Leave Lindex&Add In-world StockExchange

I think Lewis had a great idea about setting a fixed rate for L$ and not worrying about 3rd party sales and whatever loss that may come from such. Taking that idea and running with it. *grins* Blame me if the idea is stupid, praise Lewis if it works lol


I say we leave the Lindex as it is and LL sets a fixed trading in-world for whatever amount they forsee as the "average". This would take a bit of hashing out and would have to change slowly from where the rate is to where they would like it to be. Though an immeadiate change could benifit everyone, I'd think.

People would still be able to use the Lindex but it would be more for those willing to take the time to use it and for those who understand it. Let's face it, that system is a mess to understand for the common person. Like any stock exchange, the intricacies are vast. Which is why in the RW we let brokers and accountants handle such.

Keep all in-world transactions through Linden controlled sources only. Ignore the outside 3rd party market. Use the in-world market as a guide and as a stable core to work from.

Points:
1) Newcommers would be using the in-world exchange at least at first. Generating a small, but widespread stable market.
2) Transients (ie those who come to SL and leave a few days/weeks later) would probably never even find out about Lindex and not cause false fluctuations in buy/sells there of a person who is no longer in the cummunity.
3) Persons selling out of SL, or just "cashing out" could use the Lindex wiht little to no effect on the in-world economy.
4) Buisiness owners, and others who do understand economy and have a need for Lindex would still have the option to use it, and would see a more stable market without all the little sales going on. One or two "bad" trades would not affect the market as much as the many, many "bad" trades currently going on either due to malic or lack of knowledge.
5) The fixed in-world market will stablise the Lindex if only because if it drops too low, then people will only sell in-world depleting thier supply of L$. If it goes too high, people will only buy in-world leaving the Lindex with a glut of worthless L$.

Right now Lindex is going wild because it has no competition. Give them some.

~Jessy

Lets assume the rate is fixed. Could you tell me who is going
to pay me a specific amount of US Dollars no matter how many
Linden Dollars I sell?

Because surely you can't expect Buyers to always fork over
US Dollars at a fixed price when you can get your L$ for less
at places like IGE, eBay, SLExchange, and whatever new
trading floors pop up once LL tries to force a certain rate.


In the world of economics, Flat Exchange Rates don't work.
People find new markets to trade outside of the sanctioned exchange.
Oh course, if you want to open your wallet and pay me everyday a
specific amount of US Dollars for every Linden Dollar I give you,
go right ahead. And I'm sure you'll be pissed when Linden Labs
gives out a new print batch of L$ every Tuesday and you have to
continue to pay that fixed rate.

It does have competition... on SL Exchange for one. Also, your idea to add more competition, is for LL to compete with their own exchange. It's not a 3rd-party exchange. It would be odd for them to compete with their own exchange, don't you think?

Not odd at all. LL isn't running the market there. The residents are. And they're making a mess of it. Offering two choices meants more options to all.

And RBD, they can print all the L$ they want if they open up the fixed exchange in-world since the only person they'd hurt doing that is themselves and their own profit.

And yes, those other places will sell for less and sell more. But they can only undersell so much before they run out of supply. (Detailed in Point#5 above if you missed it).

~Jessy

Will people ever quit beating the 'fixed rate' dead horse!?

Not until people quit beating the "sky is falling, the L$ is dropping", and the "LL needs to do something", and every other dead horse out there.

So tell me O knowledgeable ones. WHY won't a fixed rate work? Here in SL where LL controls everything, not in the RW where it's impossible to completely control things.

I hear you all say it won't work, but never see a valid point saying why.

~Jessy

If the residents were running it there wouldn't be a 3.5% fee charged on L$ sales

Seriously though, you're wrong. The price is dictated by the laws of supply and demand, simple as that.

I'd like to believe that. I really would, and I hope you're right, but I see idiotic sales on the Lindex driving the market into the ground.

Personally, I've given up selling any L$ and am only buying as I'm able. I've not much capital so my impact on the economy is about as much as a gnat agasint a car windshield. Not much else I can do though. Makes no sense to sell at the hyper-inflated prices. Right now I just buy little bts here and there with the hopes that someday the L$ might be worth something. And spending it in-world in the meantime to actually have fun.

I still think the fixed market would help level out the other markets. It might not be used much, but simply having the option would, to my thinking, help stabilise it all. *shrugs*

I'll let the money peoples go and continue now. The lower they drop the L$ means the more I can buy. Maybe someday that will have an effect when my 1$ buys a couple thousand L$.

~Jessy

The laws of supply and demand determine price. Put very simply, if demand exceeds supply, the price goes up. If supply exceeds demand, price goes down. In a market, this is how the distribution of goods and services are determined.

If the price was fixed, you have two distinct and opposite possibilities.

1) That demand exceeds supply, and the price is too low. In this scenario, you'll run out of money.

2) That supply exceeds demand, and the price is too high. In this scenario, you'll end up with a surplus of money, people won't pay that price. You'll have a backlog of Lindens for sale.

There is a third 'logical' possibility: that the price will be 'just right': this will never happen, demand and supply fluctuates constantly.

This also explains why the market is not going down because of 'undercutting'. Rather, 'undercutting' is occuring because supply exceeds demand. If the reverse were true, you'd see pressure in the other direction.

This holds true in RL or SL.

There's more to it than this, this is the Reader's Digest version, but this is a fundemental concept in economics. Page one of the textbook. You can find out more here:

http://www.socialstudieshelp.com/Economics_SupplyDemand.htm

http://en.wikipedia.org/wiki/Supply_and_demand

*applauds*

So let me ask a question. Forgive the possible nievity here, but this sounds too simple to work.

If LL purchased a good number of the L$ at thier current low value, the value of the L$ would go up (as they took away a supply) and then could turn around and distibute it through stipends over time as the increased value of the L$ would actually be costing them less USD to hand out the purchased L$ than to print it? Yes I know they can "print" for free, but this way it's keeping the current moeny in circulation, not just creating "ghost" money to devalue further.

Example:
LL buys 1,000,000 L$ at the current value of @325-1. Cost=3076.93 USD

This causes a raising of the value of the L$ (for the example lets say it raises to 300-1. Not sure of actual effect)

LL now has 1,000,000 L$ to distribute as stipends but is now worth 3333.33 USD

Or did I miss something here?

I guess anyone with enough capital to make an impact on the market could do the same, but it's a risk (as always) to try this, I'd think.

If I'm right, this is just too damn simple. Please tell me I missed something. Heh

~Jessy

Jessica-

One major difference is, only LL can do it via stipend, nobody else can do.

See all the sell orders stuck at 315? They are not moving and not going to move for a long time because they are getting leapfrog by others wanting to sell their L and posting at 320, 325, etc. Nobody in their right mind would by $L at 300/1 while the market rate is $325/L

I proposed a similar idea, LL to buy $L from Lindex for stipends first before printing new one. Most people just ignored it.

The biggest issue is that it increase cost for LL, rather than getting the full $10 from each premium member they would only get a portion of it.

Like you, however, I think this is a worth while option LL should consider if they are serious about providing some stability to the economy.

Well you didn't miss it, but you discounted the problem with this yourself, without fully comprehending what that means for LL. 'Printing' money to pay stipend costs LL nothing, whereas if they bought your stipend off the Lindex, not only would it cost them, but it would cost them more than the proportion of your premium fee that they charge you for the stipend. Best price is currently offered by LL. If you want to know who is the biggest 'undercutter', both in price and volume, it's them. So even at the price the L$ is at now, not only would they not be making that money for premium stipends, they would be losing an amount beyond what they are charging you.

As the value of the Linden increased, it would cost LL more and more to pay you your stipend, because they are commited to giving you the same amount regardless of the price. Do you think it reasonable that LL lose money, to provide you with your stipend? That really would be paying you to play.

It should be noted that there does have to be some way of scaling the money supply to the economy as it grows. New money has to be introduced at some point. The problem is, currently, new money is introduced in a way that doesn't take into account total money supply at all. The stipend goes out whether new money is desirable or not, and they pay you (individually) the same amount regardless of whether it scales.