Currency Stablization

Please correct any mistakes I make below...

My understanding is that there are more people who want to BUY lindens (demand) than who want to SELL lindens (supply).

In order to keep the currency stable, LL intervenes and sells lindens to keep the exchange rate stable.

I can't find it on the website now, but a few days ago, the July stats said they sold roughly $600,000 USD worth of lindens to keep the currency stable. Essentially, this is free money for LL.

In August, there was only roughly $160,000 USD worth of lindens sold by LL to keep currency stable. I don't know if this means there was less demand to buy lindens or greater suppy of people selling off their lindens, or both.

Question, the first: Should things continue along this same trend and supply (those selling lindens) exceed demand (those buying lindens), would LL continue its currency stablization policy by buying lindens off the LindeX?

Question, the second: Is there anywhere to find what happened in August? Can we see if supply rose or demand fell in the raw data anywhere?

My guess is a lot more money was sold by residents bailing out after the casino ban, hence there not being a shortage for LL to take up the slack.

No idea about the first question, but...As far as I know, the best you can do is look at the sums of "sinks" and "sources." What very likely happened in August was that supply from folks selling L$s came closer to the demand from buyers as casino operators cashed out and left SL, an event not likely to be repeated any time soon (well, that's assuming the age verification thing doesn't introduce too much uncertainty, and assuming LL resists the temptation to raise tier which could trigger a mass exodus and scaling-back of in-world investments).

Sooner or later, SL WILL come to the point that supply exceeds demand; it's just a question of when. And while we of course don't know the answer to your question, I think it is a safe bet that LL will NOT pay US$ for L$ to stabilize the currency then.

There are other things they can do to keep the currency stable, some of which they have alluded to. They could make it possible to pay for land auctions or to pay tier in L$. They could increase the fees for such things as uploading textures. They could cut stipends. (See http://blog.secondlife.com/2007/08/14/the-second-life-economy/#more-1144)

Or as the need to infuse the economy with more L$ lessens, LL could simply "free-float" the currency, allowing its value to fluctuate according to supply and demand.

There are actually a lot of people who want to sell lindens.

They are usually known as Linden Lab employees who want to keep their jobs. Hence there is actually an UNLIMITED supply of $L.

Since the $L have "no value", Linden Lab will do whatever it collectively sees fit to cause US Dollars to flow into its bank account to pay its employees and keep the lights on. Up to and including closing the Lindex if that's how they determine the business is to be run. Or if it gets sold and the new company decides that is how the business is to be run.

In other words, at this time it seems futile to try and predict how LL will handle the Linden currency. There have been so many other policies that they change according to whatever they think is good for business.

Has the Bragg lawsuit been settled yet? Maybe the judge will determine once and for all if $L have value or not.

I have heard that LL employee accounts get a stipend equal to a premium account, and anything more, they have to purchase with their own money (unless it is identified as a work-related expense). Except for "Supply Linden", which is an accounting avatar only and not a real person, none of them have a specific interest in selling lindens. They get as much job security from spending their lindens on SL goods as they would from cashing them out, if you analyse it properly; probably more, since if they spend it, it continues to fuel the SL economy and keep their employer's company stable.

Right, but I understood the point to be that all Lindens have an interest in how many L$s Supply manages to sell--and indeed, for a while there the LindeX was starting to look like a significant revenue stream for LL.

Some folks think that L$ "sinks" (like classified ad charges) don't benefit LL at all, but to the extent that the L$ supply taken out of circulation by a sink gets replaced by demand on the LindeX that has to be filled by minting new L$s, LL gets revenue. On the other hand, it's a tricky business to "enhance the sinks": increasing fees could end up discouraging the activity for which the fee is charged, thereby reducing the effectiveness of the sink; worse, the wrong structure of sinks could discourage overall in-world activity, ultimately decreasing L$ demand and/or hurting LL's bottom line in other dramatic ways (reduced premium membership, land auction/island sales, or even tier payments: there's no guarantee that even every Mainland sim will generate tier payments forever--"Abandon Land" could get attractive in a serious crash of the land market).