Recent L$ Decline NOT Related to Money Supply (Stipends, Dwell, ect.)

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Maybe they need lessons from Alan Greenspan on how
to keep their mouth shut and speak in-code about pending
economic changes the Federal Reserve of SL has planned.

No. Its money supply. When the money supply increases from 60mm to 660 mm within a year, there is a HUGE problem.

Thats what happened in SL.

Get me a doctor, agreeing with RDB twice in a week! I'm not sure code is necessary, but some sensitivity about what's said, when and how, for sure.

And I'm not sure anyone who watches the market is surprised to see it's changed after and, in as far as one can tell things, because of the statements - futher evidence that as it was made more clear that it wouldn't be yet and might not happen the value recovered at least for a while.

Jamie might disagree, but I don't think anyone else does. Oh, Lewis might disagree it's a recovery...

You know you love me Eloise..


The problem is that LL made statements which left the future open
to speculation. And you know how the speculation and rumor mill
gets going in SL Forums.. That in turn scares the average Joe and
starts dumping his currency...

It is money supply, it is LL announcements, it is forum posts, it is stipends, it is all L$ sources, it is sellers, it is me, you,LL,all people................................................

There are lots of things to help L$ to loose value.

I couldnt find any reason to help L$ to gain value. Yes we have a problem
Today at town hall Philip Linden will answer all the questions:

"SL's growing population need extra printed money each month ......."

Mr Philip Linden, just keep the L$ stock in world constant. SL will tell you when it needs more L$. And if it needs more L$ it will buy from lindex. Are you afraid of Lindx is not enough to supply money? Then put unlimited L$ at 250/usd. If SL needs it, SL will buy it from you.

No matter how much money there is, if people would quit undercutting it would stop going down.

So no, its not money supply, its the sellers. And now the sellers want SL to fix their screwup. Their -continuing- screwup.

I have explained this 397653465734 times in these forums.
Imagine noone is undercutting.And the rate is X/usd And people are daily trying to sell 10million L$ and buyers trying to buy 8 million L$. What would happen?

End of 1st day: 2million at X/usd.
End of 2st day: 4million at X/usd.
End of 3st day: 6million at X/usd.
End of 4st day: 8million at X/usd.
End of 5st day: 10million at X/usd.
End of 6st day: 12million at X/usd.
End of 7st day: 14million at X/usd.
End of 8st day: 16million at X/usd.

and at 9th day , if you want to sell your L$ at X/usd you must wait for other 16million to sell, or will put at X+1/usd.
It is not sellers, it is money supply. Sometimes sellers are making it to lose value a little faster thats all.

You forget that we went from 34M to 18M available on Lindex at a certain point in time and people were still undercutting eachother. While obviously they should not have as less was offered than was sold. We've already seen how the sellers act in reality so theoretic examples are pointless. They undercut eachother regardles of whether it is sane at the time or not and hence they've let quite a few chances pass to get the L$ rate into better shape. As said many times before: it they would be really hurting that much selling at these prices they wouldn't be selling in this way.

If they are so willing to undercut eachother, Blakar, why bother 'fixing' the lindex? Why punish those who don't use the lindex to cash out, so that those who do cash out can make more money? Its like someone raping another person then saying the court should leave the rape conviction and admission out of court when they try to get custody.

Yeah, but if it went to 18M, after a time people couldnt undercut eachother because there would be a high demand, we were close to L$ to gain value,but BOOM, Robin Linden's announcement. LOL.

I mean, there is not only one reason. Money supply is the main reason(ofcourse) but if there is no extra money supply but it keeps falling, it should mean, the fall is temporary but at the moment there is so much extra L$ stock in world to contribute any panic.

Jonas, you are preeching to the choir. I never asked to fix the Lindex

Given how SL works all businesses except those who invest a lot of US$ in land to resell for L$ can always make a profit. They L$ rate just determins how much profit make. If they are not making a profit they have overinvested without proper cause.

From 280L$/$ to 315$/$ the decline has been defined by the following short term effects:
~15L$ of senseless undercutting
~15L$ due to reactions on LL anouncements
~5L$ due to downtime of SL during primetime (SL downtime results in heavily diminished buying volume on the Lindex)

The main point there is, during that time they could've moved it up about 15L$/$ and they didn't due to pointless undercutting. So we could've gotten to 18M at a rate of 290L$/$ or better with ease.



Money supply is not the main reason for any of the short term effects. The money supply did not change a single bit by Robins announcement but still the rate dropped significantly due to panic. Neither was money supply a reason to undercut during times that demand outpaced supply. Nor was the money supply responsible for the downtimes of SL.

Ofcourse money supply did not change, but there is already too much extra L$ stock in SL to contribute any panic. It is a general rule, if your economy was healty(money supply and sinks balance), these types of announcements or panic sellers couldnt effect your economy so much. Because of high MONEY SUPPLY, SL's economy is open to contribute any panic. If economy was in balance(again about money supply), this announcement couldnt effect L$ value so much. Healthy economies could absorb such announcements, because if there is a short term panic sellers in healty economies because of such announcements, you could always find fast buyers too. In SL, no, because there is already a big L$ stock in the world always ready to sell. A big potential of sellers(for example my 4 millionL$) in SL, but not big potential of buyers. This is the lack of balance, this is the inbalance between money supply and sinks. If people couldt have so much L$, they couldnt contribute the panic.

Money suppy may not have changed but the buying on the lindex sure did. Prior to the announcment the buying was going up by $12,000 per week, after the announcement the buying actually dropped by $12,000 from the previous week. Go into the LindeX and see what an additional $24,000 would do to the the exchange rate.

If the money supply and sinks were in balance and the potential sellers were holding the same amounts you'd get the exact same result (if all else stays the same). If you think you don't you see an imaginary boundary.

If you think limiting the money so that nobody can hold large sums of it would help you're wrong too. This would completly ruin your economy as your consumers would have a hard time getting the money they wish to use. Hence they would not buy goods as they would have no means to get their currency.

So cutting down the money supply would eventually lead to a stagnant economy after you had a short term of improved rates.

If you would really like things to be good there are a few prerequisites:
- consumers should be able to acquire L$ at a reasonable price immediately
- sellers should be able to sell medium amounts of L$ at a reasonable price within a short timeframe
- people holding large amounts of L$ should have an incentive to keep them in game instead of cashing out

The biggest lack currently is the last requirement. There are few reasons to keep your L$ in game. This should be solved. Things like Shauns stock market come to mind as those could make you invest inside SL instead of cashing out. Off course it'll have to be large scale for it to work.

Why can't you cut the money supply? Well you'd lose the first requirement (and wouldn't really gain anything for the third). Though in that part the new TOS is actually quite useful. With the new TOS cutting the current sources of money (over time, as they committed to some of them) can be done without losing the guarantee that people can get their hands on money at a reasonable price. The only thing LL needs to do is to sell L$ themself whenever the L$ becomes too scarce. As such the total amount of money in circulation would only change when the volume is too large to be sustained by the amount of money in circulation. This will result in a currency market which dynamics will be limited (basicly LL should automaticly intervene if the rate moves too much).

Off course if the premium stipends are no longer offered in the future LL needs something to offset the loss in money a bit. Hence before moving to a more controlled market they should assure themself that their controlling system brings in enough money to offset the loss of premium accounts (basicly it means they need to make sure that enough of the L$ sold are sold by them or they need to increase the fees). In essence they should be able to precalculate this by using historic Lindex data and simulations.

The initial post in this thread... the image... worth a thousand words.

It has been a popular theory that a few of the "wealthier" players have been hording L$, then flooding the market to drop the value of the L$, then buying it back up in huge amounts... rinse, repeat... hoping that stipends would eventually dissapear (notice who seems to be the loudest advocates of removing them). This would allow these people to essentially make HUGE profits from the sale of L$ at offensively high prices due to the limited supply, and increasing demand.

LL stating that they reserve the right to sell L$ directly to control over-valuation of the L$ seems to have cause an aweful lot of people to start dumping an aweful lot of L$ onto the market... since it won't do them any good to hold on to it now.

Interesting theory

Losing boatloads of money now to maybe make money in the sweet by and by does not strike me as something that the more renowned players would try.

Well, it would certainly fit the patterns emerging.

Without LL actually selling L$ on the market to control over-valuation of the L$, and their talk of eventually tapering off stipends, it wouldn't be all that out of the norm to think a few manipulations of value would be off base.

Never underestimate the power of greed.

Of course, now that they announced that they *are* going to sell L$ on the open market of the cost of L$ increases too much, that pretty much pooches the idea that controlling supply and price gouging could be profitable.

Whether or not this little theory is accurate really doesn't matter now... LL has made their announcement, and the market is being flooded with the fear of the paranoid... or the lost hopes of greedy intent.

What needs to happen next, is an increased sink set to reduce the disproportionate influx of new currency. And... without removing stipends. I firmly believe that removing stipends will ultimately hurt membership gains.

Well, no matter what but theory is off course interesting and maybe has some basis in it, because there ARE such players who keep buying L$ from other players directly too.

bringing back land auctions for L$ would be a good start. And then Linden Lab could use that money paid into the L$ auctions to sell back to the community when the market could withstand it. But what do I know, I just paint pretty pixels.

Add to it the same few people screaming over and over about the drop in the value of the L$... which would... naturally... cause a mass craze to dump L$ onto the market before people lose their shirts. Providing a wealth of rather cheap L$ available for purchase.

The sky is falling! The sky is falling! Many people would duck before realizing what was being said. The sky isn't falling... that's the wool being pulled over the eyes of the unsuspecting.

So, be wary of the screams from the rich... they almost never have anyone but themselves in mind.

Wrong, you dont know what "healthy economy" means. I started to think discussing with you is meaningless.


Wrong, i didnt talk about "limits", my point is supply&demand balance, basic of all economies. Atm in SL, supply >> demand. And this is the danger.

Wrong assumptions, wrong statements.



Well, i wont read the rest, it is clear that you have no idea what i was talking about. Or you are not trying to discuss something, only trying to show "oh yes i am right, it is me". Dont have time for this.
At last total i will repeat it: lack of supply&demand balance is the main problem. There are side problems too. And i am glad to see that LL saw it and will (is already) act to reduce money supply and increase money sinks.