L$ Back to Losing Ways

Well, just when everybody thought the L$ was headed higher on GOM, it decided to resume dropping.

L$300,000 for sale around 3.34.

Sell 'em while you can. L$ is going below $3.00 USD / L$1,000 before the year is up.

Whoever guessed "dead cat bounce" please come and pick up your prize...

it's beginning to smell a little ripe.

BooYa

The cost of $L is relative. If one doesn't like selling his/her widgets for $50L because the $L dropped by 25%, one should increase one's prices by 25% to $65L for the widget. This is what happns in a real economy.

If it's $1000L per dollar or $10L per dollar, prices will reflect the actual dollar value. If a creator feels her item is worth $1us, she will sell it for the current exchange to receive that dollar.

The only people hurt by devaluation of $L are those who have held on to a lot in hopes of driving up the price, by making them more scarce.

Thats my humble opinion

Its not so easy for us who operate multiple stores across multiple sims.

There's no quick and dirty way of changing all our prices at once.

Well, I guess I don't get this.

I won't be raising my prices, cause then, won't it just be that much harder for people to buy my things?

coco

o/~ IGE is still buying at $3.30. o/~

As long as IGE continues to do so; it wont drop below that mark for very long.

-Adam

IGE is buying at $3.35

Jamie - a question...

I know what your predictions are for the short-term. But could you risk a guess at the long-term?

In your *personal* educated opinion, do you think it is likely or unlikely that the value of the $L will rise above US$4/L$1000 within the next 36 months?

Just curious as to your perspective on things

If the price of $L is cheaper, it will cost the same to pay more $L for goods.

As it is, I pay about $3.50us dollars per $1000L. I can buy your $250L item for about $1us dollar. If the price of $L changes, and I can get $500L for my same $1us dollar, that means if you raise the price from $250 up to $500L, it will still cost me only one us dollar.

*looks around for Schwan* ok I'll do it....sell! sell! sell!

Buy, Buy, Buy!!!

OK - I get this, I think. But, I don't think of my customers as buying Lindens. Well, you know, they probably do. But I tend to think of them as an aggregate as people who I assume are buying items from their stipends, and other Lindens.

I guess I'll keep thinking of them that way. That way, yes, the ones paying with bought Lindens will be getting a better deal - since they will get more Lindens for their money. But the ones who don't buy Lindens won't be getting penalized, either, as long as I don't raise prices.

I think I have that figured out right. Right?

coco

It all depends on the actions of LL. If they do nothing, the L$ will never see $4.00 USD / L$1,000 again.

Duh!

If nothing is done in any economy, then things have a tendance to swing wildly. The Feds do it for the USA. There are many changes that have just happened, but they have not filtered down to the market yet. To me, I have seen a market that seems to have stablized a little bit more. It seems to have found a spot that it likes and seems to be somewhat stable. It is just a few days, but the buy and sells seem to be stable too. We will see what happens in the future. There are way too many factors pulling on the L$ to say what will happen in the future. As a personal guess, I would say we will see a rise, but how great is unknown.

Bah, the waves continues. Quick drain the ocean.

Well the thing is, if they did buy with their stipends, they still bought the $L. We can only hope that Linden Labs lowered our fees some from the money they bought with. It is hard to tell though.

Now that sounds like a trader talking.

It's funny how placing a string of 100 unit orders on the buy side, below IGE's buy price, so there isn't much risk of actually buying, then placing odd sized orders on the sell side, so that it doesn't look like a trader selling, then buying up the small orders between your two goal posts, will make some people think the market has reached a bottom. A seven or eight cent spread is a day traders' wet dream. Well, closer to a dollar spread would be a wet dream, but then you really are sleeping.

I agree it depends on what LL do.

Currently there would be approx. $5.6 Mil L flowing into SL a week (Based on 32K Basic and 8K Premium Users). These Lindens are created effectively like a government printing money and have no underlying value.

Value is established by what those 5.6Mil L can buy in SL and then the ability to convert it to an underlying currency (ie GOM). ie People with a surplus of L selling to people with a need for more L.

If businesseses in game raise prices (ie Inflation) then the 5.6 Mill of new lindens buys less and the GOM exchange rate will strengthen a little over time. But as the amount of Linden in the market does not change in this sort of transaction the exchange rate can only go down as more and more Linden flows into the economy.

The best way for LL to increase the exchange rate is remove Linden from the economy (ie Allow the purchase of new Land using Lindens). This would effectively ensure Lindens are being removed from the economy and thus drive higher buy prices on GOM

The alternative would be a Consumer or Sales Tax regime that would allow LL to collect a tax on all transactions, this also would have an effect or removing new lindens from the Market and thus stablising the Exhange rate.

Well don't forget that some day traders have big pockets and can have teirs as low as .02 cents. Now how does .02 cents of a spread sound to you. Wouldn't it be great to have US$3400 that instantly buys and sells a product for a profit in a matter of seconds.

Something that occurred to me today that might have been a better economic plan for SL would be for each player to start SL with a set amount of land (possibly as a credit or coupon used to buy a plot from a selection they can choose within SL) and L$. Everything else from that point on, the resident must acquire from other players. Players start with $L10,000 and a coupon for 2048 m2 - enough to make a good start, depending on the economy. Players can exchange that coupon for land, at which point they start to pay tier on their land - or they can sell the coupon, or just hold it. No tier discounts. People can sell their land or buy more, as they need or can afford.

A key feature of this is that LL would not be a player in the in-game economy, so they will not want to ruin it out of greed, as they are doing now. LL would make it's money from memberships and tier, but not by actively competing with the other residents within the economy.

The key element here is to remove LL from being an interested part of the economy, so that they don't destroy that economy as they are doing now. Then the developer might be more interested in developing the environment for the overall benefit of the community, rather than the current development which seems to be motivated by the desire to harvest the most money from the in-game economy.

It'll never happen for SL, but it's something to consider for the VR community that supersedes SL.

Better but that would not fix the problem. User still starts with 10,000L which is created L out of nowhere (this equates to 20 weeks in game for a premium account).

It also would not be attractive to LL as what happens to the user once the cash runs out, unlike RL, you can just stop playing (actually in RL some people do that too).

The best way is for LL to find a way to remove the made up L from the economy. It does not have to be extactly 1L in 1L out but the closer you get to that the more stable the economy will be.

People will stop playing no matter what. It seems to be a truism that if you hand out to everyone an allowance, that allowance is going to have an inflationary effect which eventually renders it worthless. To maintain a viable economy, the allowance has to go away, or it will have to be payed by the existing economy, which means taxes - taking a little cut from wherever the wealth is winding up and passing it back to where it isn't.

At some point someone will probably create a "Get a job" gesture.

The idea was that each resident comes into the world with a set amount, and that the economy grows in direct proportion with population. Trading in currency would still take place on places like GOM, IGE or wherever. So people can either work, beg or buy currency when they want more, but there isn't this day and night printing press at the mint like we have now. This wasn't a completely fleshed out idea, as I'm not sure how people leaving can be handled. What they came into the world with should leave with them too, but in many cases they will leave with just their birthday suit, having spent or given away everything else on the way out.

The goal is for LL to find a way to have a money supply that stays, as nearly as possible, the same size relative to the number of active accounts - real active accounts, not the same person's alternate accounts or transient user accounts where they come in, decide this isn't for them, and then leave.

But another key factor is that LL is actively seeking to profit from the in-game economy, which has clouded their judgment. I think it would be best for the developer to always avoid that sort of activity. I think it will impact development adversely which diminishes the products appeal and, ultimately, profitability. Developing the best product should be the developers focus. Harvesting whatever profit can be had from the subscribers in-game is an endgame.

The number one thing for LL to stablise the exchange rate is to link new land sales to the $US-$L exchange rate.

My suggestions would be

1. LL implement its own version of GOM to faciliate the exchange of $US to $L

2. A percentage of Land auctions to be held in $US but the buyer had the choice or paying in $US or $L at the exchange rate at the time of the auction close.

Effect
LL would suffer a period of reduced income where the big players dump $L to buy land but as this means the $L will no longer be offered for sale to users the $US exchange rate would quickly raise.

LL could monitor the Land Sales and once they are removing from the ecomony approx. the same amount they are paying in via stipend and dwell they have the right mix

And you might find that those of us whose sl income is not tied to the American dollar might just stop buying your stuff.