Clarification regarding L$ Economic policies

Hi,

There has been a fair amount of discussion of late regarding the prospect of Linden Lab selling L$ on the currency exchange, and we'd like to clarify a couple of points:

1. Linden Lab is NOT currently selling L$. If in the future we begin selling L$, we will post information to the community clearly describing how many we sold and when.

2. We have begun and will sustain a policy of displaying data about the in-world economy, including how many L$ are added to and removed from the economy (sinks and sources). Early efforts are already available at https://secondlife.com/currency/economy.php.

There it is folks... King Philip says clear as day that they aren't selling
L$, but they are making plans to sell L$... Statement number (1) just
about confirms what everbody has been talking about... LL is making
plans to sell L$ direct... Adding more dollars to the money supply and
further pushing down its value..


Thanks King for giving us telling us the "When and How Much"....
I think what everybody wants to know is the "WHY".. Why are you
making plans to one day sell L$ direct to the masses when you already
dish out stipends... If you think SLers need more L$, then increase the
stipends. Why sell L$ and keep the stipends? Its just going to bombard
the money supply and push down the L$'s valuation.

This is wonderful news. Please keep up the good work in economic reporting. It is very helpful even in it's early stages.

Check it out, the money supply is up L$11/million
linden dollars since early this week...

Total L$ Supply (L$) 661,399,246

Nothing like Money Supply Inflation...

You must learn to focus on the positive as well as the negative, RBD. When was the last time that you had anything good to say about SL or LL?

Thanks Philip, but your respone is -$L 19 too late....

I wouldn't call it good news. As it reads in 2 different posts(granted identical) they will sell then tell. For all I know they could sell a batch tomorrow then tell us next week we sold 1 million 1 wk ago. Personally Phillips post lowers my confidence in them further not raises it.

Its pretty clear, the Linden Lab business model for SL
isn't moving them closer to profit. As such, the nuclear
option is becoming more and more attractive. The option
to nickel and dime everything they can think of to get more
USDs flowing in.

Now there is nothing wrong with any business attempting to
create more revenue streams. But in this instance, it appears
to suggest that LLs core revenue stream (Land Sales/TierFees)
isn't bringing in enough money to get them out the red. So all
these nickel and dimes are attempting to bridge the gap between
Red and Black.

My recommendation, start offshoring the "Linden" employees jobs
to India. Outside of Server Farms and Communication lines, the next
biggest expense are those SanFran employees who cost too much.
The SanFran market is very expensive and is eating up the LL profits
for SL. Lets assume SL had 500 sims generating US$1,170,000/yr in
revenue. That number alone could only employ 25 people with the
average salary of around $46,000/yr. Peanuts for a tech firm in the
SanFran area... And thats just based off the revenue numbers.
After you minus Hardware, DataCenter Costs, Building Rent, etc..
That $1/million annually is going to be trimed substantially.

I'm sure LL's SG&A costs can be trimmed way back if they layoff
90% of their workforce and outsource everything. Maybe keep a
a lead programmer to double check the work from India and give
them guidance. But everything else, (Human Resources, Call Center,
Network Operations, etc)... Send those jobs to India for 1/20th the
cost. Then watch the profits roll in and the badly needed upgrades to
SL finally get done.

Much Love,
Pink Slip Consulting

This is awesome, the forum is awesome.
Are you all really serious ?

Linden Lab modified the TOS for *future* usage (it was clearly stated).
They didn't do ANYTHING else !

The L$ value is falling and you complain to LL about that... but... who "crashed" it ?
Linden Lab or you ?

The *constant* money supply isn't a good raison for this *sudden* -17 points loss.

If that were true, there are plenty of things LL can do to bring in more USD...

- Allow name changes for a fee ... $10-$25 USD seems fair
- Sell resident classifieds on the SL website... Auction would be best for a 1-2 week period
- Get rid of first land, charge $20 for the first month of premium and $9.95 thereafter, which will include 512m of land
-Allow private islands to connect to the main grid for a $100+ fee
-Charge residents transfering from the teen grid a $20 fee if they want to take thier name and inventory with them
-Expand the 7 day free trial to 30 days and charge a $20+ start up fee for basic accounts

There are more I could probably think of, but it's early...

I believe Lindex... dropped (crashed is rather an extreme term under the circumstance) as a direct result of a poorly considered announcement by Robin Linden.

Personally I'd have thought the likely outcome of that particular announcement was fairly obvious - equally obviously Robin and others concerned at LL didn't see things that way.

For me it came, as I'm sure it did for others, at a particularly inconvenient moment. A great shame I was selling at that point rather than buying *shrugs*. Ah well, stuff happens...
Sadly it's been happening rather too often of late.

Hi, Shaun. But, how do we know that really an accurate money supply? Is the LL money supply figure adjusted for what would be termed 'capital flight' in a real world economy and currency? Sure, LL knows the amounts being infused and the amount of the LL sinks. But, how is LL capturing the millions of $L's that are being converted to USD by third party currency traders every month?

I see IGE is, once again, overstocked, but there are other traders who are still buying $L's for USD.

Bottom line, is that $661MM figure totally accurate?

They could wait for the L$ recovering around 290L$/USD (or better) before doing this kind of announcment.

What you folks fail to realize is that all economists agree that....

3rd party currency trader don't create (supply) or destroy (sink) L$.

This is good economic information, and I'm glad that it is just a little bit vague.


Consider what a statement like this would have done: "We'll sell whatever it takes to prevent the LindeX from reaching $L 249 / USD" - that's an instant recipe for market speculation, shenanigans and gaming the system.

What we have learned here, is that the people who are hoping for sudden economic upheaval - the $L spiking to say: $L 200 / USD or such, are probably never going to 'win'.

And as crazy as it may sound, market upheaval is not a bad bet in a new untested economy - it's a cheap bet, and only takes a few hours of market frenzy to cash in.

It's like a free lottery ticket. Why keep $L 500,000 on your person, when you could leave it for bid at $L 150 / USD? If the money supply has a momentary 'dry spot' during a new user rush, you might double your money. What the Company has really done is merely "cancelled the ticket."

I do have residual concerns - because it's very hard to eliminate a revenue source of any kind, and people will watch for *any* kind of pattern and try to game the system.

But by and large I see this as a measure we won't be worrying about until there are dozens of cries screaming "the $L is rising too fast!!!111" in these forums.

Isn't the 'money supply' reduced when people goto 3rd parties and convert $L's to USD? Only the amounts of purchased $L's and subsequently returned to the game is when that same 3rd party sells $L's to a SL resident. There could be millions of $L's being held outside the economy by the 3rd parties at any point in time - as in the case of IGE, which I have seen hold over $30MM Lindens at times.

True, the $661MM figure might be the total amount of $L's in circulation, but is it really the amount of $L's actually inworld and available to the SL domestic economy?

Similarly the U.S. Treasury knows how much USD has been printed and in circulation, how much currency it has taken out of circulation, and the amounts of USD being held by foreign governments (Gross International Reserves) and therefore not available to the domestic economy.

For example a table of the "Domestic Money Supply":

http://www.rbv.gov.vu/Publications/quaterly/2005/March%202005/Tables/Tab4.pdf

Versus a chart showing the Total Money Supply, which includes the Net Domestic Assets, shows that the total money supply is somewhat greater than the Domestic Assets, which is also inclusive of the domestic money supply.

http://www.cbs.gov.ws/publications/pub/msr/05/cbsmsr05Oct.pdf

( Page 2, Table 2(a), Graph 2 )

It would seem in the case of Second Life that the domestic money supply available for inworld economic activity at any point in time would, therefore, be somewhat less than the total money in circulation figure which LL reports as the "Money Supply".

Not an economist, but perhaps one way to view the current economic issues surrounding the currency and the economy.

Interesting exercise...

That money would be held in player accounts owned by those companies. Anyone who's delt with them know's acct names. Thus the money would still be countable by LL. The bigger question is do they still continue their deception of not counting money on Lindex or have they correct their number's to count that.

Yes, good point. But, I am thinking that IGE Wheeling, et al, are acting as inworld reserve banks, and the $L's they hold, even in inworld accounts, are not circulated in terms of economic activity... buying land, shopping, etc. I don't think we could include the millions of $L's held inworld by the entiies such as IGE Wheeling as Domestic Money supply.

LL can include the amounts held by IGE Wheeling, et al, as part of the total money in circulation, but not as part of the domestic money supply that every resident depends on for day-to-day inworld economic activity.

The money supply would only be reduced in this case if it were Linden Lab itself paying to buy L$'s back from us... and destroying those L$ in the process. Not something a 3rd party exchanger can do unless, well, they transfer the L$'s they pay for to old accounts that then expire due to age or cancellation. I wouldn't consider funds held by IGE, GOM or whomever to be 'out of circulation' just because they're waiting for resale to someone else.

Unlike RW currencies, figuring the amount of currency in circulation is a simple database query.

ummm.... NVM....

You have never had to try to deal with India have you? Coordinating projects over seas is not as easy as you would think. Multibillion dollar firms have had there share of trouble trying to outsource to India. What make you think that a small little company like LL can do it so easily? Oh, and India is not 1/20th of the cost, it would be closer to 1/6th if you are lucky. Plus you would have to factor in the cost to manage people in a country that is half way around the world.

Actually, if you go for quality work you'll be lucky to get 1/2. Outsourcing is far from as cheap as people think it is. It is for very specific simplistic tasks but when it comes to development, system support, ... it will cost you.