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Linden Dollar Economy Update #1

Dnate Mars
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08-31-2006 20:29
I don't like it at all.
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Stephanie Draper
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Join date: 26 Aug 2005
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08-31-2006 23:58
From: Lawrence Linden (In the Blog Comments)

Lawrence Linden Says:
August 31st, 2006 at 2:31 PM

There are legal reasons why we can’t offer to buy L$. So that isn’t a valid option for us right now.

Instead to protect against increases in the L$ to US$ exchange rate we have to bias the system to require us to sell some L$ each month to keep the rate steady. Thus our action in times when the rate is increasing too quickly would be to cut our new L$ sales. In times when the rate is decreasing too quickly we would increase sales. I know its not as elegant as being able to offer to buy L$ but we just can’t do that.

Let me illustrate with some made up numbers since I think we haven’t adequately explained this yet:
Let’s say that for each Resident L$75 needs to enter the L$ supply each week in order for the size of the L$ supply to not put pressure on the L$ to US$ exchange rate. Further let’s suppose that half of the Residents receive stipends of L$100 each week and the other half receive no stipend. Thus, on average L$50 per Resident enters the L$ supply each week through stipends.
Without additional L$ inputs there would be pressure on the exchange rate that would push towards the L$ strengthening against the US$. To balance that an average of an additional L$25 per Resident per week would need to enter the L$ supply. Let’s say those L$ entered the L$ supply as new L$ sales on the market.
Now as additional market pressures pushed and pulled on the exchange rate greater or fewer then L$25 new L$ could be sold on the market to compensate.

-

There is no target exchange rate, and we don’t intend to prevent market movement altogether, just to slow it down when (or hopefully before) it becomes too rapid. As we gain experience with this I’ll attempt to quantify what we mean by “too rapid”, but certainly the 2.5% difference between two twelve hour averages like we saw in the past few days is in that ballpark.

Cheers,
Lawrence


Care to tell us what 'legal reasons' allow you to make money off the Lindex when it rises, but prevent you from balancing it when it falls, Lawrence? Not that I expect him to come back to this thread to deal with the bombshell, and I figure if I posted the question on the blog comments it'd be moderated out of existance. But I'm honestly curious what 'legal reasons' exist that prevent a balanced method of maintaining the stability of the economy, rather than simply printing money and raking in the proceeds from its sale.
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Desmond Shang
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Join date: 14 Mar 2005
Posts: 5,250
09-01-2006 01:10
Ah... I've been watching this... and... to be honest, I can see how what Lawrence is proposing could be a *good* thing.

Shaun is right, this sort of thing *does* limit advantage for residents. For anyone 'currency speculating', or even just doing business in a vast number of legitimate ways, yes, your position *can* be harmed by Company currency sales on the market.

But your position can also be harmed by an unstable $L, and depending what you are doing, probably moreso.



Legal reasons are valid. It's one thing to print 'E tickets', or $L, some kind of entertainment coupon. It's ok for people to sell 'E tickets' among themselves. But quite another to make a fungible currency, or speculatively deal with something currency-like, like poker chips or $L. That's unlawful, plain and simple.

Also - as a business - it makes NO sense to prop up a virtual currency by buying if say, someone starts a panic. We NEED the Company to be profitable, above all of us - they hold our world together. Do we really all want to risk everything we created, because say, some virtual bank folds and the Company bleeds fantastic amounts of cash trying to 'prop up' a panic created by 100,000 blingtards? Not me.

I own a business in RL - there is NO such expectation as a fair playing field - life isn't fair. Furthermore - in SL there is no government tax on everything you do - making money in SL is EASY, folks.

If you don't think so, try starting up a real business. I've done that (and succeeded) in my first life. What we have here is a training-wheels kindergarten environment by comparison, with loving Company representatives that WANT you to stay, prosper and have a good time.

It's not out of hand yet. Maybe someday the Company will compete with us seriously by selling $L, but this isn't it.
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Zonax Delorean
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09-01-2006 01:48
Let's say people spend about 100 000 USD on L$ per month. (arbitary value).

Until Lindens entered the sell market, all of the 100 000 went to content/service creator residents.

Now, that Lindens have entered the market, an amount (let's say) 20 000 USD goes to Lindens, and only 80 000 USDs go to residens.

How is this NOT fscking the residents? :(
Craig Altman
Second Life Resident
Join date: 11 Nov 2004
Posts: 131
09-01-2006 02:09
So really we can now only get a bad L$ rate for selling, once it gets better LL can flood it back.

The question is if it gets to like 350, do you believe LL will not be putting its 27 mil(nearly a mil a day!!) in for sale?

A bad rate does not matter if you can print money does it, if it goes to 500L$ per 1 US, all LL need to do is put another zero on the end of the amount they type in.

Yes can say if got that bad you would pack up and leave but would you?, maybe LL plans to find that point where that actually happens, because its probably far off that now, is potential for them to make a lot of money before it has a knock on effect and they maybe have to throttle back a bit
Xerius Andalso
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Posts: 170
09-01-2006 02:30
I asked this question on the blog as well:

"1) Sales will not be secret. We will trade only from the account name Supply Linden. Our sell orders will always be visible on LindeX, and the supply of Linden Dollars sold by Linden Lab will be displayed on a separate line on the Economic Statistics page."

Does "visible on LindeX" mean there will be a separate line for Supply Lindex?
Surina Skallagrimson
Queen of Amazon Nations
Join date: 19 Jun 2003
Posts: 941
09-01-2006 03:11
From: eltee Statosky

If the value 'goes up' *they* win because they can print free money to bring it back down..


That isn't technically true, Lawrence clearly says their limit is capped at the total amount of L$ spent on L$ sinks, regardless of tier. In other words, when we spend L$ on sinks like file uploads we're providing L$ that LL can sell on LindeX. They could argue that they're simply cashing in their in-world earnings in the same way that every other in-world content/service provider does. It does not amount to printing free money.

Having said that, when LL announced LindeX last year, Philip CLEARLY stated in response to raised concerns that LL would NOT be selling L$. Now I realise that circumstances and polocies can change but huge ethical questions arrise when a company trades it's own product in a market that it owns and runs and has total control over to the detriment of other traders. It's called unfair advantage. THAT is what Philip was replying to and ethics do not change. It was deemed unethical last year and it still is today...
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John Horner
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09-01-2006 04:14
There are only two things in real life that are certain (once you are born that is) and they are Death and Taxes.

In a virtual life it is much the same. Linden are the Government, some of the larger private Estate Islands are effective Governors, and we the people are just that, people to be taxed to support the system. Nothing changes...ever.

Linden tax now in two ways, via tier payment and the LindeX, there is not a lot of welfare payments now (Social Security) so essentially this economy is capitalistic in form.

To be frank I see the two forms of tax as preferable to sales tax (VAT) or income/capital gains tax.

The economy is working although I note the howls of protest of ex welfare recipicants -:)

In terms of making a profit we have moved on from simple land ownership/renting and land trading together with creating new widgets, to that of the emergence of a fungible currency, financial services, banks, and more of the other ways of making a living in real life, into that of our virtual world.

It would be against Lindens interest to over tax the virtual economy, because if they did and killed it, we would all move on, and Second Life would die.

Personally I am already making a respectable absolute profit every day from some of the new opportunities that have sprung up, and hope to make more with two new ideas I have.

Finally yes I support Linden on this one, a tax on land and currency is easy enough to understand and I am sure there are those here that can adapt as i have (or can leave)

Sorry to be blunt
mcgeeb Gupte
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Join date: 17 Sep 2005
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09-01-2006 04:56
From: Xerius Andalso
I asked this question on the blog as well:

"1) Sales will not be secret. We will trade only from the account name Supply Linden. Our sell orders will always be visible on LindeX, and the supply of Linden Dollars sold by Linden Lab will be displayed on a separate line on the Economic Statistics page."

Does "visible on LindeX" mean there will be a separate line for Supply Lindex?


I've never seen it.
Surina Skallagrimson
Queen of Amazon Nations
Join date: 19 Jun 2003
Posts: 941
09-01-2006 05:04
From: John Horner

Finally yes I support Linden on this one, a tax on land and currency is easy enough to understand and I am sure there are those here that can adapt as i have (or can leave)

Sorry to be blunt


John, the problem here is not that the tax exists, they already tax our LindeX sales at 3.5%
The problem is the way they're medling with the exchange rate and the methods they're using to do it.


They stated that a 250:1 rate was desirable. Most people here seem to agree that anywhere between 250 - 320 is perfectly acceptable. As long as market forces are left alone to determine the rate there is no problem.

Now along comes Lawrence with a massive bag of L$ (as compaired to most other traders) and starts randomly dumping them with the declaired intent of messing with the exchange rate.

There are two big problems with this.
1) The exchange rate as it is now is at that value because WE set it so by our trading. LL has NO RIGHT to tell us our valuation of the L$ is WRONG. Is LL going to also dump millions of L$ into anshechung.com in order to control their exchange rate?? Maybe they already do, but that's for another thread.

2) Many people HAVE to sell at a particular rate in order to realise enough us$ to pay land tier and other expenses. Very often sell orders may be time limited as tier payment day approaches and the L$ must be sold... When LL places sell orders at cheaper rates they effectly block legitimate sales that may be being relied upon to pay the bills. Furthermore, they're deliberatly encouraging others to follow suit and place orders at or around the rate decided by LL, further blocking the legitimate sales.

Question for Lawrence (yes I know he'll never bother to read this). What would happen if one of your customers could not pay their land tier because your company sell orders had prevented theirs from being filled in time?
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Surina Skallagrimson
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Zonax Delorean
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09-01-2006 06:11
From: Surina Skallagrimson
That isn't technically true, Lawrence clearly says their limit is capped at the total amount of L$ spent on L$ sinks, regardless of tier.


Lawrence said that TODAY. And tomorrow?
Surina Skallagrimson
Queen of Amazon Nations
Join date: 19 Jun 2003
Posts: 941
09-01-2006 06:36
He's said it befor today as well, and when Philip went back on his promise of never selling L$ he said he'd actually meant "never selling new L$".

So if they ever do sell more L$ than they recieved in sinks they'd really really really be bullshitting and even more people would never trust a word they said again.
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John Horner
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09-01-2006 07:02
From: Surina Skallagrimson
John, the problem here is not that the tax exists, they already tax our LindeX sales at 3.5%
The problem is the way they're medling with the exchange rate and the methods they're using to do it.?


Real Life Governments constantly "meddle" with their exchange rates.....until fairly recently the Bank of Japan sold yen against the dollar to prevent revaluation, in a similar vein China has recently floated the Yuan. As I said in my earlier post, we the people exist to be taxed. Nothing here is new in either virtual or real life

Mind you.....Linden should take note of this point insomuch as any Government cannot buck the market indefinitely and survive. One example back in 1992 was George Sorus who made more than a billion dollars betting against The Bank of England and the UK Government over sterling....

But as I said before, on this I currently support Linden Labs. All they are trying to do is to prevent massive speculation in the Linden to the detriment of most honest people. A stable exchange rate enables business people to plan ahead. Finally if it becomes apparent via other economic indicators the Linden is either under or over valued then sooner or later it will move to its new value regardless of Linden.

No disrespect intended to anyone
Surina Skallagrimson
Queen of Amazon Nations
Join date: 19 Jun 2003
Posts: 941
09-01-2006 07:21
From: John Horner
Real Life Governments constantly "meddle" with their exchange rates.....until fairly recently the Bank of Japan sold yen against the dollar to prevent revaluation, in a similar vein China has recently floated the Yuan.

This is very true, but the average citizen in Japan or China is not relying directly on exchanging their Yen or Yuan into us$ in order to pay their rent.
From: John Horner
Finally if it becomes apparent via other economic indicators the Linden is either under or over valued then sooner or later it will move to its new value regardless of Linden.

Again very true, but in the meanwhile a whole bunch of people get screwed over because LL are selling money into the market instead of making economic adjustments like any other government does.

As I said previously, if they admit that all they're doing is cashing out the L$ they gain in sinks then fair enough. Do it at market rate in reasonable competition with other traders.
If they continue to insist they're deliberately trying to move the exchange rate that the market has set then that is simply wrong becase their orders directly affect genuine traders.
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Queen of Amazon Nation
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John Horner
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09-01-2006 09:15
From: Surina Skallagrimson
This is very true, but the average citizen in Japan or China is not relying directly on exchanging their Yen or Yuan into us$ in order to pay their rent..


I am afraid with respect you are wrong. China and Japan export goods to sell to the West, they pay their workers in yen or yuan, but their exporters receive dollars, pounds or euro's for their sold goods which they have to convert back into the local currency to pay their workers. If the exporters cannot pay their workers because they do not recive local currency at a fair exchange rate, the workers dont eat



[/QUOTE]Again very true, but in the meanwhile a whole bunch of people get screwed over because LL are selling money into the market instead of making economic adjustments like any other government does.[/QUOTE]


All real life Governments make "economic adjustments". Here in the UK for example we have just had a major rewrite of Trust Law to prevent naughty people trying to avoid paying Inheritance Tax. In Second Life Govenor Lindon is trying to prevent naughty currency speculators driving the Lindon up and down for their own benefit.

As I said, what changes, we the people are here to pay tax. That is the price to pay to live anywhere (unless you have have clever accountants or financial advisors working within the law)

[/QUOTE]As I said previously, if they admit that all they're doing is cashing out the L$ they gain in sinks then fair enough. Do it at market rate in reasonable competition with other traders.
If they continue to insist they're deliberately trying to move the exchange rate that the market has set then that is simply wrong becase their orders directly affect genuine traders[/QUOTE]

Ah.....so now we come down to the nitty gritty, you want Linden Labs to tip you off or give you inside information on planned currency changes. Cor I want one of those too :-)
Lawrence Linden
Linden Lab Developer
Join date: 25 Jun 2005
Posts: 235
09-01-2006 09:39
I'm mostly just going to be answering questions on the blog (trying to get used to the blog thing, I'm not finding that very easy) but I just have to address this since it seems to be a common misconception...

From: Zonax Delorean
Let's say people spend about 100 000 USD on L$ per month. (arbitary value).

Until Lindens entered the sell market, all of the 100 000 went to content/service creator residents.

Now, that Lindens have entered the market, an amount (let's say) 20 000 USD goes to Lindens, and only 80 000 USDs go to residens.

How is this NOT fscking the residents? :(


Because in your "before" scenario, those residents were spending a good part of that US$100,000 on L$ (let's say US$20,000) by buying premium accounts for their stipends, not purchasing those L$ from L$ exchanges. That was still L$ sales by LL, we're just shifting those from being at a fixed, subsidized rate as part of premium stipends to being at market rate on LindeX. In that manner we actually compete *less* with residents for L$ sales since we're no longer undercutting you and since we now have the option of *not* selling those L$ when it wouldn't benefit market stability.

Cheers,
Lawrence
John Horner
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09-01-2006 10:32
From: Lawrence Linden
I'm mostly just going to be answering questions on the blog (trying to get used to the blog thing, I'm not finding that very easy) but I just have to address this since it seems to be a common misconception...



Good point Lawrence. Blogs are okay for one person to post statements and okay for people to reply.

However a threaded BB is much better for debate on a general theme. Therefore (and by your own admission) may we please keep the threaded forum within Second Life of Land and The Economy
Wilhelm Neumann
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09-01-2006 11:23
From: Surina Skallagrimson
John, the problem here is not that the tax exists, they already tax our LindeX sales at 3.5%
The problem is the way they're medling with the exchange rate and the methods they're using to do it.


They stated that a 250:1 rate was desirable. Most people here seem to agree that anywhere between 250 - 320 is perfectly acceptable. As long as market forces are left alone to determine the rate there is no problem.

Now along comes Lawrence with a massive bag of L$ (as compaired to most other traders) and starts randomly dumping them with the declaired intent of messing with the exchange rate.



2) Many people HAVE to sell at a particular rate in order to realise enough us$ to pay land tier and other expenses. Very often sell orders may be time limited as tier payment day approaches and the L$ must be sold... When LL places sell orders at cheaper rates they effectly block legitimate sales that may be being relied upon to pay the bills. Furthermore, they're deliberatly encouraging others to follow suit and place orders at or around the rate decided by LL, further blocking the legitimate sales.

Question for Lawrence (yes I know he'll never bother to read this). What would happen if one of your customers could not pay their land tier because your company sell orders had prevented theirs from being filled in time?


heh i hate to say this BUT maybe people will have to tier down LL is obviously trying to make money (no i don't support their methods) but others are attempting to make money off of LL and it looks to me like its a money grab for LL to recover its lost revenues.

People (including me when i had land) made Lindens to sell to LL so they would have to pay no land fees if possible. Well it looks like that is at an end. Its probably a good thing in a way because it will force LL to looks at its model and others to look at their land tier costs.

Hopefully peopel will stop looking down at those who want to play the game as a game instead of a money making venture. Maybe and possibly the profile of the types of playesr that play will change as well

Anyhow I long ago dumped my holdings made money and LL didn't make much money off of me as a result (maybe 10 bucks over 6 months tops for land plus the monthly game fees) of the snobby attitudes that a lot of posters had (although many of them seem to have suddenly disappeared because cutting back on account benefits doesn't seem to have helped much

In any event this wont be the first time i have seen a game ruined because of a loud minority and an attempt at a company to somehow retain something they think they might loose

*shrug*

I think people have to start tiering down I guess and then LL will see that it wont make any more money then they already are because those people holding tons of land realy can't afford it in the first place and its all based on fake currency being converted to USD

People need to take stuff into perspective and stop pouring money they should not into the game and then be upset because they gambled wrong as LL changes policies leaving them hurting for money in real life

yeah yeah i know go away little person but I have been watching from afar as things swing one way and another for awhile now with a grin on my face because I got out and didn't loose huge amounts of money because I dont gamble in a fake economy and count on it to hold up in real life
Lawrence Linden
Linden Lab Developer
Join date: 25 Jun 2005
Posts: 235
09-01-2006 11:24
From: John Horner
Good point Lawrence. Blogs are okay for one person to post statements and okay for people to reply.

However a threaded BB is much better for debate on a general theme. Therefore (and by your own admission) may we please keep the threaded forum within Second Life of Land and The Economy


The community team has asked us all to give the blogs a shot, so I'm going to do so. But I'm certainly going to offer them feedback on how it goes. :)

Cheers,
Lawrence
Metaforest Cheetah
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Join date: 18 Aug 2006
Posts: 82
09-01-2006 12:16
From: mcgeeb Gupte
I've never seen it.


That's because its not on the Market data
Look here...

https://secondlife.com/currency/economy.php
Luth Brodie
Registered User
Join date: 31 May 2004
Posts: 530
09-01-2006 12:27
So I am to understand that I pay 'taxes' in the form of sinks to upload my content, place classifieds for my shop, and list my land in places so you can take that L$ and bury my sell orders?

*still* waiting on an answer as to:
1. why adding more L$ into the economy without taking any more out will help.
2. clear explination of why you can sell L$ but can't buy it. The vauge 'legal reasons' aren't cutting it.
3. Do you have a plan of action when the L$ tanks? What is this plan?

If the amount of source L$ for stipiends are up this month by L$11mil then obviously more people are getting stipends then they were last month. So the argument that people are buying L$ instead of getting stipends is incorrect. For the month of july, about L$40mil was added to the economy (accounting for sinks). For August that number jumped to L$52mil. The stipends were cut because there were too many L$ going into the economy, so the plan of action is to turn around and sell our sinks. You really can't, as a company say one thing, do the opposite and still think we stand by and watch.
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Darkness Anubis
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09-01-2006 12:35
From: Luth Brodie
...Snip
You really can't, as a company say one thing, do the opposite and still think we stand by and watch.


Short of tiering down to basic or leaving SL we have very little choice but to stand by and watch. We can make alot of noise but noise can be ignored. For that matter alot of people have made noise about tiering down or leaving SL. Very few of the noise makers have done either.

So Yeah they have good reason to believe we will stand by and watch.

Most unfortunate
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Xerius Andalso
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09-01-2006 12:36
From: Metaforest Cheetah
That's because its not on the Market data
Look here...

https://secondlife.com/currency/economy.php



There we only see what has been sold, not the sell order placed by LL. Maybe I should put it more clearly:

Will there be an extra line for Supply Linden in the Open Sell Orders on the Currency: Sell/Buy Linden Dollars page?
mcgeeb Gupte
Jolie Femme @}-,-'-,---
Join date: 17 Sep 2005
Posts: 1,152
09-01-2006 13:27
From: Xerius Andalso
There we only see what has been sold, not the sell order placed by LL. Maybe I should put it more clearly:

Will there be an extra line for Supply Linden in the Open Sell Orders on the Currency: Sell/Buy Linden Dollars page?


I want to see that on the Graph and then see how many people get upset when they see there order get undercut by 1 1/2 million by LL.
Svar Beckersted
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Join date: 14 Apr 2006
Posts: 783
09-01-2006 13:31
From: Darkness Anubis
Short of tiering down to basic or leaving SL we have very little choice but to stand by and watch. We can make alot of noise but noise can be ignored. For that matter alot of people have made noise about tiering down or leaving SL. Very few of the noise makers have done either.

So Yeah they have good reason to believe we will stand by and watch.

Most unfortunate


I'll give them 1 month and if LL screws this up I'm out of here.
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