The economy and you

I know that this has been brought up many, many, many times before, but it seems to me that inflation is on the rise. I was just check on GOM and I notice that there are only 212 open buy orders above 3.50 per 1k. That is something to raise an eyebrow to. I am not saying that it is all over and SL is finished, but I know that there are those out there that depend on the money that they make in game to pay for the tier and fees. With land prices falling, and a trend of the value of the L$ falling, has anyone been forced to scale back? Or has anyone been able to expand because of the cheap L$? Also, why do you think that everything in SL is becoming devalued?

Maybe I am wrong. Maybe this is just the normal cycle of things. I am just looking for how, if at all this is effecting you. I know I have to tier down because I can't afford my tier anymore. Maybe this lower value is causing your sales to go up? I am just looking for what others think of this. I think that SL still needs to have more sinks. Or maybe this is what LL wants? Maybe Philip's $4/1k is too high? What do you think?

What's making me scratch my head is that while the exchange rate is down a bit, my weekly sales are up by between 25% and 50%. So I'm breaking even at worst, probably making a little more at best. I'm not really freaking out at the moment, but we'll see how this moves for the next six months. Best not to get too startled by the exchange rate without seeing it go for several months.

Firstly, decreasing prices is deflation, not inflation Dnate, but what you might be seeing Enabran is that as the marginal cost of Lindens decreases that the average spend increases in proportion to the lower marginal cost. In laymens terms, getting Lindens is getting cheaper so more can afford to buy Lindens and spend them inworld. From what I can gather to is that increasing competition in the supply side of the economy has also kept goods and services at a low price, and naturally this is also assisted by the lower land prices of late.

Now this is the really fun part: will it end.
Depending on the supply source of the cheap Lindens. I don't know where they come from (on GOM) but I know for example that Cherry Gaming sell their Lindens on ebay. I'd suggest that its both a combination of cash coming out of high profile activities (mainly casinos/ tringo, slingo halls) and people leaving SL, or reducing their holdings of land, and therefore have $L to dispose of. The land situation will eventually stabalize, and heres a point that should upset people: Cyberland and those that come after it will assist in this (and to some extent anshe already does) because they will be in the position to reduce the flow of land through the strength of their holdings. This will naturally drive up prices again, and also as more people join SL a new demand cycle should emerge (I'm presuming that membership for a percentage of people is most likely cyclical to some extent based on publicity for SL, the season and other factors). If land starts to stabalize perhaps $L will as well.

In terms of your GOM concerns I wouldn't worry too much, supply and demand seem to change there every day.

I definately concur that the devaluation of the L$ is becoming unsettling. With every passing day, there are more and more L$'s set for sale at just a bit under the previous day's average rate, leading to a slowly - but noticable - decline in the value of the L$.

I would definitely agree that more sinks are needed to stem this tide.

I think it has more to do with the new system that GOM has.
In the past a small content provider could easily sell his Lindens, people want to buy small amounts and that was what he was delivering. It was also so that when you put the money for sale it could be bought immediatly.
But right now, If you want/need to sell your smaller amounts of lindens it goes on to the big pile, and you have to wait before the big piles of lindens that the big traders have put there get sold.
Only thing that you can do if you want your money in quickly is selling it for the lowest price. Only hope is that the big traders jump on that quickly enough else the next person put it his lot even lower.
Only people that i see proffeting from the new system is the big traders. And they don't care what it is sold for, aslong as they can sell with a profit.

just my 2 cents.

In simple terms:

Inflation = currency is too plentiful and becomes worth less.

Deflation = currency is scarce and becomes worth more.

"Falling prices" are not "deflation" when it is the value the currency that is falling. The word "price" is mis-used, we should be saying "exchange rate".

Buster

I'll agree that your arguments about terminology in relation to price and exchange rates are valid, we are mixing the terminology some what, but your example dosen't apply because the value of $L 1 to the price of a good inworld has not changed at all, if any thing it has decreased (land), where as the classical sense of inflation you have described is where your money actually purchases less goods because the price of those goods have gone up relative to the falling value of the currency.

If we go to dictionary.com

1 is the general concept, 2 is the applicable economic concept and it doesn't apply to the $L because the cost of goods and services inworld has not increased, indeed many have decreased (land in particular).

But wait, its not strictly deflation either: Dictionary.com again



But I throw another spanner in the works, although the second part of deflation isn't strictly applicable either, I'd argue that it could be applicable if we take the leap and suggest that the ammount of $L available on GOM lately (particularly the large amounts) has actually caused a reduction in available currency and credit inworld, causing deflation in this case. Now the factors can come from either side in terms of cause and root affect, however what is undisputed, looking at the exchange rate this morning, that what is occuring continues to spiral downwards. For my liking its still deflation

The problem here is that you're totally missing the point of the new trading system on GOM.
If you're buying or selling small amounts as you describe you are supposed to use the Buy Now or Sell Now options. You do not wait any longer than it takes you to press the Confirm button.

Actually placing orders is intended for Day Traders who provide the float of both L$ and US$ for the buy now/sell now functions to work, and also for 'long term speculators' who will place orders way outside of the current market trend in the hope of profiting from a large price move (either up OR down, depending on the order).

Yes, if you place your L$10k in the for sale list you will get a few cents more than if you simply hit "Sell Now", but you have to be prepaired to wait. and if the price drops before your order is sold, you could be waiting a long time.

I hate to nitpick about terminology, that wasn't what I was trying to do. You are quite correct that in-world inflation or deflation would be reflected in the price of in-world goods, such as land and clothing. Because the price of land has fallen in-world, that can be characterized as in-world deflationary trend. (If there were in-world economists with scope of observation limited to in-world pricing and money supply, they would see it that way.) However the price of land in US$ has not fallen nearly as much. This effect is neither inflation or deflation, it is called "devalued currency".

If you re-read your dictionary.com definition, you will see that there is an all-important caused by. Economists identify the terms "inflation" and "deflation" with effects on prices caused by money supply.

There are many similarities between SL's economy and RL economies. I think it is useful to analyze what is actually going on. I don't mean to nitpick about the exact meaning of words, but instead I mean to characterize what is actually happening so that we can draw parallels and make predictions. For example, if we conclude that "there is inflation", we could look at RL examples of "what happens when there is inflation". So it matters very much if you try draw analogies based on terminology if the terminology isn't apt.

Buster

Hmm, you are right about that.
But what i understand from some people i talked with.(don't know if they are a good repesentation) Is that they used to sell there linden by just putting it up there as the same price as the bigger chunks, and that worked for them. And they can't/won't do that now because it takes (aloT)longer to sell.
So they have to put it up for a lower price or click the sell now Button. And that still leads to a lower L$ on GOM.
I still think that is what is happening now.

If the buy now/sell now buttons are used properly the resulting trades are replaced by the traders so the price only changes (drops OR rises) if there is consistent preasure in one direction. At the moment the price is relatively stable indicating that the volume of L$ being sold roughly matches the volume being bought, and my personal trade stats support this.

So basicaly, traders will place orders in both the buy and sell lists. When those orders are filled the proceeds get swaped to the opposite list. If a consumer places an order, when it is filled the proceeds are REMOVED from the system... this is the difference.