Holy Falling L$ Batman! L$ now at L$285 per USD $1

Nuff said. The L$ continues to drop precipitously.

At what level would you expect to see Linden Intervention?

Wasn't this expected with all of the new sims going online so suddenly? Since they had to be paid for with US$ by the people buying them from Lindon Labs, but then they get resold using L$ so the effect is similar to LL printing tons of L$ and flooding the market.

If LL holds off on any more multi-sim auctions for awhile, I'd bet the Lindex would start to climb again (as L$ is destroyed through people using it for tier payments and account payments). This is exactly the sort of thing you see in countries where the government decides for one reason or another to start printing money like mad to cover debts/buy war materia/etc...

Wooot! Thanks for the tip *buys!*

-Ghoti

Linden dollars are not created or destroyed on Lindex, they just change hands from user to user in exchange for US$.

If there is no way to destroy the L$, then it's no wonder we're seeing inflationary pressure. New L$ are created each week in the allowance, but never destroyed? Eventually everybody will have more L$ than they have anything to do with and there will be no market for them. OTOH, it's a bit of a pyramid scheme, old players would get the new players to buy their declining L$ off of them and getting out before the exchange rate gets any worse.

Certainly there has to be a way to destroy L$ in the game other than hoping people just quit playing without cashing out first?

No, Jackal is right, they're simply changing hands.

Again, this is just L$ c hanging hands. No new L$ are created.

Damn, didn't edit my post in time, someone saw my misconception. I'm now actually worried about the L$ though, I don't see any mechanism for it to actually recover. I must be missing something.

Well there are already a few money sinks of course. Whether there are enough is always a topic of heated debate in these forums. Essentially, the no. of L$/avatar average needs to remain pretty much constant.

So, thinking about it some more, here's what I came up with for destroying L$:

1. Buying land from Governer Linden. -- Generally only first land these days, which is a trivial amount of L$.
2. Fees lost in the Lindex (only maybe: are these taken from US$ or L$?) Could be the primary sink as transactions get larger and larger (the 3.5% loss).
3. Accounts going inactive without cashing out their L$ first. Unknown effect, probably not significant though.

What else is there?

Ways in which L$ are created:
1. Monthly allowance. Seems rather significant ($500/premium member/week, $50/basic member/week sometimes).
2. Referral bonuses. Hard to judge, could be very significant if people are farming the referral system with bogus alts.
3. Signup bonuses. Farming alts would be a problem here too.

Texture, sound and anim uploading, and rating.

Other money sinks: Find listings, classifieds, texture uploads, taking snapshots, etc etc.

In theory, the Lindens could also buy $L from the exchange and retire them, consider it open market ops or if you prefer, treasury stock, kind of.

I have no idea if the above is being down though.

Philip has stated personally that LL will not take a position (i.e. buy and hold) in L$ due to potential accounting difficulties. If they want their target rate to be more than just an "I wish" kind of thing, they'll have to start making some tough decisions very soon.

Or, they can just come up with an updated price target that more accurately reflects market conditions and economic fundamentals...

That's probably the best solution Lit. In order for the economy to be stable though, they would have to buy back approximately as many L$ as were created in allowances minus the various fees every week and adjusting for people who leave without cashing out. That could easily be more than they want to spend on propping up a game economy.

I don't see the tiny fees for stuff like uploading and listing accounting for much compared to the allowance. I could be wrong, but that's just my gut feeling on those fees.

It Seems to me that the market majority/Mean is right around 170 or so... which is only about 20 off what it was 2 months ago.. isnt a market crash in RL trade considered a sharp drop of something around 25% on the share??... Also the "printing money" by selling Sims at auction is an illusion if thats what yuo see.. where is the L comin from? In Game Other residents... I see it more as a cash flow influence which will be needed as the amount of L grows from the weekly allowances and population. if anything this will drive down the price of land and up the Linden value IMO in the end.


Any takers?

O

utilizing my sextant, spying with my little eye, I have surmised that the L falling is primarily due to the selling of freebies for profit thereby undermining the perceived value of this currency that is built on little more than said perceptions.

I believe that this is a common fallacy about currency, that in order for a currency to be stable the amount of the currency in circulation should not expand or decrease. I would propose that as the economy and population of SL grows, the amount of currency in circulation must expand or else the linden would begin to increase in value. Look at it like this:

Say there is only 10,000 lindens in existence. If there are only 10 people using SL, lindens are relatively common, on average everyone has 1000 lindens and it's not difficult to get a few more from another player if needed. But what what if there is 100 or 1000 or 10,000 people all competing for those lindens? Now suddenly the average account has much less and it will be that much harder to get extra when needed. The value of the linden would grow in that situation, not remain stable.

I believe that the same is true as the ecomony grows. As more goods and services are created in SL and the value of the experience increases for users, the linden will also grow in value as well since there will be more demand for them.

If new lindens weren't introduced in the ecomony, if the available pool of currency didn't grow, then we would be seeing a increase in the value of the linden, not a stable value.

I'm not saying that LL has the balance correct at the moment. The long term trend does seem to suggest that the linden has a bit more room to fall, but the answer is not fixed number of lindens in circulation.

You're right. I ment to say that they would have to buy back an amount in proportion to the number of users in the game. IE, the "average" premium account should have say L$20k, while Basics have L$400.

It would be almost impossible to calculate exactly, but as long as they were in the right ballpark it would work.

So, if there are 50 premium and 450 basic accounts, there would need to be 1.18M Lindon total in everyone's pockets. As the game grows, and you get 5000 premium and 10000 basic accounts, there would need to be 104M Lindon in the game.

As more goods and services are created, you would expect people to buy more, but that won't affect the price of the Lindon because it would be transfer between players. Eventually, the sellers would end up with an excess of Lindon and would put it up on the market where they get bought and put back into circulation.

Since someone else mentioned that LL won't buy back Lindons on the market, the only real solution to me appears to be to cut back on the allowace and bonuses until the fees built into the system balance out. Unfortunatly, this would most likly have the side effect of stagnating sales, as people are generally more reluctant to put more cash into the game to buy the Lindons they need to purchase stuff in-game. It's a lot easier to spend the 500 Lindons you got for free at the beginning of the week than it is to put $2 real dollars into the market, especially if it's just some in-game pair of pants or something.

I can see why this problem hasn't been addressed yet, it's a tough one.

In the not too distant future, a Land Baron is riding through the mainland in his Shadow, driven by a chauffeur...


"Jeeves, Tell me the selling price of FIC Industrial Group."

"It's at $L 100 per share, sir."

"Let's take a chance. Buy 1000."

"Well done, sir. Right away."



- the next day -

"Jeeves, what is FIC Industrial going for today?"

"It's about ten percent higher at $L 110, sir."

"Great! Buy another 5000!"

"Right away."



- the next -

"Jeeves, how is my investment doing?"

"FIC Industrial is up to $L 200, sir."

"Buy! Buy! Buy with every penny I have!"

"Yes, sir."



- the last -

"What is the price today?"

"It's at $L 500, a 500% increase over three days."

"Wow! Jeeves, I'm getting nervous. This can't last."

"I agree, sir."

"That's it - sell it all! Every last share!"

"I don't think I can, sir."

"Why not?"

"You were the only one buying, sir. Shall I drop off at the bank, or the lawyer?"

speaking of share companies in SL .. I have some investment opportunity concepts that would essentially Market a company into a pulblic trade after its begun to bring in revenue .. the investment once it starts will be only a a few L per share and meter land tier to measure your shares... Once i have a more solid plan down and a some investors I will be offering an IPO for all interested. Hopefully with brighter returns than above.

(you will in theory receive weekly dividends based on your share that will add vaule to your shares if somebody with the tier has the L you want for the rights)

Conversely, non-Monetarists would argue that money supply discussions can only occur if you discuss the velocity of circulation.

Inflation from the view of the other camp would say the increased money supply results in inflations as demand for goods exceeds production - resulting from increased spending from the increase in money supply.

The first view (the N-M view) would hold that the increase in demand would be met by increased production through underemployed resources within the economy. Only in a fully resource utilization state could the inflation occur. They would also posit that an increase to cost of production (more money sinks) would cause prices to rise as producers need to maintain margin and workers demand wage increases to maintain real income levels, which eventually trickles to the consumer and results in inflation.

Either way there is much dispute as to the link between money supply and pricing.

Straight line comparisons to RL economies simply do not hold with what occurs in the SL economy. For one, LL is not a central bank and should not be in the business of regulating money supply through holding a position in $L. Secondly the issues with production resources and cost of production are simply not in evidence to the degree we see in any RL economy. Next, the pay out of "wages" is almost nonexistent in the content seller world, which prevents the money recirculating to the degree that it is removed.

Thinking about this critically demands a more expansive view than "must maintain avg $L per av".

I don't see this either, I agree with Oasis


The sales of land for USD is a transaction completely outside the game with no direct impact on the number of L$ in existance IMHO.

LL auctions land for USD to Player A who pays with USD - No impact on L$
Player B wants to buy land for L$
Player B uses some L$ saving, and buys some on Lindex from Player C - Increases L$ value some
Player B pays Player A in L$ - No impact on L$
Player A sells all L$ on Lindex to Player D - Decreases L$ value more

I suspect the current L$ drop is because a lot of L$ from savings have been concentrated into a few hands (Player A) who need to raise USD quickly to pay for their recent auction wins. They are selling into a L$ market that doesn't have any pressing need to buy them.

Actually, I would argue the opposite. The selling of freebies INCREASES the amount of L$ being circulated because otherwise, no L$ would have been circulated if they had been purchased for L$0.