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".....At present, we are adding about 7% per month to the economy (money supply) with new money. By comparison, the population and overall transaction rate of SL is growing at a rate closer to 20% or so per month.....
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The population is the wrong parameter, user-to-user transaction volume could be more accurate. While i was running a casino, one day a guy came and offered me something:
"i have 15 alts, pay me monthly and they will stand on your casino all day".
Why there is a devaluation? because L is using the wrong parameter, population growth.
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Philip Linden's Answer |
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Kazanture Aleixandre
Here I am.
Join date: 5 Oct 2005
Posts: 524
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03-30-2006 12:41
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ReserveBank Division
Senior Member
Join date: 16 Jan 2006
Posts: 1,408
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03-30-2006 12:51
/139/e1/94866/1.html ---------------------------------------------------------------------------------------------- ".....At present, we are adding about 7% per month to the economy (money supply) with new money. By comparison, the population and overall transaction rate of SL is growing at a rate closer to 20% or so per month..... " The population is the wrong parameter, user-to-user transaction volume could be more accurate. While i was running a casino, one day a guy came and offered me something: "i have 15 alts, pay me monthly and they will stand on your casino all day". Why there is a devaluation? because L is using the wrong parameter, population growth. I agree.. Increasing the money supply based on population growth is stupid.. It should be based on in-game economic factors... But the hell with it.. King Phillip is blind to the problem and believes that pumping in more money because new accounts register is good. Yet obviously this policy has spawned a continued decline in the linden dollar since Oct 2004. Insanity: Doing the same thing over and over while continuing to expect different results each time. _____________________
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ReserveBank Division
Senior Member
Join date: 16 Jan 2006
Posts: 1,408
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03-30-2006 12:55
If you assume L$500,000,000 in circulation, a 7% month over
month increase would be a L$200+/million dollar increase in 6 months. No wonder the Linden Dollar is going down the tubes.... Did he really say 7% per month? I think its time to liquidate everything in SL, this economy is doomed to MudFlation History.. _____________________
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Sabrina Doolittle
Registered User
Join date: 15 Nov 2005
Posts: 214
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OK, we're officially screwed.
03-30-2006 13:02
Ok I just came to post about this same PL answer. The title of my thread was going to be "Ok, NOW I'm scared..." but this will do.
Linden Lab controls one variable that we can adjust to influence the economy: the rate at which new money is introduced into the system in the form of stipends (the largest factor), traffic awards, and other smaller incentives. When the President and CEO of a company doesn't realise the following, the company is in deep ca-ca: 1. The economy is not driven by availability of currency. IT IS DRIVEN BY LAND PRICES. 2. Linden Labs controls the base rate for land prices by what they charge for First Land. A 20% fluctuation is acceptable when it's +/-10%. A 20% DROP in the value of the currency isn't the same thing. Given the 7% addition of new money supply every month, we *should* be seeing inflation. But we're not - we're seeing deflation. Something is very very wrong here, and it ain't stipends or dwell. To paraphrase Bill Clinton: IT'S THE FIRST LAND PRICES, STUPID. _____________________
Linden Lifestyles: The Unoffical Second Life Shopping Blog
http://www.lindenlifestyles.com |
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Eboni Khan
Misanthrope
Join date: 17 Mar 2004
Posts: 2,133
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03-30-2006 13:02
The L$ is dropping because of all the people cashing out L$ because SL is their RL job. Tell them to stop selling so cheap. The Residents control the lindex and what L$ sell for.
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Adam Zaius
Deus
Join date: 9 Jan 2004
Posts: 1,483
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03-30-2006 13:04
Actually, that's not nessecarily so. Land sales are generally:
A Buys currency to buy from B B sells currency A net gain of L$0 to the economy. _____________________
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Eboni Khan
Misanthrope
Join date: 17 Mar 2004
Posts: 2,133
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03-30-2006 13:04
1. The economy is not driven by availability of currency. IT IS DRIVEN BY LAND PRICES. The economy is built on consumer confidence. |
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Shadow Garden
Just horsin' around
Join date: 17 Jul 2005
Posts: 226
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03-30-2006 13:04
If you assume L$500,000,000 in circulation, a 7% month over month increase would be a L$200+/million dollar increase in 6 months. No wonder the Linden Dollar is going down the tubes.... Did he really say 7% per month? I think its time to liquidate everything in SL, this economy is doomed to MudFlation History.. I presume this means you will be listing ALL of your L$ on the market, creating an artificial panic and causing the market to slide even further? _____________________
"Ah, ignorance and stupidity all in the same package ... How efficient of you!" - Londo Molari, Babylon V.
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Kazanture Aleixandre
Here I am.
Join date: 5 Oct 2005
Posts: 524
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03-30-2006 13:05
month increase would be a L$200+/million dollar increase in 6 months. It is cumulative so it must be: 500m*107*107*107*107*107*107*10^-12=250365175,9245 increase |
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Blakar Ogre
Registered User
Join date: 18 Mar 2006
Posts: 209
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03-30-2006 13:06
It's funny to see how people manage to block themselfs from seeing "and overall transaction rate" even if it's just right next to "the population". If you read his full reply he even repeats it worded differently.
Face it, transaction growth outpaces stipends and hence you need the stipends to sustain the market. To be honest, Philips answer is one of the most useful things to be posted on this topic for quite a while. |
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ReserveBank Division
Senior Member
Join date: 16 Jan 2006
Posts: 1,408
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03-30-2006 13:06
The L$ is dropping because of all the people cashing out L$ because SL is their RL job. Tell them to stop selling so cheap. The Residents control the lindex and what L$ sell for. Unless you posted your L$ forsale at L$250 and 500 people jumped in front of you with lower offers... Then the wise man would say, cancel your L$250 and get out at L$300 before the price falls to L$350... _____________________
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ReserveBank Division
Senior Member
Join date: 16 Jan 2006
Posts: 1,408
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03-30-2006 13:07
I presume this means you will be listing ALL of your L$ on the market, creating an artificial panic and causing the market to slide even further? Whatever I can do to help..  Better to get my cash out at L$300 then L$400 next month _____________________
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Gabe Lippmann
"Phone's ringing, Dude."
Join date: 14 Jun 2004
Posts: 4,219
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03-30-2006 13:09
Poor Phil is wrongly assuming the market would adjust its prices and that all you folks are actually Econ Gurus as opposed to Single Variable Tunnel Visionaries.
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go to Nocturnal Threads
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Shadow Garden
Just horsin' around
Join date: 17 Jul 2005
Posts: 226
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03-30-2006 13:16
Whatever I can do to help.. Better to get my cash out at L$300 then L$400 next month Ahh.. the smell of pure capitalism. Take advantage of em while they are down, profit, then sell them the solution to fix their problem. Brilliant. Reminds me why I have less and less faith in capitalism. Considering I went to NAJAC as a delegate when I was in Junior Achievement, and believed strongly in capitalism at one point, this is a bit of a cultural change. I now realize that we need something between capitalism and socialism for humankind to ever evolve past the petty bickering over finances we have now. Too bad we aren't evolved enough to figure out the solution. *shakes head* _____________________
"Ah, ignorance and stupidity all in the same package ... How efficient of you!" - Londo Molari, Babylon V.
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Eboni Khan
Misanthrope
Join date: 17 Mar 2004
Posts: 2,133
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03-30-2006 13:26
Unless you posted your L$ forsale at L$250 and 500 people jumped in front of you with lower offers... Then the wise man would say, cancel your L$250 and get out at L$300 before the price falls to L$350... I am not sure why people keep clinging to this $250 rate, that was in like 2004. Those days are over, SL is not the same place. If people want to keep the price at 250, then sell at 250, if you aren't willing to hold out, shut up. |
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Kazanture Aleixandre
Here I am.
Join date: 5 Oct 2005
Posts: 524
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03-30-2006 13:30
Linden Lab controls one variable that we can adjust to influence the economy: the rate at which new money is introduced into the system in the form of stipends (the largest factor), traffic awards, and other smaller incentives. Wrong, you are also controlling the L$ leaving the system. Adding L$ paid Classified Ads is controlling it. Adding new services would be also controlling it. At present, we are adding about 7% per month to the economy (money supply) with new money. By comparison, the population and overall transaction rate of SL is growing at a rate closer to 20% or so per month. Wrong parameter. Our strategy in managing the economy is to watch a number of factors and make changes to the amount of new money based on what we think is best. Some of the factors we watch include: the growth rate of new users, the growth in the total in-world user-to-user transaction volume, and the exhange rate at which people are trading currency. This is good. Right now the economy is growing rapidly, both in terms of new users, and also the overall amount of goods and services per user that are being bought and sold. This means that we need to put new money into circulation. As the economy grows and matures, its rate of growth will naturally slow, and this will mean that there will be less new money to put into the economy. So, in general, stipends and other new money sources should be expected to decrease as the economy matures. This is good. One high-level goal within this strategy is to try and keep the Lindex currency exchange rate fairly constant. This is good. This is different than having a price 'target', because what we are looking at is not the absolute currency price, but the rate at which it changes over time. We've confused folks a couple times by using the expression 'price target', which we shouldn't have done. i agree. The absolute rate (250:1, or 275:1, or 300:1, etc) isn't really that important, because if it changes slowly, folks can just reprice goods and services as desired to match their prices to a desired 'real-world' value. I am not sure. So when we watch the Lindex, we are looking for trends that seem to be moving the price continuously and at too great a rate up or down. But this is hard problem! Sometimes, like in real-world markets, the movement of the currency exchange prices is not due to 'fundamentals' like the rate of new money, but is instead just random fluctuation caused by speculation, etc. If an economy starts to loose blood, it is for sure speculators will have the power more than anytime. The Lindex volume is still small compared to real-world markets, and any economist will tell you that less volume equals more 'volatility' - if there are fewer people trading, you can expect the prices to move around more. In the last 5 months or so, the Lindex has moved about 20% in terms of the exchange rate. Most world currency markets move less than that, but not tremendously less. So overally we feel like the LindeX is pretty stable for it's lower volume. This is right but none of world countries dont have the power you have to control the market. As discussed above, we will continue to watch for trends and make adjustments to the new money rate in response to those trends. This is a learning experience for all of us and for the overall community - we will do our best to keep things as stable as we can. I am not satisfied. But i (hope)am sure LL will do necessary actions. |
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Pix Paz
Away with the Pixies
Join date: 17 Oct 2005
Posts: 129
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03-30-2006 13:32
Thank you Philip for giving us a reasoned answer.
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Lina Pussycat
Texture WizKid
Join date: 19 Jun 2005
Posts: 731
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the real problem....
03-30-2006 14:05
There is no type of restraints on how far L can devalue. Problem with this people are like ok we can keep devaluling to sell fast without running into problems. Having some restraints on the Lindex Market could very well piss a few people off here and there but the fact remains that a few Places actually do this to keep things normalized in the real world economy. Sure it may get a few people mad here and there but ultimately it allows the golas to be implemented a a slightly easier rate. This would allow for their long term goals to be more prevalent .
Problem is people are going to debunk it cuz OMG i cant sell L at a super fast rate. The question is SO what? Your the ones that dragged down the Value Of L now you should be the ones to deal with your consequences. I think really Philip needs to leave the matter alone as its not his fault at all. Rather the fault of greedy people out to make a quick buck! |
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ReserveBank Division
Senior Member
Join date: 16 Jan 2006
Posts: 1,408
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03-30-2006 14:09
Ahh.. the smell of pure capitalism. Take advantage of em while they are down, profit, then sell them the solution to fix their problem. Brilliant. Reminds me why I have less and less faith in capitalism. Considering I went to NAJAC as a delegate when I was in Junior Achievement, and believed strongly in capitalism at one point, this is a bit of a cultural change. I now realize that we need something between capitalism and socialism for humankind to ever evolve past the petty bickering over finances we have now. Too bad we aren't evolved enough to figure out the solution. *shakes head* Thats human nature baby... You can't coral it with something between Capitalism and Socialism.. You must let freedom ring... Trying to control people to help people leads to Socialism.. There is no Utopia Shadow.... Its a fantasy... _____________________
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ReserveBank Division
Senior Member
Join date: 16 Jan 2006
Posts: 1,408
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03-30-2006 14:12
There is no type of restraints on how far L can devalue. Problem with this people are like ok we can keep devaluling to sell fast without running into problems. Having some restraints on the Lindex Market could very well piss a few people off here and there but the fact remains that a few Places actually do this to keep things normalized in the real world economy. Sure it may get a few people mad here and there but ultimately it allows the golas to be implemented a a slightly easier rate. This would allow for their long term goals to be more prevalent . Problem is people are going to debunk it cuz OMG i cant sell L at a super fast rate. The question is SO what? Your the ones that dragged down the Value Of L now you should be the ones to deal with your consequences. I think really Philip needs to leave the matter alone as its not his fault at all. Rather the fault of greedy people out to make a quick buck! Any suggestions about controlling the trades on LindenX is the WRONG SOLUTION... The CORRECT SOLUTION is to fix the problem that leads to all the selling in the first place.. Hint: King Phillip's stupid Economic Policies.. _____________________
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Mistah Hand
Registered User
Join date: 22 Mar 2006
Posts: 47
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03-30-2006 14:17
Thats human nature baby... You can't coral it with something between Capitalism and Socialism.. You must let freedom ring... Trying to control people to help people leads to Socialism.. There is no Utopia Shadow.... Its a fantasy... Actually, I believe the US uses a modified form of capitalism, so there is such thing as a medium between capitalism and socialism. The Market we have in the US is not really a true "free market." |
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ReserveBank Division
Senior Member
Join date: 16 Jan 2006
Posts: 1,408
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03-30-2006 14:19
Actually, I believe the US uses a modified form of capitalism, so there is such thing as a medium between capitalism and socialism. The Market we have in the US is not really a true "free market." Okay okay.. Not a true free market. I would agree... The only true market in the world is Currency Exchange. ** Assuming countries allow their currency to float free _____________________
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Lina Pussycat
Texture WizKid
Join date: 19 Jun 2005
Posts: 731
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Problem is....
03-30-2006 14:44
Any suggestions about controlling the trades on LindenX is the WRONG SOLUTION... The CORRECT SOLUTION is to fix the problem that leads to all the selling in the first place.. Hint: King Phillip's stupid Economic Policies.. Any correction in those terms is going to lead to more trouble and less users. Im not saying to totally control them just a safety zone. Which with a day to day economical (stock) market sort of setup is done quite often in the real world. and example was something that jopsy provided. In which he/she stated that they worked with stuff like that in R/l b4 where it was illegal to go past 25% a given value (usually what the stock is worth) in either direction. It can be applied to SL in the same manner. I look at it this way though. i dont think LL should do anything User created the problem with L falling users should fix it and they can. But thats putting alot of faith in users and is highly doubtful. Sure control sounds like the wrong answer now but its only control to a certain degree if people stay in bounds of current area's of the safe area's then there isnt a problem at all... But again its all down to faith in users which time and time again they prove themselves to be corrupted at least the majority of the sellers.... |
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ReserveBank Division
Senior Member
Join date: 16 Jan 2006
Posts: 1,408
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03-30-2006 18:58
Any correction in those terms is going to lead to more trouble and less users. Im not saying to totally control them just a safety zone. Which with a day to day economical (stock) market sort of setup is done quite often in the real world. and example was something that jopsy provided. . All a safety zone does is extend the hurt... _____________________
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Alan Kiesler
Retired Resident
Join date: 29 Jun 2004
Posts: 354
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03-31-2006 01:22
I think what Lina and Jopsy are suggesting would be better implemented as something like the NYSE's 'circuit breakers.' The idea re-worded slightly for here:
A drop of N points from the open (absolute or %) would kick in an automatic 'forcing' of all subsequent sell orders that are lower, to that floor for a period of time (say 2 hours) before they release again. Subsequent 'break points' can be established for longer periods (4, 8 hr) or until the 'day' is over and the new open is set. Before someone puts holes in the idea this is merely a suggestion, and probably a bad one at that. I'm just bringing up one way that controls can be implemented. (Note the original Breakers suspend trading altogether - perhaps just disallow sell orders for that period? *shrug*)Again, this is merely a suggestion, and one that will likely not work in SL anyway. I'm merely bringing it up so those not familiar with RL markets have an idea what really goes on in situations like this. :link: _____________________
Timothy S. Kimball (RL) -- aka 'Alan Kiesler'
The Kind Healer -- http://sungak.net No ending is EVER written; Communities will continue on their own. |