An idea to balance economy

Real life governments regulate their economy by adjusting the interest rate up and down. When the economy is slow, they'll lower the rate so it enourages consumers to spend more. To discourage spending, they'll raise it much higher. Though second life doesn't rely on interest rates, maybe there is something that could regulate second life's economy better.
I know its just an idea, so please be gentle on me as I'm in no way saying I know anything about economics. Let's say if the Lindex is as it is right now, to reduce the stipends until we reach a certain rate. If we go over that rate, then the stipends could be set back to where they were.
I think this getting rid of stipends altogether, in my opinion, is not a good idea. I'm not going to discuss why because that is not the point of this thread. I'm bringing up an idea and positive discussion to help the economy is what SL needs. Any other ideas would be great too. Thank you.

Ah, don't be worried so much about the opinions of SL's "economists"!

Every forum post with demeaning intent usually makes someone look bad, but it's rarely the intended target




Yeah, some kind of feedback mechanism has to be there. Who knows what they will do.

Usually with regard to changing stipends, a couple of the arguments against are "I paid for $L 500 a week!" for premium users, and "Yeah, so what?" by legitimate free account holders.

Changing $L 50 stipend a week doesn't do much, unless it or the referrals are being farmed (which, by watching the total population stat barely move after the referrals freeze, I believe they were being farmed *very* heavily).

Eventually the $L may slide to about 361 per 1 USD, which is what premium users pay for them. (72 USD yearly for an account netting $L 500 for 52 weeks) Call the rate 400 if times get tough and people want to move them.

Is this bad?

Only if you hold a lot of $L for the entire duration of the slide. Or, maybe demand will go up. Hard to say because the Lindens are constantly tinkering with things to try to make things better.

mcgeeb, this is a good idea. It behooves LL to experiment with some kind of structural management of the SL economy.

There are several suggestions so far:

a) Create a penalty for those who are selling far above the posted target rate and return that penalty fee to those who sell near the posted target rate
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b) Pay an actual interest rate to those who have deposited money with SL
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c) Money supply management via bonds, L$ denominated investments
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d) Restrict/Increase stipends as we approach the posted target rate
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They each have their pros and cons. I invite everyone to read through the threads, there is quite a bit of signal out there for anyone who is interested in this issue.

For someone that says they know nothing about economics, you seem to understand them pretty well. The only problem with changing stipends all the time is that people get used to the amount of stipend they get. Every time you have to lower the stipend, which has been done before, you anger almost everyone in the game. There is the traffic bonus which is changed daily, and there are things that can be made to destroy the $L like $L land auctions and upload fees. Anything that lessens the amount of $L out there will raise the $L value.

I think if Linden Labs wants to eliminate the amount of work they have to do to keep everything balanced, they will eventually get rid of the stipend altogether. Without the stipend, balancing the economy will not involve as much flow of money as it does right now.

Let me throw another one out.

Linden Labs should allow the payment of monthly fees and land fees in Lindens as well as dollars, and they should fix the exchange rate.

Lets say they fix it at 300L per $1, so if you have a $5 tier fee, you can pay it off with 1500L instead.

By setting a fixed value, it assures that the exchange rate should never get too far away from the fixed value.

If the market rate is 280L/$1, you are better off selling your lindens and paying fees in cash, driving the rate higher. If the market rate is 320L/$1, you are better off buying Ls and paying your fees in Ls, driving the market rate down.

If Linden Labs announces ahead of time that the fixed exchange rate for fee payment is subject to change, so players don't get upset if it does change, it gives LL a tool to control the economy (sort of the LL version of "prime rate".

Unfortunately, LL's revenue is mainly made up of tier payments.

If they were to accept L$ for tier, they'd have to convert that into USD onto the exchange in order to pay the salaries of their employees, repay their investors, pay their bills, etc, which would bring us back to the original problem.

Yes, if they were to accept L$ for tier and land purchases and then sell it at a fixed rate, that could be very interesting.

They have said that they will not sell L$ in the past though, so they'd have to get past that.

Once the businesses in the SF area beginning accepting L$ as payment for goods and services, this will work splendidly. Until then, LL has to pay its employees with real money, because their landlords prefer it over L$, the electric company prefers US$ over L$, the grocery store....

I believe the idea is that LL would then go ahead and sell the L$.

By providing this huge reserve that they hold they would bring the rate down quite a bit. The idea has merit, as far as I can see, but has its pros and cons like the rest.

What? So they have to sell the $L, and it goes right back into the economy. Now not only do the Lindens get a shaky income revenue stream (rather than stable with a $US tier structure), but no money is taken out of the economy.

What's the advantage here?

Then it'd be like if they would be able to "print" money. It would work for a short period of time, but would definitely fail in the end. By the way, who would they sell the lindens to? They have (had?) an option to pay L$ for tier on the website, but they set the L$ value so low that only people in a most critical financial situation would actually use this option. Question is... was that just coincidence?

LL will make US Dollars no matter what.

Right now people can sell off their lindens for cash to pay their fees and LL makes money on the conversion as well as the cash.

Going the other way, if people buy lindens to pay their fees, LL basically pockets the cash used to buy the lindens, either way LL gets real US dollars.

The only loss to LL with my plan is if the market driven exchange rate gets too far away (too high or too low) from the fixed price of fee payment via Ls.

Part of that is made up for in transaction fees, and the rest can be written off as the cost of economic control. If the market driven exchange rate gets too far away from the fixed linden fees, they could simply make a price adjustment.

The problem right now is that if someone wants to pay fees via lindens they have to sell the lindens first, and this just contributes to the ever increasing inflation.

Who's gonna pay US$ to buy L$ to pay something they could have payed US$ in the first place for? It would only make sense if it would be cheaper to pay in L$ - which is the case if you pay all or most of it in ingame earned L$.




Which is why LL doesn't follow your plan...