Say "thanks" to Philip!

Apparently the devaluation of the L$ is part of his plan...



http://www.wired.com/wired/archive/14.06/rosedale.html

To be fair, it is unclear as to how much those words are being put into Philip's mouth.

I think, for example, we can safely assume that Greenspan did not provide Wired with his responses.

OMFG!

*dies*

That doesn't appear to be an actual Philip quote...

Of course, I've suspected it may be true for a while now,
for the stated reason.. and to encourage people to move
their L$ more swiftly to generate more Lindex fees.

Oops. Throw out the sinks because they're clogged with new money.

I agree with Iron and Jopsy, but it seems that the tenor of the article is currently spot on.

Ricky, I was under the impression that the Linden dollar was relatively stable until GOM was GOM'ed. At least, it had seemed so to me prior to that (I have been in SL since February of 2005). And that after that, it started to significantly decline in value, and in the past weeks, has declined on a more precipitous curve.

I was told at the Save Our Stipends! demonstration last night that no, the Linden dollar was always going down.

Do you have a chart or something that could clear this up for me?

coco

I hate to agree Jopsy, but I have seen too much going on lately that indicates LL is paying more attention to coporate bottom line and investor pressures than customer good and goodwill.

LindeX is failing; the economy is tanking. The Market Sell system was a forseeable problem. They've cut dwell. So far not one thing they have done has improved the economy even a little. The moment I become aware of these things I can tell they're going to be a problem (and I've told LL so, as have others). One has to believe that someone at Linden Lab is able to do the same thing... which leaves the very real possibility that LL is intending all these things to happen for a reason we can only guess at. But I'd bet it has more to do with corporate bottom line than it does with increasing customer satisfaction.

The thing is: if they would shoreup the foundation and see to priority needs, if they would put customer satisfaction first, the corporate bottom line would turn out well.

It's actually been devaluing for a while now - quite a good way back before GOM closed. Back in late 2004, it was around 200:1, it's been steadily depreciating since then.

Hi Coco. The L$ was declining in value before GOM died. GOM, like LindeX, was an unregulated market vulnerable to manipulation and market glutting. It was failing before LindeX ever hit the scene and LL was cautioned by many to not repeat that mistake. But they modelled LindeX a lot like GOM... with the added problem that LindeX is easier to use. That just caused an already existing trend to accelerate. The result is that while the L$ was devaluating under GOM... it started landsliding under LindeX and as of yesterday was selling at an average of L338/US$1.

8-9 months ago it was selling at L250/US$... which is a pretty incredible devaluation. The cause: there are too many L$ on themarket and LL keeps flooding the market weekly with millions of additional stipends. Many question the wisdom of giving free stipends by the millions to non-paying users. Some even question giving 500L / week to premium users (as opposed to 250L).

No sink system is going to be able to overcome that weekly glut. So we're stuck with the fact that until LL takes more pro-active steps toward stabilizing the L$ market... it's just going to continue to get worse and worse.

The devaluation of the L$ is to be expected and is a sign of the over all success of SL as a platform.

Think about it.

The more businesses that start up and make L$, the more people selling L$ in the exchange. People who want to sell their L$ will undercut the lowest price. Thus the more successful businesses there are, the more people selling L$ and the lower the price will drop.

If the L$ raises too much or membership and log ins slows down, rest assured that LL will print more L$ to keep people in the game.

Believe me when I say that you don't want the hobby players cashing out their L$ before quitting the game. We'll undercut by 5L$ or even 10L$ if needed on the principle that something is better than nothing.

Just for you, Coco. A chart from February 2004 to the present.

The value increased throughout the summer of 2004 (during the great virtual land rush). Since LL opened up the land spigot, the value has been steadily declining, puncuated by brief periods of recovery.

Thanks, Ricky!

And that brings me to my other question. Last night, I said I thought the land glut was the real problem, but Jillian pointed out that when people buy land, they don't actually put any NEW money into the system.

That threw a monkey wrench into my thinking. So explain to me - how can the land glut affect the economy adversely when it doesn't represent any new Lindens coming in to the market?

coco

And while I'm asking questions, here's another:

Why - if the stipends, dwell, and all are supposedly the problem - why does the Linden dollar value only get WORSE the more things like that they cut out?

Seems to me fairly obvious that these cuts don't help at all, but make things worse.

coco

I see three basic flaws in this posting:

1) The idea that rampant L$ devaluation is a sign of a healthy game. Using boolean logic, that would mean that if the L$ were stable the game would not be doing well. That doesn't work.

2) The idea that the L$ being stabilized would be a problem or that devaluation is necessary to increased system use. It is entirely possible to stabilize the value of the L$ while still having new users added to the system daily.

3) That LL printing free L$ is necessary to people staying in-game. If 16 cents worth of free L$ is the only reason people are using SL, chances are SL would be better off without them.

It is possible, healthy, beneficial to stabilize the L$ market so that merchants and landowners can better operate. Since it is primarily the merchants and landowners that are paying for this system so that the freebie users can even play... it is beneficial for everyone to make sure that they are able to operate with the least amount of hassle and stress. A devaluating L$ means they are receiving less value for their work. That results in closed shops, closed lands, lousy events.

There are two ways to run SL properly: a thriving economy, or no economy. To have an economy that tanks is bad.

Well the other big factor to consider is Sentiment. Fear is a very powerful motivator in markets.

RL example would be the recent fears on the stock market about the weak dollar, high oil prices and potential interest rate rises in the US. All these make a heady cocktail which has resulted in the case of the UK Stock Market a £34 billion drop in the value of shares on the FTSE 100.

Another example was when a Asian Central Bank suggested there were converting their US$ reserves into Euros. That cause the US$ to deprecate on the market by a substantial amount.

Unfortunately it seems to me that peoples lack of confidence in the L$ is causing them to cash out into a more stable currency as it were. Something people again do in RL, usually investing in things like Gold when theres a panic.

Either that, or they have served to slow down a problem that has been getting progressively worse. I think without those cuts the surplus of extra $L in the economy would've made its value MUCH lower than what it is now.

The stipend cut has been in effect for less than 72 hours. Dwell is still being phased out. The full effects of these things will not be seen for months.

That's not really the conclusion to be drawing. The fact is that this month is the first month that dwell was cut, and only by one half, it has yet to disappear completely, so it's still having an effect.

As for free account stipends, that's only for new players, and until more new players join who will need to get their $L from the exchange, that hasn't been a factor yet.

So, while LL has made some changes, it's simply too early to see much in the way of positive effects from them yet.

Simple economics though, say pretty clearly that if these changes had not been made, things would almost certainly be even worse, and get worse more quickly.

A good way to think of it as a sink with an overflow drain (The $L sinks.) and a running tap. (Consisting of DI, dwell, ratings income, stipends, etc.) As the sink fills, the value of the $L goes down. What LL has done is turned down the tap, and reduced the amount of water coming in, but eliminating these various sources of $L that had been flooding in.

The tap still hasn't been turned down all of the way yet though, since dwell isn't gone all the way yet. Meanwhile the overflow drain (The $L sinks.) is still working, draining off the the excess. We still have to see if it'll be enough to keep the sink from overflowing (That is, the value of the $L crashing.) but at least it's not filling so fast as it was, and will be filling even more slowly when the last of dwell goes away.

Hopefully by that point, the overflow drain will be able to cope with the inflow from the tap. (That is, ongoing stipends.)

Anyway, I hope that this anology helps make the situation a bit clearer.

Easy supply and demand. But for USD. This is a game it's reasonable to assume there is a relatively fixed supply of USD available to everyone who wants a share at any given moment. When LL releases 40 sims they demand atleast 40kUS in response land barons sell lindens. They have to have enough of that land sold to buy the next batch when it comes out. The faster LL releases land the lower the price land barons have to offer and the faster they have to churn land and lindens. A flood of land creates a flood of lindens reaching the market. Most of which are sold by land barons to pay LL. When 30-40 sims were being released a wk you could watch the market fall in conjunction with large quantities of auctions ending. The land flood has killed the linden because LL has demanded a lion's share of the USD people are willing to spend and there isn't enough to go around.

I think Coco's point was that the *other* extreme measures taken in the past have had only transient effect on the downward slide. Things like removing rating bonuses to stipend caused brief periods of recovery, but the decline has inevitably continued.

Ratings bonuses, then. The monetary rewards for bring new basic players to the game.

None of any of these cuts has improved the value of the Linden dollar.

However, they may have just slowed its fall, as Rasah points out.

I don't think so, though.

coco

When you buy an island, you pay for a brand new fast PC, network cables, SL server software, and for someone to set it all up and make sure it's working, so the price seems kinda fair. But aside from that, where did all the $L that those land barons sell off on Lindex come from if not many customers who probably bought it off Lindex to begin with?

Indeed I think you're right. However, that would indicate that it is far too little to meet the immediate need. An effective solution would have a more quickly observable effect.

It doesn't do any good to give a patient medicine to cure him in a year if he only has 6 months to live.

Thanks, Jon. I get it. (Except for that last sentence; not sure I understand that.)

coco

I agree with everything you've said except the word 'killed'. The L$ isn't dead. It seems exaggerated to use terms like "tank", "kill", and "worthless". Last year's USD aren't buying 2x, 3x or 4x as many L$'s... they're buying about 1.35x as many. Sure it's not "ideal" for L$ sellers... but it isn't fatal.

As I see it... the 'flood' of new land (and new L$) prevents outside parties from creating a market bubble by driving either or both upwards, using the proceeds from their climb to expand their holdings to create even more artificial value. Maybe the floodgates are a little too wide open, I won't argue that.... but as long as one side is completely open it's impractical to try to manipulate the value of either.

I see that as a good thing.

It's dangerously short-sighted to think that the LL land market and L$ economy is too big to be meddled with by just one or a small number of people.