A simple money sink
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Colette Meiji
Registered User
Join date: 25 Mar 2005
Posts: 15,556
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08-19-2005 10:34
From: Dnate Mars LL also takes money from the economy and makes it disappear. So on the balance, they are like a government that is spending more then they take in. The statement was not just directed at you either, it was more of general point. There are time sinks, but cause it does take time to make something that other can buy and/or get. There is a balance that will come over time, just ride the wave and have some fun. LL taking money from the economy and making it disapear is what we mean by money sink. As far as time sink I was more refering to other virtual economoies that use Time sinks to limit character incomes. Many people are concerned over the L$ dropping - indeed this isnt my thread nor was the related one. Many posters have far more stake than I do - remember inflation means content producers will have to raise their prices. Thus reducing the value of the stipends and dwell payments people wish to remain in place. |
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Jellin Pico
Grumpy Oldbie
Join date: 3 Aug 2003
Posts: 1,037
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08-19-2005 11:28
From: Whata Fool I really don't understand the need for a "money sink", and barely understand the concept of why one is needed. . It's simple, there are many people who sell $L, and right now they're all going crazy because the price per $L1000 dipped slightly and now OMFG they're making 10 or 20 cents less per $L1000 than they were a month ago.
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Stephane Zugzwang
Brat
Join date: 26 Jun 2004
Posts: 192
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08-19-2005 11:33
There are money sinks in RL economies, most notably importation: It is currency that leaves the economy, in exchange for value imported to the world. In a way it's VERY similar to what loading files (textures and sound) does, and it's a very logical money sink. LL monitors money supply very carefully. The (relative) stability of the Linden $ over the last year is nothing short of astounding. The Linden is MUCH more stable than, say, the dollar or the Euro relative to each others. It does help to be able to monitor money creation, sinks, get stats about ALL transactions  . In more way than one, SL is a dream come true for an economist.
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Phoenix Psaltery
Ninja Wizard
Join date: 25 Feb 2005
Posts: 2,599
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08-19-2005 11:47
From: Dnate Mars Don't forget, money that is in an account that is no longer used, either because people stopped playing, or they were banned, caused money to leave the system. Hmm. That's a VERY good point. Perhaps LL could implement a policy like many RL retail stores have for their gift cards, where if they are unused for a certain period of time, the value begins to decline. For example, if you have a basic account, and have not logged in for three months, you forfeit 10% of your L$; after six months, another 25%, and after a year, the remainder? I don't think it would be necessary to have a similar policy on premium accounts, because, after all, who among us would pay $9.95 (or more) each month and then not bother to actually play? P2 |
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Lordfly Digeridoo
Prim Orchestrator
Join date: 21 Jul 2003
Posts: 3,628
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08-19-2005 13:25
From: Whata Fool I really don't understand the need for a "money sink", and barely understand the concept of why one is needed. There is no equivalent in a RL economy.
The US Mint burns millions of "old" dollar bills every year, taking them out of circulation permanently. This is a money sink. Other countries also buy up our money, taking it out of circulation semi-permanently. This is another money sink. Plus couches, sewers, holes in the pants, etc. From: someone
I can see the concept of a "money sink" as a means of regulating the money supply, but it is not a necessary part of an economy as many have suggested. Other more conventional suppy and demand controls should work as they do in a RL economy.
It's absolutely essential in an MMORPG economy; if you don't have these sanctioned, official money holes, the players end up printing WAY more money than there are goods. It happens every time. Ultima Online, Everquest... Motor City Online was the worst. At the end of its existence, one part for one car cost upwards of several million dollars. At launch, the same part was roughly "real world market price". There were no money sinks. LF
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Keiki Lemieux
I make HUDDLES
Join date: 8 Jul 2005
Posts: 1,490
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08-19-2005 14:05
From: Lordfly Digeridoo It's absolutely essential in an MMORPG economy; if you don't have these sanctioned, official money holes, the players end up printing WAY more money than there are goods. It happens every time. Ultima Online, Everquest... Motor City Online was the worst. At the end of its existence, one part for one car cost upwards of several million dollars. At launch, the same part was roughly "real world market price".
There were no money sinks.
LF Well sure... but this isn't a MMORPG. Money is not "printed by players." In almost every MMO I can think of, you can go out, do a repetitive task and farm currency endlessly. You can't do that in SL. 500L per character per week is nothing compared to the kind of huge influxs of currency that are possible in MMORPGs. I agree with you that based on the medium term devaluation of the linden, SL might need some money sinks, but the problem is nothing like the kind of thing that has happened in typical MMORPGs. |
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Madame Maracas
Not who you think I am...
Join date: 7 Jun 2004
Posts: 1,953
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08-19-2005 14:05
When Federal Reserve Banks destroy unfit currency, it is carefully balanced by new bills released into circulation, a zero-sum equation, or nearly so.
The following taken from http://www.mackinac.org/article.aspx?ID=3549
From: someone Currency and Inflation
Dear Ask the Economist:
Could governments simply fight inflation by destroying (shredding, burning, melting) their currency? Why don't they?
First, we must be careful to operate from the best definition of inflation. Though it is commonly thought of as "rising prices," I am among the many economists who prefer the more traditional (and ultimately, more meaningful) definition: "an increase in the quantity of money and credit." Rising prices are simply one of the effects of inflation; first you have the inflation in the form of an increase in money and credit and then as an aftereffect we experience rising prices.
Having defined inflation that way, the answers to your questions become clearer. Since government increases the supply of money directly and increases the credit supply indirectly through the banking system, then yes, government can certainly decrease inflation by destroying some of the very currency it first created. If such destruction is not offset by increases in new currency or credit, and all other things remaining equal, then one of the effects of the destruction of currency would be for prices to rise at a slower pace or even decline.
The government does indeed destroy some of its currency now, but that activity is confined to the destruction of old bank notes that have become excessively soiled or torn. The average life of a dollar bill, for instance, is less than two years. This currency destruction probably has no impact on prices in the marketplace because it's not a significant quantity at any one time and is usually if not always offset by new, replacement notes.
Could the government actually cause prices to stop rising or even decline by a larger, net decrease in currency through the methods of destruction you suggest? Theoretically, yes. But even then, it is important to understand that paper currency is a relatively small portion of the total monetary base. Bank reserves and credit are much larger and the government can greatly affect those elements through Federal Reserve policy: raising or lowering its discount rate, buying or selling government bonds, and regulating reserve requirements. These methods are actually the primary tools the monetary authorities of the government employ to raise or lower the money supply and thereby affect prices.
Why doesn't the government destroy more currency to deal with the problem of rising prices? As explained above, paper currency is a small component of our total purchasing power. Burning paper money as a way to affect prices would be a very inefficient way to deal with the problem and would have minor impact in any event. The Federal Reserve prefers to use its more powerful tools that I outlined in the previous paragraph. Personally, I think these tools represent excessive government control over the money supply and the economy, but that's another matter altogether.
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Dnate Mars
Lost
Join date: 27 Jan 2004
Posts: 1,309
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08-19-2005 15:07
From: someone
The government does indeed destroy some of its currency now, but that activity is confined to the destruction of old bank notes that have become excessively soiled or torn. The average life of a dollar bill, for instance, is less than two years. This currency destruction probably has no impact on prices in the marketplace because it's not a significant quantity at any one time and is usually if not always offset by new, replacement notes.
This is the only thing I found close, I don't see where it says that it is a zro sum game. If that was true, then we have the same amount of money at all time, even with an expanding economy? Somehow, I don't think that is true. Inflation would not happen if the money supply is zero-sum, there would be deflation, where each dollar became worth more, because more people would want to have that money to pay for things. From: Lordfly Digeridoo
The US Mint burns millions of "old" dollar bills every year, taking them out of circulation permanently. This is a money sink.
Other countries also buy up our money, taking it out of circulation semi-permanently. This is another money sink.
Plus couches, sewers, holes in the pants, etc.
While you are right about the burning of old bills being a sink, everything else is not. Other countries holding our money is no different then people at the top of the leader board holding onto thier money. It is not really gone, just not being used. Goods that you buy are just like goods you buy in SL. The money just goes to someone else. Things do "wear out" in SL also. I know I have stuff that was scripted a long time ago that is now no good. I have items that I just won't use so they just sit there. As SL grows, many items will become useless. Scripting will become better, items will look better, things will become "old" and not used.
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Bob Bravo
Registered User
Join date: 10 Jun 2004
Posts: 210
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08-19-2005 19:38
I would like to volunteer as a Money Sink.
Please instruct LL to pour their money into my account.
LL, that's B..o..b B..r..a..v..o
Thank you.
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Byron McHenry
Registered User
Join date: 21 Sep 2004
Posts: 204
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08-19-2005 21:06
From: Nala Galatea Yes, but then you have to think that people pay for a premium account, oneof the benefits is a garaunteed $500 stipend each week. That would seriously irritate some people.
Now, if they got rid of rating/dwell bonuses for a month, that would be more feasible without violating any contracts.
They could also raise the price of uploads. Tier upload costs based on what's being uploaded. (image, sound file, animation)
Charge a tax for having music/video streaming on your land.
etc, etc, etc....(just ideas for sinks)
However, as things stand right now, there is no true money sink except for ratings and upload fees (ie. the money otherwise changes hands, and is not removed from the game)
and they aren't expensive enough nor popular enough to affect much. There needs to be viable ways to remove money from the game that people would be willing to pay or have shown they will pay.
Of course, people here are more concerned with the RL value of their money than other online communities, so I think any increase in a sink will be met with some stiff opposition (though that's never stopped any online company from implementing their policy, and as always, either ante up or fold) you economist just let it be. it better off fo the economy to grow but as the sl dollor gets stronger you will find that more people will because ingame business owners because ofthe fact that or you can cause hyper inflation by reducing stiperns and raiseing prices to do things also most people would use lindensto pay their teir but its too expensive to do so. you dont want sl money to equal us dollars or do you as a user satnd point its good from the linden stand point hey they are printing their own money. esenally the gom is a way of investing with out the liabilities of having stock owners but they wont screw you over by raising prices untillevery one gets peid more . the thing is becuase we all pay a flat rate just to play the stipen is extra if you do noting with it in game the the short run model will just be the same as the long run model unless they raise prices and dont raise stipens to match. |
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Dark Korvin
Player in the RL game
Join date: 13 Jun 2005
Posts: 769
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08-20-2005 02:47
I don't think Linden should need to spend their money to level out the value of the linden. The biggest factor in the price in the linden is the desire in people to spend US dollars to own things in SL. If Linden just kept buying Lindens back and people other than Linden continue to desire buying things in SL less and less, then they will loose huge amounts of money when the market corrects itself. I don't know if I like the idea of the owner of the servers that make Lindens have a value in the first place is such an appealing thought to me.
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Colette Meiji
Registered User
Join date: 25 Mar 2005
Posts: 15,556
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08-20-2005 15:10
From: Dnate Mars This is the only thing I found close, I don't see where it says that it is a zro sum game. If that was true, then we have the same amount of money at all time, even with an expanding economy? Somehow, I don't think that is true. Inflation would not happen if the money supply is zero-sum, there would be deflation, where each dollar became worth more, because more people would want to have that money to pay for things.
. This is of course not true AT ALL - ONLY a fraction of "money" in any modern economy are actual slips of paper. Please read this post above, he quotes a very good reason Why - From: Zonax Delorean A bit of sidenote: While governments don't just create money, banks, in a way, do. Money creation in RL (Wikipedia)It's an interesting read, worth checking out the whole page. The other reason is that money can be spent in a serial matter. Person A pays Person B who pays person C and so on. (this happens in SL) In Macro-economics this is money creation and there formulas to estimate how much one invested dollar will create in terms of "wealth" And as Madame points out Actual Currency is printed to match that destroyed. Additional printed money beyond that would have to be "bought" with money the government had in accounts for that purpose. A big reason for this is becuase the US govenrment does not have a blank check to make money - they only have the permission to create currency. Countries HAVE tried printing money in extreme situations - a good example is 1930 Germany - where a wheelbarrow of cash was needed to buy groceries. Others are latin american countires in the 80's that had to pay workers wives at lunch time becuase they had daily increasing inflation. Basically if a government prints money with no offset , Inflation results. |
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Barbarra Blair
Short Person
Join date: 18 Apr 2004
Posts: 588
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08-23-2005 09:52
All of us Linden sellers (OK, I'm a teeny Linden seller, but I still count sort of) could just stop selling so darned cheap.
There is no rule in the TOS about price fixing, is there?
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Persephone Phoenix
loving laptopvideo2go.com
Join date: 5 Nov 2004
Posts: 1,012
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money sinks must be evenhanded
08-25-2005 04:34
I'd say that user fees for larger texture uploads is a good idea, and that commercial postings, if paid in $L are a good idea. I think that arts and culture events should be exempt from any event posting fees, though. Whatever LL does, it must be even handed so that one part of the economic base isn't sacrificed to meet the needs of everyone else. I would be willing to pay a point to point TP fee if in a hurry. Otherwise, I can schlep from the telehub for free. Particularly if we don't ever get more telehubs at the new continent. (I'd think about it as the extra service provided by the telephone company's information service when it offers to dial the number for you for a few more cents.)
One thing to think about: new products in the forums is kind of the same as the event posting. If one is made to pay then the other should too for the sake of fairness (unless there were increased texture upload fees, but I am against those unless the texture is more than 512, simply because the best products sometimes require trial and error and new builders need more trial and error uploads than more experienced creators).
my .02
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Gabrielle Assia
Mostly Ignorant
Join date: 22 Jun 2005
Posts: 262
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08-27-2005 13:52
From: Dnate Mars Um... wrong? Money still does not leave the economy. Money comes from the company to pay the workers, the workers buy the products that the company makes. Where is the money sink in that cycle? Companies pay other companies to build a machine for them, that company pays its workers, the workers buy the goods that the first company makes. Still no sink. The government taxes the people in the country, that money goes a pays for government run programs. Yet again, no money sink. Must I go on? The government prints money, much more then is lost or ruined, so the amount of USD floating in the world increases every day. There are no money sinks in RL, why do we need them in SL? The portion I put in bold above is exactly what I was talking about last weekend. I'm not convinced uploads and ratings are any kind of "sink"... as long as we are defining a "sink" as money being permanently removed. In out SL universe I doubt anyone except an informed Linden knows exactly what happens to $L used for uploads and ratings. Can someone PROVE they get flushed down a bit bucket? Is it IMPOSSIBLE that those $L are just recirculated as stipends (government welfare program) ? From: Lordfly Digeridoo
The US Mint burns millions of "old" dollar bills every year, taking them out of circulation permanently. This is a money sink.
Even if someone can point to a reference where LL does totally flush the incoming $L from uploads and ratings ("burn them"  and then create new (from thin air) the $L for stipends, I still don't think I can consider this a "sink". If the government (US or SL) takes my crinkled old dollar and burns it... then prints and hands out a fresh crisp dollar from thin air..... where is the sink/loss of that dollar from the economy? ... so.. my original question was... What sinks DO we really have in SL? However... I'm really on the side that we should not have LL trying to come up with any sinks. God does not have money sinks on Earth. We are set here, and have created our own life and reality. I would HOPE that LL has the same future plans for SL.... as they say.... we are born... now it's from our imagination that we create our SL world. I would hope that LL keeps their hands out as much as possible. If people want various forms of government (socialist, capitalist, anarchist, etc) .. then let the people in SL form areas within the world and set up their governments with whatever "sinks" and taxes and/or freedoms THEY want... Perhaps some places my have dictatorships... others clusters of sims might hold democratic elections. Etc, etc. That way people can move/live in the regions they want to live. Everyone can choose the lifestyle THEY feel happy with. Why do we want to put LL in a position to FORCE any tax, nontax, government type, laws, etc... on the ENTIRE universe of SL? The quote is "You can't please all the people all the time." And ANYTHING LL puts in to universal law will not be liked by some group of people. The easy (and happy) solution is for them to leave it up to the people.... let us form their own clusters of sims with various governments, and move where we want. |
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Gabrielle Assia
Mostly Ignorant
Join date: 22 Jun 2005
Posts: 262
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08-27-2005 14:42
From: Lordfly Digeridoo Other countries also buy up our money, taking it out of circulation semi-permanently. This is another money sink.
Plus couches, sewers, holes in the pants, etc.
LF Ooops... sorry I didn't include this in my last post. If we are considering THESE to be valid money sinks then why was I scolded for suggesting getting money out of SL and in to GOM was a sink? It seems valid to me that the methods listed above are indeed sinks (yes.. perhaps temp ones)... which cause money to not be in circulation in the SL world for at least SOME period of time, and so ANY of the ways $L are removed (for some period of time) are valid sinks that would cause the value of $L to rise. The Chinese government could probably dump a ton of US dollars right now and cause the $USD to crash... so, was that really a sink or not? Any more than tons of money in GOM? I think it's really all a matter of semantics... and doesn't really matter WHAT we agree on or dont agree on to call a "sink". The bottom line is that if there are less $L in circulation actually IN-WORLD, and people want $L in-world, then they will pay more for them. The bigger question is... should we rely on LL to do this? I would say "no". Let LL be "God"... who does not deal with money at all... and pressure them to leave all the government and economics to us people. Those of us who do not like what one group is doing (taxes, etc) can form our own group and do it the way we want). Gabrielle |
