Learn from Second Life's Leading Economic Mind...Blog Reopened!

Due to popular (and public service) demand, I've reopened my blog.

Learn from the best.

I predicted this SL depression.

http://sleconomyblog.blogspot.com/

Maybe this is a good spot to ask these questions then:

If Stipends are the reason for the devaluation of the L$, then how does that explain the recent plummet when stipend supply has not increased a related amount in the same time?

Doesn't that point more towards a psychological reason for devaluation, such as sellers undercutting each other with no regards to their effect on the market?

Really low buy orders are being filled, and the sellers aren't saying "No, I won't sell that low." Isn't that more indicative to the cause of the devaluation of the L$?

I'm asking these questions in all seriousness. I'd like to know.

You are Da Man....

Try sombody else..

No. The fall is related to the fact there is more money for sale than buyers. Due to supply.

But the fall is increasing under the same amount of supply. I'm asking you, as "Second Life's Leading Economic Mind," to please explain this discreprency to me. I've stated before that I'm not a trained economist, so I'm turning to you, in all respect, to explain how what appears to be a downturn based upon irresponisble selling is in actuality directly related to the stipend.

There are many forumgoers who immediately attack you. But this is not an attack, I'm asking a serious question here. As you have proclaimed yourself SL's Leading Economic Mind, I am prevailing upon your expertise to explain something that confuses me. So please, teach me.

Here is the setup:

L$60,000,000 of new money is minted each month. Thats an increase of about 10% per month.

Now, these federal linden deficits have been running for months - but fortunately - L$ demand was able to keep a rampant money supply growth in (relative) check.

However, we've come to the point where money being offered for sale (which has grown because the money supply has grown) far outstrips money demanded. This leads to severe deflation. The deflation will stop when the supply of money available for sale = the supply demanded.

LL needs to curb its federal deficits because introducing so much money is having an adverse effect on the value of it. Remember, when the supply of anything goes up, the value goes down. Simple economics

Hope that helps

To a degree.. But the inflowing L$ has actually decreased recently with the reduction in Dwell. Yes the L$ has plummeted instead. First with the announcement that LL will sell L$ if needed, which caused an unwarranted panic. And now with the Limit Buys, and sellers filling the outrageously low orders. It seems that the recent downfall is more psychologically driven than supply drivern. Yet it seems you're stating the opposite. That's where my confusion truly lay.

Currently, it appears that sellers are filling orders for L$350 and worse, which is driving the value hard towards the soft floor of L$361. When they really should be refusing to fill those orders and selling for a higher, more valuable price. Doesn't this seem indictive of an attitude that's far more damaging to the value of the L$ than stipends? I'll agree that the stipends can definately account for some of the devaluation, but I would think that recent events are casting light on the possibility that it's the sellers leap-frogging each other to sell faster which is causing the bulk of the problems the L$ faces against the US$.

So hopefully, you can see why I and others find it confusing to blame the devaluation on just the stipend.

There is no "floor".... just some abstract idea by the uneducated public that some god-like event will keep the L$ from breaking through L$361 / $1 USD.

Rest assured that the L$ can and will fall through this "magic number".

I agree but would also comment you have to factor in the support and resistance argument. At some point you reach a zone where people feel fair value has been reached, much as the Dow seems to have settled today after the sharp downward pressure of the last few weeks (no advice intended).

But like the Dow people may feel differently next week/in the future.

I have no means of predicting fair value.....no true PE or PEG ratios exist in Second Life, and it is also fair to say that currently I an not totally convinced the whole thing (Second Life) is long term viable in its current format.

Not a floor. A mean reversion point. Big difference.

See, e.g., here for more info and here for a fun little calculator than can show you how a mean reverting process works (the volatility in this simulator follows such a process).

And where can we find this economics blog, Jamie? Cause it certianly ain't you.

No, actually, that blog is written by me. It really is!

That might well be, but it doesn't seem to have anything to do with "Leading SL Economic Minds" nor their blogs, mentioned in the thread title...

I haven't read the blog. But you are as much the 'greatest economic mind' as you are a 'capitalistic legend.'

To paraphrase someone whos name slips my mind 'I can be a legend in my own bedroom too, simply by saying it.'

Just because you say you are a capitalistic legend, or the greatest economic mind, does not make it true. In your case, neither are true.

A clear voice of reason returns to educate the SL populace. Thanks for starting the blog again.

OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOKHAYY there....


haha

By "reopened" you mean, "deleted everything except one entry where I suggest a depression will happen", right?

No. There were some nasty personal insults and threats I had to exercise discression in removing.

You mean you had to take the ones telling the truth off. Can't have any of that honesty..

Oh, and Jamie - put your money where your mouth is:

/130/a0/109283/1.html

No problem. I could never abandon SL or her citizens in their collective hour of need.

Why on earth would I volunteer to give away my stipend or have it ceased?

If I was in war, I would never arm the enemy. Ever. Putting myself at any kind of competitive disadvantage is something I will never knowingly do. Sorry.

I guess stipends AREN'T the problem if the 'leading economic mind' won't give theirs up to help the economy.

Thanks for showing me the stipends are GOOD for the economy, Jamie.

You're nuts. I wouldn't give away 1 cent let alone the dollar and change I get from stipends. LOLZ.

Charity starts at home.

Curious if LL wants a more stable economy and there is more $L for sale than what people are demanding then why doesn't LL just buy the $L back off the exchange and not return it back to the economy?