Where does Payday come from?

I'm pretty new to SL, and I'm wondering how the $L economy survives. On payday, loads of money is handed out, but where does this come from? Do Linden introduce more money in to the economy every payday? If so, does this lead to a loss in value of $L, and does anyone know what the rate of inflation in SL is, 'cause I can imagine it's pretty high.

Although I'm covering my premium costs now, I'm trying to see if my (ever so boring) camping strategy is viable in the long term. Will inflation make dancepads & camping a thing of the past, or is it likely the payout from such mundane activities will increase?

So, If anyone has a crystal ball, please let me know what the future holds =)

Word of advice..ignore a certain advocate of egold on this subject. You pay for the lindens that make up your stipend but he likes to call it welfare. Didn't know you paid for the welfare you receive? Well that 'genius' has you pinned!

Let's see if it can be all simplified a bit:

Residents hand out money to LL to make their land exist and stay.

This money pays the machines and slaaries and expenses, etc... and part of it translates to premium stipends.

And some other L$ are handed out as basic stipend too. This is what people might call "welfare", since the value for these L$ comes out of people who pay tier and buy land (and obviously are not on basic accounts). There are also some L$ handed out for educational events.

All those L$ accumulate in people's ingame accounts, pass from account to account when they buy things, and return to LL as group creation fees, upload fees, classifieds and places listing fees, rating fees, and some more. They evaporate when accounts are discarded.

If I remember correctly, LL estimates that residents average 4500 L$ each. Multiplied by the number of active accounts, this gives the "target" number of L$ in circulation. And it grows with the population.

As for inflation, well, check the rates on LindeX: right now the L$ is deflating, not inflating. I think this general trend will continue for a couple weeks.

The money from stipends is new money each week. Essentially LL just prints it. This is somewhat offset by money sinks where money is destroyed through uploads, classifieds, group creation, etc. But it seems that the money supply is always expanding.

It's important to note that so is the population of Second Life. A more relavant thing to look at is what is the ratio of the money supply per account or account holder. The overall money supply should increase as the number of active players increase.

I'm not sure anyone has tried to quantify the rate of inflation. For one thing, we are not exactly talking about inflation (there is no consumer price index in SL), we are talking about the value of the linden against the dollar typically. Anyway, that's just nitpicky. You are concerned about how much the linden will be worth 6 months down the line, whatever we call it.

To see the longer term movement of the linden vs. the dollar, check out this thread:

/130/13/80788/1.html

You can see from the data two things, I think.
1) Over the long term the Linden is fairly stable. I'm guessing it's much more stable than the average "game currency" which typically devalues quite a bit as a game matures.
2)However, it does seem to be declining over the last year or so. Certainly money supply does affect the price. You will find a wide variety of opinions about how much stipends will affect the value of the linden. IMHO, it is impossible to predict where the Linden will be in 6 months or a year. Especially since LL seems quite willing to change their policies to ensure the linden does not fall too far in value.

I hope that helps.

Actually, not completely true

What you pay for with your subscription, tier etc. is the costs of actual developing and running second life. One of these costs is coming from LL actually burning L$ through upload fees, ratings etc.

The stipends money is just printed by LL. It's as easy for them to give out 10, 500, or 2 million L$ a week, as it's not costing them anything to do so.
As this money is simply added to the collective pool of L$, the community is actually paying for it initially. As more currency in a pool of the same amount of people means that a single unit is worth less. (If in large amounts, this can cause L$/US rate drops).
So stipends are a Linden created and community accepted mechanism for redistribution of wealth. To call it welfare is maybe a bit harsh, as welfare has another purpose. But it is most definitely a social system.

As mentioned, part of your payments are actually used to make sure that excess amount of L$ is being removed out of the system. Because LL is not selling the L$ they made from 'community services' like upload fees or ratings on Lindex, this is basically costing them money.

So this is how it turns full circle again.

(Well not completely full circle, as LL doesn't remove as many L$ out of the system as they put in, or sometimes mints L$ for their own purposes. But that's a whole different discussion.)

Its part of the benefits of premium however, and actually written into the 'contract' that some premium users have. If they were to cut or lower stipends I myself would ask they lower the cost of premium, or I would simply tier out and drop to basic. I don't pay for premium so I can work a second job.

No no no no no. That is the value of the L$ relative to the US$ and nothing to do with inflation.

Inflation is a measure of price change, ie. how much you can buy with your money, in this case, L$. To get an inflation figure you need to record (or remember) the prices of a defined set of goods, (skins, dance balls, prefab houses etc.) then go back to them a while later and calculate the price difference. If the prices have gone up you have inflation.

The prices of most "standard" goods in SL have not significantly changed in 2 years. Thus our inflation rate is roughly zero.

LindeX defines a foreign exchange rate. As LL are US based, it is measured against the US$, but you could just as easily measure against any other currency. Inflation in the US economy will alter the percieved value of the US$, as will many other factors, thus altering the ForEx with L$. That doesn't result in SL inflation though.

When you're not online your agent is earning this money in the prim mines, by carving raw prims from the primal aether at the primface deep in the bowels of the earth. Some people believe that wild prims are also hunted in the mysterious void sims, but I consider this no more than superstition: after all, you can see the prim mine wellhead in the middle of the three water sims joining the two mainland continents together, but no-one has every retrieved ANYTHING from the void.

The foremen at the prim mine are notoriously easy to bribe. For a mere ten dollars you can have your agent assigned to a high quality seam, and receive steady bonuses that easily add up to hundreds of lindens over a month. Otherwise your poor agent will find itself pulling plywood cube after plywood cube from the crumbling hexadecimal matrix.

Surina, you're an economic God to me. I knew that, but I didn't know I knew that, and I kept making the same mistake in terminology...

The prices of most of the goods I buy have gone down over the past six months, actually, due to competition... though this is only reflected in a few actual price changes for the same product. Mostly I see the original vendors updating their products with better versions and dropping their "low end" lines or turning them into freebies as competitors begin to produce better quality goods.

*giggle* I love this explanation!

The Money Comes from the Linden Printing Press Gone Mad....
It prints out milllions of new Linden Dollars every Tuesday.

Thanks to LL, more and more pressure is put on the L$ Dollar
which is sending into the tank...

You know the notion of SL inflation rather amuses me.

Considering prices for in world goods have remained mostly at the same prices for some time..I don't see any inflation.

Prices in-world don't change because the cost of production is ZERO.
As such, content creators have no incentive to revise their asking
price for Widgets. Duh!!

But Inflation does exist in terms of additional Linden Dollars in
circulation in the economy. As a result, more and more Linden
Dollars are available which is swamping the LindenX with more
L$ forsale than Buyers with US$. Sending the valuation down
the tubes.

If Prims were a Commodity, then the cost of production would
have an intrinsic value that would vary based on the changes of
the US$/L$ exchange rate and the L$/Prim exchange rate.
This would in turn force Widget Makers and Land Dealers to
adjust their pricing according to the ebb and flow of the economy.

But since this doesn't exist, everybody, including Jonas, is
blind to the looming Inflation (Mudflation) that exists in SL.

I'm not concerned with the foreign trading of lindens to us dollars. Thats not the problem of anyone on this thread. Feel at home to go make your own exchange where people care.

The only acceptable alternative to stipends is have say..7 dolars US bought on the lindex each month for each premium user. Then broken into 4 payments and done as the stipend.

7$ because its a middleground between monthly (convenience pay) and yearly (dedicated to a year).

Then, it all stays in market except for the occasioanl 'drop' gridwide to all users to balance the ratings and upload fees that act as a money sink.

As was pointed out, this is not an inflationary issue, but an exchange issue. For those you would call wellfare recipients (assuming they are not buying $Ls), there has been no noticable change to their economy in terms of real GDP. LL is working on calculating the GDP so we should have something else to butt heads on soon enough.

Don't be blind to reality, the exchange rate of the US$/L$ is
very important in Second Life. More important than you think.

You got that right Gabe, it'll be Civil War in SL...
Bring on the GDP Numbers....

Did you even bother reading the rest of that post?

I seem to be able to quote you saying 'reply to the whole post not a snippet'

Edit: prims already are a commodity. You have to buy land to build on, with set prims per m2. A prim tax on active building would shut the economy down completely, stagnating any new production. And you say I ruin the economy [Reserve].

Prims aren't a commodity. Any attempt to make them a commodity would be some weird ideological decision, and utterly unjustified by anything apart from madcap economic theories. Get over it.

No, No, No, Silly. Prims as a Commodity in which you can buy
as many or as few as you wish to manufacturer Widgets. The
amount of Land would not be an issue. You could have 512m2
plot and buy 100,000 prims to make as many widgets as you
like. Then sell them for a Profit = SalePrice - PrimCost

The prims per m2 setup is related to technical isssues.

Hey Reserve..how about replying to my ENTIRE post. I seemt o recall you being so anal about that.

Note to Lindens: anal here is referring to anal retentive and not sexually

I'll reply in a little bit Jones. The prison guard has said
Yard Time is over and I need to put away my bench press
before I can go back to lockup. lol

Dunno 'bout inflation but they're going to kill of developer incentive and I was told that this is what pays for camping and dance pads .... good riddance i say