Welcome Vasudha Linden!

No, you weren't correct.

Under the Gold Standard the amount of US dollars in circulation was directly tied to the amount of gold the US held. For every $20.67 the US printed, it had 1 ounce of gold in reserve. Ordinary people could trade their dollars in for gold. The government couldn't print more money than it had gold in reserve.

Under the Bretton Woods system, the US could print as many dollars as it wanted. Dollars held in the US were not redeemable for gold. In effect the Bretton Woods system meant that we had abandoned the gold standard while still promising to buy back US dollars from foreign central banks at a fixed price in gold.

Under the Bretton Woods system, the US dollar did not have gold backing, the US only agreed to buy dollars back from foreign central banks with gold at a set rate.

Gold Standard: Every dollar printed has its equivalent in gold held in reserve
Bretton Woods: The US will buy back foreign held dollars at a set rate in gold.
The number of dollars printed is not tied to the amount of gold in reserve.

As you can see, the Bretton Woods system was much less inherently stable than the Gold Standard. The Bretton Woods system relied upon the economic success of a single nation, while not restraining the ability of that nation to make foolish economic decisions.

I'm not a fan of the stipend for touchy-feely, namby-pamby "we have to make people feel good about themselves by giving them money" reasons.

However, if we remove the stipend, the currency supply doesn't scale and we end up with rapid deflation. I can't see how this would be a good thing, as it would reduce fluidity in the market and cause exchange rates to go insane. That can't be good for my business.

SL's currency needs to be managed so that it remains a useful medium for exchanging micropayments. That means scaling the currency upward enough to compensate for growth in the population without scaling it to the point of rapid inflation. Balancing between those two poles is pretty tricky, and should be hopefully done with minimal volatility.

If we eliminate the stipend, how do we scale the currency supply? What happens when we run out of L$?

If you are going to discuss what people will do. I know I personally would be back in a second in Second Life if I could trust the economy. Who can trust the economy when the stipends are around. There is a chance that a person could get hooked and buy a little more land. There is also a chance that more than a handful of people would start investing much more in Second Life if there wasn't the fear of the long falling economy in the future.

The stipend scales things exponentially. It is a change in the growth of the money supply. You can give people a sizeable initial balance to give them a taste of Second Life without giving them a life long allowance. That would be a linear scale, and not exponential. Fine tuning can be given out in traffic, developer contests, or whatever else they can think of, but why would you want the money supply to scale exponentially?

Just like you said. The US Agreed to buy back dollars with Gold
at a fixed price. As such, the Dollar was technically backed by
Gold.

Because of this, the price of Gold dictated the price of the USD.
Yes, you are correct in saying the US couldn't print more dollars
than it had Gold to back it. Understandable, pretty straight forward.
But if the US was still exchanging Gold for USDs, 'cept only to central
banks, then technically the USD was still backed by Gold. The amount
of paper bills in circulation no longer was tied to Gold, but its value
to Gold still remained. If Gold Rose, so did the value of the USD.
Because any Central Bank could take their supply of USDs and
cash them in for Gold. It was as if the USD was on par with Gold.

Think of it like this... You are a Central Bank with a stockpile of
US Dollars. The US says they will give you XX amount of Gold for
every dollar you give them. So what does this mean to you? Well
if you are smart, you will be keeping tabs on the USD/Gold spot
market. As Gold rises in value, so does your stockpile of Dollars.
Its as if, the USD is a soft currency for Gold.


"Floating" Bretton Woods (1968–72)

By 1968, the attempt to defend the dollar at a fixed peg of $35/ounce, the policy of the Eisenhower, Kennedy and Johnson administrations, had become increasingly perishable. Gold outflows from the United States accelerated, and despite gaining assurances from Germany and other nations to hold gold, the "dollar shortage" of the 1940s and 1950s had become a dollar glut. In 1967, the IMF agreed in Rio de Janeiro to replace the tranche division set up in 1946. Special Drawing Rights were set as equal to one U.S. dollar, but were not usable for transactions other than between banks and the IMF. Nations were required to accept holding SDRs equal to three times their allotment, and interest would be charged, or credited, to each nation based on their SDR holding. The original interest rate was set at 1.5%.

The intent of the SDR system was to prevent nations from buying pegged dollars and selling them at the higher free market price, and give nations a reason to hold dollars, by crediting interest, at the same time, set a clear limit to the amount of dollars which could be held. The essential conflict was that the American role as military defender of the capitalist world's economic system was recognized, but not given a specific monetary value. In effect, other nations "purchased" American defense policy by taking a loss in holding dollars. They were only willing to do this as long as they supported U.S. military policy, because of the Vietnam war and other unpopular actions, the pro-U.S. consensus began to evaporate. The SDR agreement, in effect, monetized the value of this relationship, but did not create a market for it.

The use of SDRs as "paper gold" seemed to offer a way to balance the system, turning the IMF, rather than the U.S., into the world's central banker. The US tightened controls over foreign investment and currency, including mandatory investment controls in 1968. In 1970, U.S. President Richard Nixon lifted import quotas on oil in an attempt to reduce energy costs; instead, however, this exacerbated dollar flight, and created pressure from petro-dollars. Still, the United States continued to draw down reserves. In 1971 it had a reserve deficit of $56 Billion dollars; as well, it had depleted most of its non-gold reserves and had only 22% gold coverage of foreign reserves. In short, the dollar was tremendously overvalued with respect to gold.
[edit]

The "Nixon Shock"
President Nixon announces that the U.S. will stop redeeming dollars for gold.
President Nixon announces that the U.S. will stop redeeming dollars for gold.

By the early 1970s, as the Vietnam War accelerated inflation, the United States was running not just a balance of payments deficit but also a trade deficit (for the first time in the twentieth century). The crucial turning point was 1970, which saw U.S. gold coverage deteriorate from 55% to 22%. This, in the view of neoclassical economists, represented the point where holders of the dollar had lost faith in the U.S. ability to cut its budget and trade deficits.

In 1971 more and more dollars were being printed in Washington, then being pumped overseas, to pay for the nation's military expenditures and private investments. In the first six months of 1971, assets for $22 billion fled the United States. In response, on August 15, 1971, Nixon unilaterally imposed 90-day wage and price controls, a 10% import surcharge, and most importantly "closed(ing) the gold window," making the dollar inconvertible to gold directly, except on the open market. Unusually, this decision was made without consulting members of the international monetary system or even with his own State Department, and was soon dubbed the Nixon shock.

The surcharge was dropped in December 1971 as part of a general revaluation of major currencies, which were henceforth allowed 2.25 % devaluations from the agreed exchange rate. But even the more flexible official rates could not be defended against the speculators. By March 1976, all the world's major currencies were floating—in other words, exchange rates were no longer the principal target used by governments to administer monetary policy.


http://en.wikipedia.org/wiki/Bretton_Woods_system#The_paralysis_of_international_monetary_management

I'm sure LL wouldn't mind selling L$s directly, when needed.

The price of gold never dictated the price of the dollar. The price of gold was fixed. It didn't change. Gold couldn't rise in value, because its price was artificially set. Gold was not a traded commodity, its value was fixed, it always equalled $35 per ounce. So the value of gold versus the dollar didn't change. If you sold gold you got $35 per ounce. If you bought gold it cost $35 per ounce. It didn't change. You couldn't make money trading back and forth from dollars to gold, the price was always the same. There was no USD/Gold spot market, gold wasn't a traded commodity.

The gold standard was when the supply of money was tied directly to the amount of gold held by the government that printed the money. Currency rates were fixed. The value of the dollar versus the franc versus the yen was always the same, the price of gold was always the same.

The Bretton Woods system disconnected the supply of dollars with the supply of gold. It did require the the US trade gold to foreign central banks at a fixed rate, but it did not tie the supply of dollars to the supply of gold. Predictably the US began to print way more money than it could cover in gold. And when the flow of capital out of the US increased, the amount of gold held in reserve declined and the system was scrapped.

Well, I don't think it is so much that there is "a chance that a person could get hooked and buy a little more land," or a handful would. I think it virtually always happens exactly that way.

coco

It -is- necessary. I pay monthly for it.

SL -is- a game, its not real life.

I agree that its nto a welfare program, -but- I don't pay for premium just so I can take a second full time job.

As you can see you'll have no shortage of folk willing to share their opinions with you - on these forums, and inworld!

FWIW, I think that the outputs of any 'stipend policy analysis' have to be closely aligned with LL's strategy for growth. You will find a lot of blithe commentary here recommending the end of the stipends 'for the sake of the economy'. Leaving aside the fact that much of this 'economic' commentary needs to be taken with 6g of salt, there is the effect on new and existing players to consider.

IMHO the basic and premium stipends are good selling points for Second Life. The increase in stipend, along with the opportunity to own a patch of land, was a key feature in encouraging me to pay for premium. The reduced rate for a year's membership also convinced me to pay up front. With that monthly expense now accounted for I've increased my tier to what I can comfortably afford each month.

A change to the stipend would be very unwelcome to many. I feel it's part of the Terms and Conditions I signed up for five months ago. Taking it away would feel like changing the goalposts and be resented. I would recommend researching some of the threads here about the recent change to P2P teleporting and the effect on the value of telehub land. Imagine that level of 'annoyance' spread among all the residents of Second Life - not pretty!

Good luck... and tread carefully!

LOL! Is this kind of like how they sell land directly, when needed?

ResearveBank, Michael, and Shaun.

Well I do know one thing (and I am sure you three have noticed this point as well)

The total membership is going up...it seems to average around 500 a day

The daily spend is also slowly increasing

Average numbers online is also increasing in ratio. Last night at around 23:00 GMT Sunday 13/Feb there were more than 5,250 online.

I have no hard data where the increased daily spend is coming from or what is driving it, but I could hazard a guess land sales are powering it.

So if you all put aside your first life debate about gold and inflation for a few posts, and if the stats I have posted here ARE correct, how do you think this will translate into SL economics

EXACTLY!

Welcom Vasudha!! Thank the gods!!

Also wanted to comment about the so called "Welfare State" ReserveBank is complaining about. Rather than explain how tired I am of crotchety, selfish, stingy, miserly, "no body deserves anything" conservatives, I'm simply going to explain what the stipend represents.

It represents the investment that PAYING members ALREADY make into Second Life. This stipend factors into the equilibrium value of the linden, and is roughly worth the average monthly fee paid by paying customer, which is $6 - $10 a month. It's perfectly fair that they should recieve this COMPENSATION as it ensures that they will get to purchace $6 - $10 worth of entertainment in world. It's perfectly fair and balanced as long as the monthly stipened is roughly equal in USD to the amount premium members pay.

Let not the conservatives ruin second life as they have the first life. THIS IS OUR WORLD!

My point is there is two types of customer. There are the majority of people that might pay a little to get more land when they get hooked. Then there are the minority of people that would pay hundreds or thousands of dollars on land to make money.

If we are going to ignore the fact that it is very hard to guess how large groups are going to react as a whole; you can also look at how the sword cuts both ways. The stipend may be the reason some people give money to LL in the end. It is also the reson some people are scared to give money to LL. Those trying to make money could be more hesitant to invest in Second Life with the stipend. Not everyone is more hesitant, but then again not everyone is going to leave if they don't get a stipend. As long as there is a stipend increasing the money supply exponentially, there is good reason to fear the $L devaluing.

sure it is, there is nothing in second life that I have seen that falls beyond it being just a game. you're just playing at economics and politics.

when second life moves beyond just being a game and a curiosity you won't need to discuss how $L are generated or what should happen with the economy, goverments, not linden labs will do it for you, and they'll take a share of what you earn.

You know I was just wondering. I've read all the posts in this particular thread. And, isn't susposed to be a welcome to Vasudha Linden? And, yet I haven't seen Vasudha reply once to any of this? Maybe I missed that somewhere. Or, if I'm right. Has anyone seen anything from Vasudha Linden posted? I'd love to see what some of the ideas might be from the one that is here to help in this matter?

They DO. It's called "the Premium Account."

coco

Well, i also say WELCOME, Vasudha! Tho i think LL is who i should thank for you being here lol

As for Paradigm's words, i'm a conservative, and i AGREE wholeheartedly with his and other's reasoning that this is money deserved, due to the money we pay for premium SL accounts. If LL says u get 512m of land and $500L stipend per week for the $US you pay for a premium account, then that's what you should get. It's not welfare, by any means. Is the $50L per week stipend that FREE member accounts get welfare? Yes, but good luck to anyone determining how someone receiving $50L/week could create the change (inflation) in our SL economy. Maybe if 500 newbies got together with group buying power - a NUDGE upwards, yes. ($100,000L might have a minor impact per month) Aside from that, even in a conservative viewpoint, the premium account stipend can hardly be considered "welfare", and if someone is a working member of SL, selling goods, services, etc. and doesn't NEED or WANT the stipend, well then plant a pretty little money tree and get the newbies excited to be here

I love the idea that certain capitalistic geniuses want to take my stipend to make their money rise in value, and when I complain they call me a lazy, welfare addicted moocher. LOL.

Let's look at the facts, not the hysterics, shall we? I work 50 to 60 hours a week in the real world. I spend some of my disposable income on a service provided by Linden Labs. Part of the cost of which is rebated to me in the form of Second Life money.

Now what part of that is welfare?

Uh...welcome, Vasudha? Despite the engaging derail. Which is made much more interesting because, for some reason, I'm reading Michael Seraph's posts as spoken by Christopher Walken.

IMHO, removing stipends from premium accounts is not a good idea. Not ony is it not a good idea, LL would never do it.

To do so would mean that the only difference between a premium account holder and a basic account holder would be a plot of 512 land. This is not enough incentive, in and of itself, to keep a premium account holder paying $9.99 per month.

Why would they when they could just cancel their premium and go basic and simply rent a 512 plot of land for much less than $9.99 per month.

The only way that this would work would be if the free basic memberships were eliminated, and everyone playing SL were required to pay $9.99 per month. In this way, the fee would be justified as an entry fee into the game itself, not the current allure of a 512 plot of land AND a $L500 weekly stipend.

Besides, premium account holders do pay for their stipends via their monthly fee. It's really no different than going basic and buying lindens via the LindeX, with the additional bonus of a 512 plot of land.

Having said that, the Basic Membership L$50 stipend and L$250 starting allowance should be eliminated.

Generally speaking, nothing for nothing should leave nothing. Meaning, you should not expect anything if you're not paying anything.

Basic members should be happy that in this case, nothing for nothing atleast gets them in the game for nothing.

And for that alone, they should be grateful.

Oh, and btw, welcome Vasudha Linden

Michael Seraph, LOL. I consider myself a Capitalist (with a Capital C) because I like the Idea of the exploitation of others so that I can get REALLY rich. Maybe that just the evil in me talking but I dream of having a big screen projection theater one day.

However I am by no means conservative. Though I know that some conservatives sometimes agree with me as above, and they are generally fairly nice and sensable people in person. And I don't mean to be a biggot, but it's just that I hate all conservatives

That said, it is a joke how some in world business people are calling PAYING customers lazy freeloaders, when thier real agenda is to sit on thier lazy bums in REAL LIFE earning income from SL selling the same old cheazy recycled freebies retextured. (with free textures).

You want to drive the value of the linden higher? MAKE SOMETHING ORIGINAL! MAKE SOMETHING WONDERFULL, STUNNING, SOMETHING WORTH PAYING FOR!!!


I personnally spend all my time in SL working on scripts and ideas to make people want to spend more time in SL or enjoy it more and want to visit more often. And I'm looking very much forward to the day when I can actually sell something

I plan to save up $72 in my SL account so that I can get a yearly account, buy land, get a store to sell my products from (Thank you P2P teleports). Sofar I have $10 and I am adding to my future product line every week. When I feel confident in my product line I'll start work on my marketing campain and use the money I make for employees (once the groups system is usable) and to pay for two very large projects I have in mind.

I hope to build myself up in this way, and believe I can do it because SL is built upon the model of capitalizm that we have in RL and I don't think that anyone is freeloading except those sleazy reselers of free items who complain about the stipends of paying customers. I think that we have to power to make ourselves and the second life economy successful in more productive ways.

Umm...have you looked at the LindeX numbers lately?

There's $L6,000,000 to $L7,000,000 sold per day on the LindeX.

I'd say that's a little proof that a few people find some of the things made in SL original, wonderful, stunning and worth paying for?

Wouldn't you?

One thing that Linden Labs could do for the economy is to make land tiers go up in, say, 1024 m2 lots instead of doubling at each new tier. More people would tier up if they did. This would increase the value of land and create a Linden sink (in land).

The second thing they could do would be to increase the number of smaller parcels sold at auction for Linden dollars.

Linden Labs also needs some stable way to entice the basic accounts to tier up. If owning land is the only incentive, there is not much point in tiering up unless you want to host events on your own land, and there is no longer much of an incentive to do that. If you are only hosting for the fun of it, you can host many places, and you don't need a premium account. The dwell payment is so tiny that it can't begin to replace the premium stipend. Nothing that I do to earn Lindens requires me to have a premium account.

Frankly, I think they need to worry more about (1) the in-game experience and less about (2) how much the Linden dollar is selling for nowadays. If they take care of (1), (2) will probably take care of itself.

They need, for example, to enforce the event posting rules and kick advertisements off the event scalendar. They need an "all-day" event section to avoid the habit some have of posting the same event over and over in order to indicate that it is a day-long event. There needs to be a forum of some sort for highlighting outstanding efforts and a way to reward those efforts. The "junkiness" of the Second Life experience does more to degrade the Linden dollar than just giving a few dollars away.