"Help!! I've Fallen and Can't Get Up" Cries L$

<- agrees and told this 3 months ago.

Hehe, you are right. But I think Anshe's point is that converting huge amounts of L$ is nothing new for us. We do so since more than a year. Gradual inflation also seems to be a long term problem indication an imbalance in money sources and sinks.

Of course, Guni, you are doing it for a long time.

But when rather suddenly, the market forces change, because many want to do that or feel a "need" to do it, it would be naive to expect that this can happen without consequence. We can wittness the consequences every day at LindeX now. "Awwww, my L$ do not sell. But I need the US$. So lets make them a point cheaper or better two." And I would call it at least a little euphemistic, if you call it "gradual inflation" what is happening there.

The conditions in the real estate business are the biggest single force of influence on the exchange rate now.

This is not because it is the biggest part of the SL economy. It isn't. But the land business is coupled to "real money" as tight as no other part of the SL economy.

1. So when Linden Lab decides to kill the telehubs (and devalue the telehub land), the L$ fell 5 points in one day and another 8 in the following week.
   
2. The very same day Robin announced the land wholesale programm, the L$ fell 3 points, recovered slowly and,
   
3. after it became obvious that 100% of the new land was in the hands of one group, fell an additional 8 points in 5 days.

Coincidence? Hardly.

There is this funny anecdote about the butterfly in India, flapping its wings and through a long cause-and-effect-chain causing a panic at the New York Stock exchange. This goes to show unpredictability of the market. But that is just that: an anecdote. In the real economy, markets react (or overreact) to events and changes in the environment.

There were huge changes. And the market reacts.

I have a slightly different take on things - with no evidence, but perhaps some may be interested.


1) It's winter in the northern hemisphere. People come inside and play with the computer on long, cold winter nights. And want $L.

2) After the US Thanksgiving holiday, then a day of RL shopping, the overstuffed sat down at their computers again, and played. SL seemed ridiculously inexpensive, after buying gifts costing RL USD for everyone.

3) Christmas holidays began. The slide of the $L was halted, by people using their holiday free time in SL. The 'steady' on the graph through December was due to a period of increased demand.

4) January came, and again people spent New Year's on the computer. Then - they went back to work. Tired in the evening, they didn't log into SL as much. Demand reduced, the $L reacted.

5) As winter turns to spring, people will abandon their computers for the delight of the real. Without intervention, the $L will continue to slide. Perhaps it should.

6) Eventually, fall will come, and long winter nights. By now, there may have been events, or intervention - but expect demand for $L to rise in the fall once more.


Simply my thoughts on the matter - take as you will, for what it's worth.

Everyone is entitled to his or her own set of beliefs.

Hmm ...

1. At a time when the number of residents (concurrently online) is soaring to new heights every day, you see a "Tired in the evening, they didn't log into SL as much."?
   
2. At a time where the trading volume at the LindeX (even taking into account the fallen value of the L$) is climbing to and staying at more than 5,000,000 you see a "Demand reduced, the $L reacted."?
   
3. People losing interest, "demand reduced" (exchange rate falling resultingly) happened exactly this week? Not after New Year? Not in the days when people really had to get back to work?
   
4. And the much lower trading (buying) volumes in the pre-holiday time you see as a "period of increased demand"?

No offense intended. Just want to make sure, I get your line of reasoning.

Ah, no fear of offence, I like discussion!




*pretends bullet points are numbered for easy quoting*

1) Concurrent resident numbers now are comparable to the stat prior to widespread use of camping chairs? That's a big assumption.

I'd expect hundreds of campers online at any given time, if not more, out of only 3000-5000 total.

2) Volume on Lindex today -vs- two months ago is not a very comparable stat - new users are still learning that the Lindex even exists.

I explained its existence to a couple new people at my shop just this week. I expect volume to climb steadily.

3) I don't expect a perfect, bright-lined correlation to overall supply and demand in the Lindex.

Human psychology will often miss the mark, overestimate, underestimate, and yeah, the market will be oversold and undersold for weeks or months.

4) I don't think trading volumes and buying volumes are that tightly linked, either.

People hoard $L, and have to burn through it before they need to resupply. So the question is - how much $L did people have going into the holiday season?





Now, none of what I'm thinking really negates the effect of a market panic, or $L being cashed in, in quantity - those may still be perfectly valid.

But I don't expect a tight, tight linkage between the market's day to day performance and the fundamentals of the economy.

If such tight linkage existed in RL, then the 1990's would never have happened - the bubble would have been corrected and nipped in the bud. Same with the crash in the '80s, going all the way back to the Great Depression.

Markets lag and overcompensate badly, and are often far off the mark until they correct. If day to day analysis made easy analtyical sense, day traders would be rich, instead of, well, day traders.

Me too! It is just because these forum "discussions" so often seem to be prone to bitter emotional fights. So I try to be careful.

Regarding your other points in this Argument: Desmond, it is your firm belief, that "all is fine" and the sometimes hectic movements combined with a mid-term downward trend we are witnessing are all just seasonal fluctations. As it is impossible to disprove that, I would like to say "let's leave it a that!"

You might call that cowardice. I will have to live with that. But the only relevant data that is available to us non-Lindens are the numbers on population, residents online, exchange rate, trading volume on so on. All other assumptions on number of campers, average L$ in residents accounts, knowledge about LindeX etc. can't neither be proved or disproved.

Amen to that.

Desmond, please don't get me wrong, when I am posting about these issues. It is just an expression of my worries that our Wise Overlords sometimes may not be so wise. When I see LL paying resident sub-contractors with freshly minted L$, when I see them paying "compensations" for value loss of telehub land with freshly minted L$, when I see them selling former telehub land for US$ again, when I see them flooding the market with a new type of land in an unprecedented volume ...

This all might be interesting to watch if seen as a socio-economic experiment (wich SL partly is) or stress test. But sometimes I wonder what the long - or medium - term strategy is behind all this. Fueling inflation has not been an acceptable (seemingly sensible) policy for RL economies for quite a while.

Ah, no worries.

I'm well aware that none of us will never get good economic data here - that's what makes speculation so fun!

In fact, my only firm belief is this:

The only way to truly damage the economy is for the Company to hire an 'expert' to outsmart all the rest of us...

SUPPLY > DEMAND

There is no cap on how fast land can be added to the game's total recources. If it is added too fast, values are bound to change, aren't they?

Also, the market is short on consumables and items that wear out. Everything is permanent and freely duplicatbale. It surprises me constantly that we can have a market-based economy in such an environment. In SL, 100% goes to R&D, 0% into production... So the cost of a new product is completely filled before the first one is sold. After that, there is virtually no continued cost to produce and sell. And the items will never break or wear out. (Everlasting gobstoppers for EVERYONE!)

It's a strange ol' duck, innit?

Since all this only starts to show itself as the populcation gets bigger, I'm interested to see what the Linden's come up with in the near future.

I don't know how old this is, so maybe everyone and their mother has seen it, but it's a good piece, and I think the people in this thread will findit interesting.

The Attention Economy and The Net
http://www.firstmonday.org/issues/issue2_4/goldhaber/index.html

but it seems relevant to SL.
The abstract: