Real Life Recession and the SL Economy

So iTulip.com [ http://www.itulip.com/ ] is back and predicting a massive, 10 year US recession when the housing bubble goes bust and takes 40% of the jobs created in the past 10 years with it. Historically, iTulip very sucessfully predicted the dotcom bust, down to the correct fiscal quarter, so this makes interesting reading.

Leaving aside the debate about iTulip itself and whether the site's track record, predictions, methodologies or politics are flawed, let's play Doom and assume the RL economy in the US is headed down the loo, taking quite a lot of the rest of the world with it.

What would happen to the SL economy as a knock-on effect? Will low-cost micro economies thrive or fail? Will the value of the Linden crash, taking LL with it? Will we all have to eat cake?

Tell, Chicken Little, tell :)

I'll bite.

SL, or any other online game, returns a great deal of entertainment value for the $. In recessions/depressions people's need for escape rises, so good entertainment values should do well.

And on a slightly cynical side note... Those folks who have been shop-a-holics in RL and are crushed by credit card debt can satisfy their urge to shop (or fly) in SL for a fraction of the cost.

On the other hand if the US economy heads downwards and Europe and Asia don't follow (they're not entirely in lock-step after all, and the UK economy has been doing better than both the US and the rest of Europes and on a different cycle to both for some years now as one example) the chances are that the shift we've already started to see to more non-US players becoming stronger and stronger as it becomes cheaper and cheaper for us to be in SL.

I don't think LL is there yet, but organisations such as eBay, Amazon etc. are essentially global and any country's recession might locally hur them, but not globally. LL could turn out to be a smaller one that follows the trend successfully.

Might i interject? I take particular interest in business, and i thought id make my first ever business/economic post EVER here ^_^. Seeing as i just did this last year at school.

Yes, people need to escape during times of recession and depression. HOWEVER there is one thing that you must look at when you analyze an economy and predict that will happen.

One BASIC and very fundamental thing that all marketers must look at when creating a product or just predicting the market is Maslow's Hiearchy of Needs.

To save me talking for a VERY long time, ive included the following link to a simplified hierarchy.

http://www.pateo.com/images/maslowmaster4ts.gif

This is not a totally accurate version. The idea is that without everything under your "escape" is satisfied, you won't be spending to much on anything else.

If a zillion jobs are cut, where will the money to goto the movies come from? (also food, housing, security).

Just look back at previous depressions that shocked North America as a whole. Google is your friend.

BS. The US economy is coming out of a recession and is in better shape than ever, not going back into one.

hello? Hello? HELLO???



Nobody asked "is the US economy headed down the pan?" and if I wanted to debate that question, I wouldn't debate it here, and certainly not with you. This is a hypothetical question: "IF the US economy DID enter a recession, what would the effect be on the SL economy?"

I couldn't have been more clear. If you don't like the rules, go throw sand in your own sandbox.

The US economy won't enter a recession in the near term.

And we all know how accurate SL's top economic mind is

(do I really need sarcam tags round that?)

OMFG you guys in the US must be *really* screwed! Start panicking NOWWWWWWWWWWWWWWWWWWWWW!

I am very familiar with Mazlow's hierarchy, but I still disagree with your conclusions.

First recession/depression is about perceptions for lots of folks. The old joke about it's a recession when your neighbor loses his job, and a depression when you do.

Even during the Great Depression people found ways to afford entertainment because it was one of the things that helped them get through it. They chose the most affordable entertainment they could find. My point was that even with ISP fees, SL is a very good entertainment value.

Also, even in the current economy, there are people who cut back on other necessities to be able to afford things like SL.

If this were to happen - whether via. burst of housing bubble, or violent attack, or other means, it would be a disaster of unprecedented proportions, never before seen in America.

American has never experienced 40% unemployment, and were this to happen, entertainment value would be irrelevant - most people would be struggling just to feed themselves and to surrive. Major cities would be in total chaos, food distribution would be disrupted, there would be long, long gas lines and rationing, etc.

crap. now I AM worried.

what percentage of current jobs were created in the past 10 years?

Millions..... Thanks to Offshoring.. Naysayers of Offshoring are
nothing more than protectionist. Cause without it, I'd have to
employ expensive Americans to do my bidding...

Don't know would have to research it - but do know that the majority were created in the Health Care Industry - and many of these jobs are here in the US.

I disagree.

40% unemployment - been there, done that, although the way unemployment is counted now, it will be touted as 17%
stock market collapse - yup
massive loan defaults & repossession - nod
banking system collapse - that too
rationing and lines - several times.. most recently the 70s
defaults on pensions - yes
bread lines - umm hmmm

My great-grandmother was a young women during the Great Depression. I grew up listening to her fascinating stories of what life was like and how they got by. It made me interested enough to read a fair amount of history and biographical info about that period. We are a different society, with different technologies, however, the U.S. has been there before. We've adapted and survived.

Now if we talk about how we get there - yes that would have an impact. If it is as a result of terrorism or bird flu, two things which have the potential to seriously disrupt society, not just the economy, then yes -- apocolyptic visions are appropriate. If it's a slow collapse, with people struggling all the way down, then no.

It's not an accident that the gaming industry was about the only segment of the California economy that showed steady growth when the dot.com bubble blew up.

And if you feel like worrying... It's not just the housing bubble that's the problem. Record credit card debt, no savings, pension funds underfunded, retirements in the stock market (which is like a trip to Vegas), rising health care costs, looming wall of gas/oil unsustainability & the suburban life style...

add your own

My prediction, for what it's worth. I think we are 18 months from a recession. How severe, no clue.

But it never hurts to get out of debt (did it!!), plump up your savings (doing it), and think about your options if the shit hits the fan.

Agreed. Here at self-employed (partly SL-self-employed) Chez Doolittle, we are looking at ways to recession-proof our work and incomes with an eye toward the near future. I have a feeling that come the big bang, my SL income isn't going to worth quite so much of my time, but I will be very curious to see what the effect on the SL economy is. I'm prepared to be very pleasantly suprised

My over arcing concern is actually the viability of LL in a serious recession. I have zero data to fuel that concern, except the generalised knowledge that when money becomes a scarce resource, investors often need/want to see a faster return on their money than I imagine LL is delivering now. Growth is great; growth is not cash, however.

A L$/Euro marketplace would save Linden Lab from a sky fall

yay for Euro \o/

This period reminds me of how it was before the bubble burst five years ago. 18 months maybe. I do think it won't be quite as bad as it was five years ago though, unless there is another major terrorist attack to go with it.

or an earthquake, a tsunami, a war in iran ...

Sabrina I pondered hard before replying to your thread header post mainly because I do not give financial advice here, and nor do I wish to become involved with troll poster/s no disrespect intended.

But.....the FT100 started with a 6 yesterday, although in part that may have been driven by good results from life assurors, a possible takeover bid for the Prudential and Zurich, and of course triple witching day. The Dow looks like it might be breaking out of a long term trading range too, go back and look at a chart over say 3 years to see what I mean.

Here in the UK PE ratios do not look too demanding for the FT100 majors, indeed we are currently at around 14 with a yield of around 3%, which is covered at more than 2.5.

And when I think about the billions of people in China and India wanting a western lifestyle with consumer goods and services that boads well for both the natural resources sector and the world yield curve.

But.....the US cannot continue to fund a lifestyle for ever, founded on debts and deficits, indeed Warren Buffet warns against this and I would suggest you seek out his website and read the annual reports there for a more accurate insight than I could give.

What could happen is not a world recession, but one in the US alone, especially in California (which is already skint) If that happened China would emerge as the next world superpower, and after all for most of recorded history it was. It is only in the last 200 odd years the USA peaked, and perhaps that is an aberration due for correction in the long swath of centuries

Just my personal thoughts, do your own research.

Finally as for Second Life and its economy.....well who can tell. Perhaps things will continue much as before except I may need to learn to speak Mandarin Chinese, and I am sure Anshe Chung will help us all out in our collective hour of need -

WTF?! Where do you people get these ideas from.

Pick up the WSJ. Our economy is in great shape and we're coming OUT of a recession (if you want to put it that way) rather than going back INTO one.

Housing is a concern, yes. But the reason interest rates are headed up is due to economic growth... you should be more concerned if rates dropped.

The USA is in great shape. For now.

Yes, she will speak to the local Chinese Occupation Authority Overlord on your behalf for only 2 years of indentured servitude.

So get very familiar with Edit Land, Parcel.

Wow. It's kind of obvious what's happening -- at least in our USA. People with money are not experiencing depression. People without money are. This is not sustainable, especially with our trade deficit at an all-time high of $805 billion, and expected to hit the trillion mark next year: that's 3 times the deficit it was in 2000.
What else might be affecting us? The high-cost housing bubble, low-rate savings, low-rate money markets, low-rate time CDs, high-rate loans, an ever-increasing number of required student assessments playing the war-of-attrition against both newb and veteran teachers, etc, etc, etc, etc) And in a few more years the young-uns who don't know a radical sign (square root!) from a squiggly (yes, I met a few of these in Tucson), who don't know where the Grand Canyon or Niagra Falls are, who don't know Ben Franklin aside from the art supply shop with the same name, will account for a great deal of the entry-level workforce, whereas the majority of the rest of the workforce is still in the process of gradual retirement -- all I can say is that if all the government support is ready for the retiring baby boomers, then our economy will boom as much as they did and our unemployment rates will drop to record lows. But if not, then get ready for a huge recession and thirty-somethings with Master's degrees handing you your 7-up & fries.