"Most world currency markets move less than that, but not tremendously less."

Ahh, philip, target inflation rate is 2-3% per annum. Right now,we're experiencing about 50% per annum.

Can you say hyperinflation?

Holy sheet!

I think Philip has confused volatility with trending.

Volatility: Variations of an asset price around a value. This is due to difference in investor priorities or information and is associated with the riskiness of an asset. This is what wouldn't be unusual to see around 20% per year. For reference, the USD/EUR exchange rate sees an annual volatility in the 7-10% range.

Mean reversion (trending): When an asset value tends toward some value. This is often seen as "seasonality" in commodity prices -- heating oil is more expensive in the winter than it is in the summer. This can also appear as a long-term trend upward or downward. That's what we're seeing in the L$/US$ exchange rate. This is what is pushing the 20% per year change. Not a good thing.

The only major currency I could find that has taken that kind of hit lately is the New Zealand Dollar (NZD), which has dropped by around the same amount as the L$ (~20% in 5 months), which has been a *big deal*. Other than that, we're seeing 5-month peak-to-peak movements like 4% (USD/CAD), 5% (USD/GBP), 6% (USD/EUR), etc.

The difference between volatility and a trend can be seen in this chart. Both the currencies in this chart have comparable volatilities. However, the long-term trend is clearly different. So, the statement that "In the last 5 months or so, the Lindex has moved about 20% in terms of the exchange rate. Most world currency markets move less than that, but not tremendously less." is a little misleading.

........................................................

What worries me more with Phillip's reply is the open invitation to convert L$ devaluation at the LindeX to inworld inflation:If residents would do this, we really would start runaway inflation (20% in 6 month, 10% in the last 40 days). An interesting suggestion to be brought forward by the head of a (virtual) country.

I've believed this for some time - Pham Neutra at SLOG is the true economist in this caterwauling wailing cesspool of the forums. Pham, write more articles, I really enjoy reading them. (Seriously, I do, I'm not being a smartass.)

I only see third-party currencies as an attemp to extract yet another premium, at the same time, cornering a market by creating it out of thin air. Ambitous, but the Hunt Brothers learned the hard way - the market doesn't care if you *think* you are right.

Its been fun seeing the relative hysteria over a 50 L$ fluctuation in price. It would be a real treat to see you guys trade futures, you'd probably shit your socks, with the volatility and all.

Eh, keep it up, I'm amused.

Pham, get writing!