Stabilization Of L$

I think confidence in the L$ is more to blame for its value than any conspiracy theory, or method by which its traded. And rightly so confidence is to be low. After the GOM/LL revelations, it requires LL to steady the ship with some more info on their intentions with the future of L$ trading.

No, actually we weren't talking about GOM converting to IGE method at all. We were talking about GOM retaining their existing structure, ie, acting as a CONVERSION facility between buyers and sellers, but changing their strategy method from a stock-market mockup to a fixed-value system. In such a case, GOM "buying" L$ and winding up with a huge overstock doesn't enter the picture.

Of course, that's easy to misunderstand with the number of messages in this thread.

But basically, what I and others have recommended is that GOM abandon a system that is obviously failing (a stock market model) and set the price of the L$ at $4/1000 for buying, $3.90/1000 for selling, with GOM taking a 1% service fee from sellers. It's a workable model-- one which I'm surprised there is so much resistance to.

I think the resistance comes from a hard-wired concept that anything that takes away "freedom" (ah, the utopian call of the masses) is bad. In reality, a stabilized L$ value removes no freedoms at all. It in fact adds freedom of the merchant/buyer to form a mutual working relationship without having an unstable L$ undermine that relationship.

K Dnate, might want to go back and read a bunch of prior posts.

First, IGE does not deal at a "fixed rate". Their rate goes up and down directly in line with GOM. They're just a Japan-based merchanting company that works on a different line than GOM (ie, they buy and sell L$ directly) but are heavily influenced by GOM structure.

As far as GOM being "small"... HUH? Right now, GOM rules the L$ roost. IGE gives them some competition, but unlike GOM, IGE has a really bad rep.

As for GOM "growing"... haven't you heard the news? GOM is about to kick the bucket unless they find a way really fast to change the way they do business. Because LL has declared it's going to be offering L$ sales IN GAME, which is the one thing that can boot out GOM overnight. So unless GOM has some trick up its sleeve I'm not aware of, they're about to be ancient history. And from GOM associate responses I've seen in this thread, they sound more like the Captain who decides to go down with the ship rather than the Engineer who figures out how to fix the leak.

As far as "The market is always going to set the value of the L$ "... please give me one reason WHY this is so... other than the fact that LL and GOM has set up that model. The value of the L$ should be determined by how many of them the customer is willing to pay for a certain piece of merchandise... which concept is undermined every single time the L$ goes up or down.

All it would take is one intelligent person with a little vision to cry, "Hey, the Emperor has no clothes" for the L$ system to stabilize and allow people to start doing business rather than playing stock market games with the currency system that a lot of people rely on to earn a living. The L$ is a REAL economy... and GOM's monopoly of constantly messing with that system is just one more fly in the ointment for landowners and merchants who need a stable L$ value to conduct business.

Ok, I guess I still am missing something. Does not IGE buy at a fixed price and sell back at a fixed price? What is differnt from what you are suggesting GOM do? It will never work, look at all the other games that IGE deals in, in all of the games, prices have dropped. There is no market style exchange set up for the other systems, but yest the value in USD to game money keeps dropping. There are underlying market forces that will always push and pull on the market. I think the dump on the market has shown how well it works, 12ML$. Almost 41,000 USD worth of L$ has been placed on the market, and yet, it still has not hit a complete freefall. Wait a few weeks, maybe a month or so, and watch the recovery of the market.

To an extent I agree with you. But I have to also observe that it is difficult for LL to stabilize an economy when GOM prices are jumping all over the place. I still maintain that GOM has the ultimate opportunity (thus the ultimate responsibility) for stabilizing the L$. I believe that if GOM tommorow decided to take the steps mentioned in this post and stabilize the L$... the whole market would calm down and start doing business.

Or of course... GOM can continue what its doing now, and go down in a flaming mass of twisted metal, plunging to the very depths of the inferno...

Oh... sorry. Got carried away there.

Seriously though, one of the things I hear folks say is, "This is not GOM doing this. This is the buyers/sellers of L$ declaring their choice of what the L$ is really worth."

To that, I say hogwash. I've already stated the reasons in this forum; I'll not state the same things again here. But bottom line: GOM sets the model by which the reality works. And having one or two sellers decide they're going to lowball L$ sales has nothing to do with what other sellers want... and Buyers buying L$ at a declining rate has nothing to do with what they are WILLING to pay for L$; they're just cashing in on the best deal they can get. If that deal was L$ at $4/1000--- they'd STILL buy.

So this concept that the current market value decline of the L$ has to do with Seller/Buyer free market choices is in reality a fairy tale created by folks who really know how to work the market. And unless GOM steps up to bat and alters the marketing structure-- those few "players" are going to get away with it.

Of course the value is related to GOM, when I want to exchange my USD for Euro, it is dependant on the trading floor of the world exchange. I still see no differance.


GOM is small, they are maybe a few percent of the entire SL user base. They are too small to absorb big dumps on the market. If their where more people using it, then a big dump would be traded away in a few hours, maybe a day or so.


GOM is not going to kick the bucket. LL has said that there will be no buy orders for the sell now people. You will have to be "approved" to sell on the LL market. I know there are many that just won't use the LL system. Do you know the fee structure on the LL trading site? It may be much more, thus allowing GOM to undercut the fees. GOM is no where near dead.


Basic economics. That is all it is. Supply and demand. As more people want to sell then are willing to buy, the price will drop. If more want to buy then sell, the price will rise. When an equal number want to buy and sell, the price will sit there. There is no way around this. It always happens. Show me where price fixing has worked?

They quadrupled the amount of L$ in world in the space of 2 or 3 months just by taking away L$ for land auctions....

raising rate cost etc was smoke and mirrors

Good post Editorial. I think that cuts right to the bone and reaffirms what I and others have been stating: GOM *does* have a great responsibility in the decline of the L$. Because bottom line, I cannot believe that the decline of the L$ is based on the idea that buyers will pay no more than $3.50/1000. The very idea is nonsense. The decline is, as you very well stated, due to GOMs exchange method allowing such market manipulation. As someone pointed out before, GOM is like a stock market with no government regulations. And THAT is what is causing the L$ decline... not the sellers/buyers themselves. What's going on in GOM right now has nothing to do with what people want or are willing to pay. It has to do with the fact that GOM method is prone to manipulation by one or two heavy hitters and the smaller guy just has to follow along-- or alternately hang on to his L$ and refuse to sell until the market climbs again.

Of course, by that time, perhaps GOM will be history and LL will be directly involved. Which, from what I've seen, may or may not be beneficial, because it seems like LL plans to follow the GOM plan rather than using a stabilizing factor. It's like getting rid of one bad boss and hiring another bad boss.

Wayfinder you're posting the same thing over and over with no added value or reasoning.
The guys at GOM have created a model of a real world money exchange. This is how real world exchanges work. There is no argument.

If you truely believe that L$1000 is worth $4 then go post your L$ on GOM at $4. Do your best to convince your friends that they should post their orders at $4 as well and not at $3.31 Convince enough people and the sell orders down at $3.31 will dry up and not be replaced with more.. thus the value rises.

The point here being, people in general don't believe that their L$ will sell if they place them at $4. You're welcome to convince them otherwise, I wish you luck.

Way, you seem to be mixing two fundamentally different concepts -- the internal SL economy and exchange with real world currency. I'll do my best here to extricate them.

You want L$ prices of in-world objects to remain stable. I agree that, all else being equal, they should be. That's one concern.

The other is the idea of foreign exchange risk and exposure. This thread is full of people saying the L$ is only worth what someone is willing to pay for it, etc. If the exchange rate is dropping, it's because more people want to get rid of their L$ than want to purchase. That drives the USD-L$ exchange rate down. The variability in the exchange rate gives rise to FX risk.

In principle, the in-world economy could chug along nicely without concern about exchange rates. In practice, however, land owners and vendors care about the exchange rate. That is the price of doing business in one currency (L$) but wanting to take revenues in another (US$) -- again, FX risk rears its head.

Your claim is that "[t]he value of the L$ should be determined by how many of them the customer is willing to pay for a certain piece of merchandise... which concept is undermined every single time the L$ goes up or down." If a customer is willing to pay a certian L$ price for an in-game service/product, then the exchange rate should be irrelevant to them. If the exchange rate *is* relevant to your customer, than clearly it's not the L$ price they care about, but rather the equivalent US$ that L$ price represents. It becomes an issue to you because you don't like your FX exposure.

Now, if the exchange rate went through the roof, would you be complaining if your customers' habits didn't change as a result of it? Probably not. You'd be on the winning end of a rate movement.

Now, if we wanted to develop new products for LL to copy, we would be finishing up development of the L$ hedging instruments we'd been working on which would allow people to lock in a certain exchange rate. But we don't, so they're not likely to happen.

First of all, that is a sink. Secondly, what proof do you have of this? The reclaimed land goes on the auction block in L$. The bigger plots of land have always gone is USD. They have been putting in less money then they would have been had they not taken away the sources of L$. Bonus cuts, stipend cuts, and other such cuts have reduce the sources of money. Sink have been increasing, and decreasing too, so I am not sure how that all balanced out.

That is removing sinks, not adding new sources. For each sink removed they have tried to remove sources. The question being (for another thread) should they have removed the sinks?

No, the decline is based on the idea that sellers believe they will receive no more than $3.50/L$1,000 for their L$. Buyers would probably pay more, but since sellers don't particularly want to hold onto their L$, they don't have to.

I've seen this mentioned a couple of time, the idea of "Merchants, raise your prices"

If we lived in a utopian fantasy, that might be valid. But even as you folks suggest this, you have to be aware that is just not going to happen. First, raising prices for most merchants is a really big job. And if one person raises his prices while other merchants don't, that merchant is slicing his own throat.

It's not as easy as it sounds. Because in general, the market does not base the value of the L$ on what the GOM selling rate is... people base their buying power on "how many L$ they got in stippends this week"... or the very important L250 figure given newbies at sign on. Raising commodity prices is not the solution; in fact, it's a pretty unrealistic one. GOM or LL stepping in and making some major changes is what is required. I know that right now I have L$ to sell, but I'm surely not going to take $3.45/1000 for them. I worked too hard to get them in the first place. So if I have to sit on them until things stabilize, that's exactly what I plan on doing.

Unfortunately, others are just closing shop and throwing their hands up in disgust at the whole ball of wax... and GOM just keeps doing what they've always been doing, seemingly in denial that they have anything to do with the L$ plummeting.

Because thats how the RL market works and I think its more the case that SL is just mimicing RL in terms of the mechanism available, its a model we are use to. Plus some people like trading And some people prefer to have control over their financial affairs rather then having to be force to sell something at a given price.

Personally it will not stop the fundamental problem which is monetary policy. Currency Devaluation is still going to occur because even IGE has not been able to stop devaluation in all the games it operates it. So it will still happen in SL even GOM wasn't around, there will be an eventual decrease in value unless monetary policy changes.



Businesses in RL have the same problems, especially if you deal on an international basis. There are already mechanisms in place that will allow to hedge your currency risk. And in some ways these concepts could conceivably work within SL a well. A Real Life economy is still susceptible to what the markets decides.

Or you can just raise your prices

So go place them at a price you WILL accept... And tell your friends to do the same, or maybe they are already at $3.31

OK, let's see if I can explain this. IGE buys and sells at a fixed price.. but that price is directly governed by what is currently going on at GOM, so in a sense they're the same as GOM-- and their L$ conversion method is just as unstable as GOM's. IGE does not use a "fixed price" method... their sales/buys are directly in line with GOM prices-- and IGE goes up and down right along with GOM. What we are recommending is that GOM sets the L$ sell/buy factor at $3.90 and $4.00 respectively and LEAVE it there. Give us some foundation of economy so that merchants can set fair price and landowners don't have to constantly readjust their rent figures (which is a real pain for landlords and renters alike).

You know, I really don't know how to answer this. It's one of those "If you can't see it by now, you never will" things.

Of COURSE L$ won't sell at $4.00/1000, with the market flooded by some clown who decided to mass dump at $3.50/1000. And that's the rub.

Because if the market tomorrow suddenly for some strange reason jumped to $4/1000... people would still buy L$. Sellers would still sell L$. Again, the current value of the L$ has NOTHING to do with what buyers are willing to pay for L$. Just like gasoline... they'll buy, regardless. Otherwise, they'll have no L$ to finance their SL spending habits.

This will work just fine, until someone else starts up a open market type trading system. Then what? Then we have GOM, IGE, and AC all being market driven again!
Or IGE desides, they will sell at 3.99 instead, now GOM is more expensive, so they drop. Repeat.

The market will always drive the exchange, there is no way a 3rd party can control it.

The reason for the decline is quite simple and is easy to follow if you have been watching the markets for a while. When there are more lindens out there than people want to buy, the sellers start lowering their prices to attract buyers, or the buyers start lowering the prices. And the price declines. When the linden was at $4 a few months ago, there simply weren't enough people willing to pay that price and it declined.

On most days over the past few months, there has been a lot more lindens listed for sale than there have been orders to buy. The price declined. Over the last week that trend switched. The price got small enough that a lot of new buy orders came into the market and the price began to rise again. This is very easy to follow if you look at the market every day. IGE apparently dumped a lot of lindens on the market today and the price will decline again for a few days until that excess is absorbed. What happens next will be determined by simple supply and demand.

The decline of the lindens is directly related to how many lindens people want to sell and how many lindens people want to buy. That's the bottom line and whether or not there was a GOM, it would still work that way. A system where the buy/sell prices are fixed forever will never work, because someone will always come along and buy or sell for less or more if it was in their interest to do so.

You know, you DO have a point. It is not just buyer driven. It is also the sellers. The question is NOT what will the buyer pay, it is what is the seller willing to wait for?

This isn't being governed by a few people. If you actually followed the markets, you would see that large dumps have very temporary effects. Yes the price may decline rapidly on a specific day because of a large dump, but it usually bounces afterwards right back into longer term trend lines within a day or two, sometimes within hours.

LOL I almost laughed at this one (no insult intended). Do you really believe that GOM-loyal folks will switch over to IGE to save ONE PENNY on a transaction? LOL

We've covered this before. Not going to rehash it.

Ok, maybe then 5c, or 10c... if I am buying a large amount that little change per block sure can add up fast.

Well, this thread has been very interesting, pro or con. It's also taking a lot of my RL time.

I think what was to be said on both sides, has (as one user pointed out) already been said, and now we're just repeating the same concepts. So I'm going to go clean my living room and get ready for the critter races at ElvenGlen tonight. We'll see what happens to the L$ over the next few weeks/months and see whether GOM is still around by the end of the year.

Best wishes to all.