far better would be to wait for LL to take over and then sell their L$ on SL at increased rates. Unless they've done projections and believe that when LL takes over, the L$ will drop like a rock. I don't think that will happen... but it's hard to tell.

There Dnate, now we've got something. You agree that stabilized currency is a great thing to have. Honestly, I don't see why others disagree with that concept. It's so simple it boggles the mind. The more stable the currency, the more friendly the market. It astounds me that so many people can't see the obvious. I have to wonder WHY they're against the idea of a reliable currency measure.

You're right, there's only one real way to have a stabilized currency, and that's where GOM has failed so badly. All it would have taken is for either LL or for GOM to state, "OK, we're switching from this flaky stock-market game and setting the value of the L$ at $4/1000".

Bam... stabilized currency. But no one bothered to do that. They saw the L$ go as low as $2/1000 and as high as $5/1000 and it seems to have never occurred to anyone, "This is a bad method". Then when someone mentions that stabilizing the currency might be a better way, folks cling to the existing/already failing system like it's some kind of faith totem.

One has to wonder.


[edit: Oh hold it. It just hit me. Maybe some of the folks objecting are doing so because they know exactly how the market works and play it like the scenario just recently described. They buy low, sell high, make a profit... and they couldn't do that if everyone glommed on to the idea that a stabilized market would cut out that kinda stuff. Duh! */me slaps head*. Fact is though, that in an unstable stock-market type money market that does not include dividends as a profit item, for everyone that makes a profit... someone else loses.]

It is hard to tell. I'm guessing rock, but I haven't found enough information to have any certainty about what will happen.

It is interesting that IGE has decided to dump on GOM and get out fast regardless of losses, rather than to simply not buying and continuing on their own site at a profit until their stocks are reduced. I would think that they would do that latter method, then dump whatever is left when they are ready to stop buying and selling altogether.

Yeah, it doesn't make a lot of sense. It sounds more like a move that Anshe would make if she had something up her sleeve that's so ingenious we just don't see it yet.

As far as the LL takeover... best I've been able to figure out it's a 50/50 chance. Either folks will get scared that LL is going to muff the deal and sell all they can at whatever prices (ie, PLUNGE!) or... everyone will like the idea so much and buying L$ will now be so easy, that folks will buy buy buy, driving the price of the L$ up up up. Kind of a russian roulette with 3 loaded chambers. ; )

The problem with saying that it is GOM that failed by not setting a price and acting just like another IGE is that we live with a free market. In a competitive market, the exchanges are going to compete for customers over price anyway. GOM has simply made that competition much more widespread, so that it isn't IGE, AC and GOM competing, it's more like IGE, AC and each member of GOM competing. If GOM acted in collusion with IGE and AC on pricing, you'd just have another site pop up to take advantage of the lack of consumer choice.

A stable market is a key thing to have, but you are suggesting that the market should be determined by a cabal of monopolists, rather than by the consumer. The problem with the cabal of monopolists is that they have no way of maintaining their monopoly. GOM is an inevitable institution in a free market economy.

Ultimately the price will be determined by the underlying market fundamentals.

Seemingly valid points. However, how many FEDS are there in the US?

If I remember correctly (and I admit, this is a little out of my daily expertise here), the value of the dollar is not determined by the general market buying and selling US$... but rather by the gross national product, among other things. It's determined by how much people are willing to pay for a certain item, not how much they're willing to pay for the money to buy an item (which is exactly what happens on GOM every day).

Free enterprise has nothing to do with buying and selling money (although agreed, that does happen in RL to an extent among an elite group of investors). It has to do with the right to make, market and charge whatever you want for whatever you make. If people buy it, you're successful. If they don't, you're not. When an economy gets to the point that the items I sold bring in $X (which would have paid my rent at the beginning of the month) but that same $X doesn't meet the rent at the end of the month, then that economics system is failing. That's what we call a recession/depression... and that's one of those "not good" things.

[edit: actually, a correction. That's not an exact definition of a recession/depression... which are better earmarked by the total lack of fund availability. It's 12:23am and my mind is drawing a blank. What IS it called when money devaluates to the point that it's worthless? Is that currency-based inflation?]

GO TO BED, WAY!

GOM is a currency exchange.

The value of a currency on an exchange has very little to do with GDP. GDP also has little to do with prices. It's an indicator of the size of an economy, which also is usually related to the population of a country. The price of a loaf of bread or a currency isn't going to be sky high or in the gutter simply due to the size of a country - or it's GDP. You can have a huge GDP and all that it might show is that you have a large unhealthy economy.

You just might want to read all the posts before you jump all over me, were are talking about GOM not being a open market, but more of a fixed trading system, like IGE and AC. I have done enough business with GOM to know how they work.

This is where we differ. The worth of the L$ is determined by many of what you listed in SL. A product is worth XL$ to one person then that person will buy it for XL$. The L$ is the common currancy in SL. If I were to goto Europe, it is much easier for me to take my USD and get Euros for them. I will use the current exchange rate, which changes all the time because of them being traded on the open market, to get my Euro. I won't be doing this directly on the trading floor, but that is how the rates are set. SL is really no different. IGE and AC act as the corner bank that will exchange at a fixed rate. GOM is the currenty exchange site that will help set the price.

I think the biggest problem with GOM right now is how small it is. As it grows, you will have large dumps having a lesser effect on the market because more people will be there to absorb it. The market is always going to set the value of the L$, there is no way around it unless LL starts buying ans selling at a fixed rate.... even then there may be other market factors that cause the price to change.

No, that is my point, it is NOT up to GOM or any other 3rd party to stablize the economy, it is LL's job to do that. LL needs to work within the economy to stablize it. That is the only way a true stable economy will be achived. GOM has not failed, it allows anyone to sell at what ever price they want. It is LL's job to make is so people can sell at 4USD/1KL$ and get the asking price.

If you notice, before IGE desided to dump 12ML$ on the market, we were begining to see a rise again. An open market works both ways, sellers undercut each other, and buyers overbid each other, when you have a balance between the two, you have a stable market.

Actually, that's what you would call FX risk. We at GOM have that too. It's just that ours is between US$ (the currency we use with our customers, and what we take as commissions) and CAD (the currency we use to pay our bills). The Canadian dollar has strengthened significantly against the USD in the past several months, leaving us with fewer CAD at the end of the month than we otherwise would have had. See the similarity? As the exchange rate changes, the amount of base currency that used to be sufficient to cover your costs in the secondary currency no longer is.

If the dropping exchange rate is a sign that the economic system is failing, it's not our doing! Blame those with the ability to moderate money supply for neglecting it. Hint: their initials are LL.

Most currency's like the US$ are free floating, that is the market determines the exchange rate and this isn't based on anything very fundamental. In the old days currencies were tied to the Gold Standard. But these days a lot of rate will be based on sentiment and fundamentals. For example recently a few central banks in Asia suggested using the Euro as their reserve currency and this caused some drops in the US$ value.

Putting the blame on GOM is probably a harsh thing to do as all it has done is created the market mechanism to trade a free floating currency. However, it is up to LL, as the defacto government, to create the appropriate monetary policy if it wants to have some measure of control on the exchange value. This is can do by controlling liquidity of the money supply.

Another possibility is a pegged currency like the Chinese Yuan which is pegged to a certain amount of US$. This gives stability but can also cause problems in the long term, such as what happened in Argentina when its economy collapse because the dollar peg didn't allow it to react.

GOM must accept a large percentage of responsibility for the perceived lowered value of the Linden currency.

Overall there is not enough information in the system for the price of currency to devalue based on inflationary pressures alone. Prices in world rarely change because it is inconvenient to do so. The account history interface is so pitiful few people truly know what they receive and what they spend. The details on the amount of currency in the system is sketchy and anecdotal at best.

While it is true that Linden Lab has been neglectful in regulating the money supply, GOM has made lowering the price attractive by increasing the size of their blocks and by removing the ability to set prices based on purchase size.

When the GOM block size was changed from 250 to 1000 the value dropped significantly. The sudden seeming price increase for purchasing a small amount of Lindens caused a sticker shock effect for the average user.

When GOM decided to remove the ability to set your price for a set amount of currency there was another significant drop that continues to this day. Blocks can now only be purchased at the lowest price posted and as single blocks. Users can easily accidentally trigger automatic sales that wipe out the wanted side of the board, causing the for sale side to chase after it. The removal of the ability to wholesale and retail currency on GOM has begun a race for the bottom.

The single greatest pressure on the Linden is the perceived value listed at GOM, and that price will continue to slide downward at an ever increasing rate due to interface changes decided arbitrarily by GOM. No one group or player has as much ability to change the market at a whim as GOM.

Linden Lab has decided to step in and reduce this power, and as long as they implement a truly open market where people can set their price and amount I welcome the change.

ok... there is a lot of L$ in the economy now

Linden Lab does NOT assign the value of the L$

they are not responsible for controling the value of the L$

They probably never will be especially now that they are opening a trading market....


here's a clue.....

WE ASSIGN VALUE TO THE L$

STOP COMPLAINING AND RAISE YOUR PRICES IF YOU ARE SO PROFIT OBSESSED

Just do what people do in RL when faced with similar inflation / deflation....

I don't give a crap about the L$... I do give a crap about the time I invest... it's simple really, just stop devaluing your own time investment and ask for more L$ for products and services....

I've been using GOM for well over a year now and run my own analysis on the fundamentals. Too be honest the partial fills did not cause the decline, the L$ was already in decline well before that. The consolidation of the block size from 250L$ to 1000L$ also didn't affect the price in the long term, there was some short term fluctuations but for a while the L$ value was actually going up. A two year chart is available at http://forums.gamingopenmarket.com/viewtopic.php?t=344

All Partial Fill did was removed what can be describe as a fraudulent practice that does not exist in RL markets. That is forcing people to buy smaller block sizes at much higher prices which is a very unfair practise and is something that has no place in an open market. It makes the market more liquid by removing the artificial barriers to trade.

Whilst its very easy for somebody to dump on the market, I have found that in many situations the market does rebound because much of the action occurs on the buy side.

I don't think the structure of the marketplace affects prices nearly as much as you think it does. Remember, it's just as easy for a big *purchase* to drive up the exchange rate as it is for a big sale to push it down.

So, why doesn't this happen? Simple. People don't want L$ badly enough. Clearly there is too much ucrrency in circulation to sustain a higher exchange rate. If (a) currency was taken out of circulation (LL's responsibility) or (b) there was more desire in-world for currency (land resellers' and content developers' responsibility) then the exchange rate would rise. Pure and simple.

And, given that (a) partial fills was a request from Philip, and (b) we've communicated with the developer building LL's copy, I would be surprised if their sales didn't work in substantially the same way as ours, with purchases coming from the orders with the best prices.

Well, we're probably getting to the real value of L$ a lot more rapidly then we would have if we didn't have partial fills.

And maybe that time could have stretched out into the new year when all those computers with the cool vcards got bought and people logged onto to SL and pumped the L$ up with real demand.

Who knows. Life is very complex.

Sand in the gears of capitalism, while it doesn't change the facts, does delay them sometiems long enough for the calvary to arrive.

I think LL knows what they are doing, they probably had this lined up a while ago if they are really sneaky. I think you can judge better than most if they are really sneaky or not.

-- put more L$ in and force people who rely on SL as a income (even if suplemental) to raise their in world prices

-- Get in on the trade biz when trading volume skyrockets due to the increase of in world product prices

LL have consistently removed sources of L$ over the past two years or so, not added more.

If LL would actually manipulate the L$ for their own financial gain, I would be very peeved about that indeed. I would never use the L$ again, and I would have a bone to pick with LL till the company folds.