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Linden Dollar Economy Update #1

Clubside Granville
Registered Bonehead
Join date: 13 Apr 2006
Posts: 478
09-02-2006 17:43
From: mcgeeb Gupte
So is LL saying the magical 250:1 rate no longer exists? If they are selling Linden's, very unlikely it will reach that ever again.


At a discussion last night attended by Lawrence Linden, I asked a question posted earlier in this thread by Shaun Altman about whether Linden Lab had a "desirable" rate. The answer was a simple "no" and a point to previous blog postings about a desire for simply a stable market.

I asked this question just to lay the L$250/$1USD comments to rest. Whether their current policies meet a need to maintain a stable market is up to the rest of you to debate.
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Trader Zenith
Registered User
Join date: 14 May 2006
Posts: 10
09-03-2006 04:16
From: Koriani Ixchel
I don;t know, the value just dropped another 12 bucks in 12 hours.

I logged out last night at about 288 or something, and I check here at noon and its 276 per dollar.

It got this low a week ago (*or high depending on how you look at it*) and then rallied for the past few days slowly climbing up *or lower value of Linden heh*, and now its falling back down again :(.

I'm not a content maker, I"m a buyer. And I have put off buying things and investing in this game because of this. I was figuring on 10K Linden being about 35 bucks which would get me some main avatars I wanted, a few clothes, and a few extras and I was find with that to begin with. But now its gettin' onto 40 bucks for the same amount of linden...and that's starting to be too high.

Personally I wish it would stay around 300, 3bucks ish Linden for a dollar seems like a fair rate to me. Not so high that little buyers like me feel they are spending too much (that makes your typical regular outfit about a dollar, really nice outfits buck and a half, that seems fair to me - and reallky nice avatars at about 8-10 bucks), and not so low that people cant' make money. *shrugs*

250 per dollar is definitley going to limit my spending in this game, and even possibly limit my staying here. Because if the player doesn't feel they can afford to be buying pretty little digital pixels, then the rest of you won't be selling as much - and that's not good all around.

(and no, economic theory is latin for me, this is just how one pure-consumer sees it)



What this guy wrote is exactly what I see and that I posted first on a topic of my own (Linden Exchange Rate) and after in other topics, and even on the blog, regarding the Linden Dollar Economy Update #1.
I'll keep saying that this is a logical conclusion. The size of SL increased very much and more and more people become residents everyday. They buy L$ to buy land, goods, avatar expansions, services, everything that keeps creators creating. But they have to do that at the cost of US dollars, and if LL wants to keep this economy flowrishing, there's no other way but to balance the L$ buyers with more L$ supply.
The L$ exchange rate has the potential to fall well bellow the 250L$/1US$, and that would turn things really expensive for the average customer.

I use Second Life for many things, for currency trading, I use it to buy and sell land, I used to build things, to create things, and to reinvest what I earn, as I think many residents do. I can't ignore the effect of a volatile exchange rate on all this activities, and that is the point here.
Svar Beckersted
Registered User
Join date: 14 Apr 2006
Posts: 783
09-03-2006 06:43
From: Trader Zenith
What this guy wrote is exactly what I see and that I posted first on a topic of my own (Linden Exchange Rate) and after in other topics, and even on the blog, regarding the Linden Dollar Economy Update #1.
I'll keep saying that this is a logical conclusion. The size of SL increased very much and more and more people become residents everyday. They buy L$ to buy land, goods, avatar expansions, services, everything that keeps creators creating. But they have to do that at the cost of US dollars, and if LL wants to keep this economy flowrishing, there's no other way but to balance the L$ buyers with more L$ supply.
The L$ exchange rate has the potential to fall well bellow the 250L$/1US$, and that would turn things really expensive for the average customer.

I use Second Life for many things, for currency trading, I use it to buy and sell land, I used to build things, to create things, and to reinvest what I earn, as I think many residents do. I can't ignore the effect of a volatile exchange rate on all this activities, and that is the point here.





L$ Sources and Sinks
2006 August
Description Sinks (L$) Sources (L$)
Classified Charges 5,255,414 327,432
Group Creation Fees 848,400 32,500
Land 2,373,162 1,399
Supply Linden Sales 0 2,389,282
Parcel Directory Fees 1,372,020 0
Referral Bonus 0 251,000
Stipends 40,250 71,596,900
Upload Charges 7,361,631 0
Other 12,797,410 7,848,906
TOTAL 30,048,287 82,087,487

As you can see this is the August data from the page I asked you to read the last time you posted this. The bottom line is there were L$52 million new Lindens printed last month and there will ba a similar number printed this month. The problem is how much additional new L$ is needed to stabilize the exchange rate. Nobody knows but LL should attempt to find out by increasing the amount Supply Linden sells every month slowly. Last month Supply Linden sold 2,389,282 LS. Under the new policy Supply Linden can sell 30,048,287 just to control any decrease in the exchange rate. Selling all that new L$ could cause a selling panic by the big holders of L$ and LL has no mechanism to control that side of the market. That is why I said to take baby steps in instituting this new policy and not grossly overshoot the ability of the currency market to absorb the change in new L$ entering the total L$ supply every month.
Trader Zenith
Registered User
Join date: 14 May 2006
Posts: 10
09-03-2006 08:36
From: Svar Beckersted

As you can see this is the August data from the page I asked you to read the last time you posted this. The bottom line is there were L$52 million new Lindens printed last month and there will ba a similar number printed this month. The problem is how much additional new L$ is needed to stabilize the exchange rate. Nobody knows but LL should attempt to find out by increasing the amount Supply Linden sells every month slowly. Last month Supply Linden sold 2,389,282 LS. Under the new policy Supply Linden can sell 30,048,287 just to control any decrease in the exchange rate. Selling all that new L$ could cause a selling panic by the big holders of L$ and LL has no mechanism to control that side of the market. That is why I said to take baby steps in instituting this new policy and not grossly overshoot the ability of the currency market to absorb the change in new L$ entering the total L$ supply every month.


Yes, I saw the numbers you asked me to take a look. I think you are right on saying that LL will have to figure how big does it has to sell L$, and perhaps a more prudent "baby steps" tactic should be desireable but...the course of action seems to me that is given and as for now, there is only one direction: LL has to sell L$. I don't think that LL will generate any panic nor overshoot the ability of the market to absorb the change beacause I believe that this monetary policy can be succesfuly executed.
Svar Beckersted
Registered User
Join date: 14 Apr 2006
Posts: 783
09-03-2006 09:22
From: Trader Zenith
Yes, I saw the numbers you asked me to take a look. I think you are right on saying that LL will have to figure how big does it has to sell L$, and perhaps a more prudent "baby steps" tactic should be desireable but...the course of action seems to me that is given and as for now, there is only one direction: LL has to sell L$. I don't think that LL will generate any panic nor overshoot the ability of the market to absorb the change beacause I believe that this monetary policy can be succesfuly executed.


I don't disagree with the need for LL to sell L$ and in greater volume than done previously but think it needs to be done with a longer term goal in mind than what is happening daily with the exchange rate. Take a page from the Fed in recent months in raising the discount rate to member banks while trying to control inflation without triggering a ressession. It can be done but the Fed did it with many baby steps. We don't know what increase in the money supply is needed to stabilize the exchange rate but the figure LL gave itself was a 70% maximum monthly increase. If that is applied the first month I betting the exchange rate will crash through the L$350/1 barrier.

Fortunately for me I'll be in Hawaii marlin fishing the last half of September and any crash will have no effect on me at all. I neither pay land tier nor sell content, I merely trade currency on the LindeX and a stable rate anywhere benefits me. My profits are based on and limited to volume of USD sold per month. A 2% profit on $10,000 sold each month is $200 regardless of the exchange rate. Having the rate go either up or down presents the potential for much more profit but creates a lot more work. I'm lazy, I want to play SL and let the currency trades execute automatically without me watching them every hour.
mcgeeb Gupte
Jolie Femme @}-,-'-,---
Join date: 17 Sep 2005
Posts: 1,152
09-03-2006 10:36
Putting a lot more Linden in the system can also show up later down the road. So it may look good now with LL selling, but the rate could fall a lot faster further down the road. Look what happened last January through April. It took a few months for dwell and stipend cuts to actually effect the market, wouldn't it be the same delayed kind of effect LL would have selling Lindens? Also if the rate hits 330:1 again, is LL still going to try to sell huge amounts? I'm worried.
Keiki Lemieux
I make HUDDLES
Join date: 8 Jul 2005
Posts: 1,490
09-03-2006 11:03
From: mcgeeb Gupte
Putting a lot more Linden in the system can also show up later down the road. So it may look good now with LL selling, but the rate could fall a lot faster further down the road. Look what happened last January through April. It took a few months for dwell and stipend cuts to actually effect the market, wouldn't it be the same delayed kind of effect LL would have selling Lindens? Also if the rate hits 330:1 again, is LL still going to try to sell huge amounts? I'm worried.

Exactly. They made a bunch of changes and I remember people expecting it to effect the market immediately. It didn't. It took time for the market to adjust. The latest big change, premium stipends to 400 a week is just now affecting the market over the last week or two.

They can't "unsell" the extra currency they intend to dump on the market. Selling a lot of extra currency when the market spikes may well have the opposite effect, causing big swings in the other direction and back again.
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Svar Beckersted
Registered User
Join date: 14 Apr 2006
Posts: 783
09-03-2006 11:29
From: mcgeeb Gupte
Putting a lot more Linden in the system can also show up later down the road. So it may look good now with LL selling, but the rate could fall a lot faster further down the road. Look what happened last January through April. It took a few months for dwell and stipend cuts to actually effect the market, wouldn't it be the same delayed kind of effect LL would have selling Lindens? Also if the rate hits 330:1 again, is LL still going to try to sell huge amounts? I'm worried.


I really don't think LL will try to drive the rates up but this policy could do that with them selling 0 new L$, just look at last May when they announced their intent to sell any new L$.

The question then remains what happens if the rate does return to L$330/1 and starts a rapid correction back to L$300/1, will they step in to stop a natural correction? I'm worried too and their track record of expertise in controlling the exchange rate leaves little room for comfort.
Koriani Ixchel
Draconic Mistress
Join date: 9 Dec 2005
Posts: 23
09-03-2006 20:52
First off I"d like to say I'm a "dudette" :) Trader :)


Secondly, I didn't mean any disrespect to your hard work by calling it 'pretty little digital pixels". Not at all, SL building is frustrating to me to say the least, and that's with little simple things. What I do Mean to say though is that they really are "Just that", and just like there is a limit to the value of what anyone is willing to pay for ANYTHING, much less a "game" where you don't actually have to "have" things to "play" (unlike say a more typical MMO where progression requires money on a monthly basis), there is a "profit limit" that your average SL player will place.

And much like Trader later said, if things get too pricey no matter how cool or how complex or how hard to build the item in game is - ultimately its a bunch of pretty little pixles that aren't worth whatever it is that personal "limit" is.

A 10 dollar avatar seems worth it to me, when its nice and well done (ala for myself thinking of Darth's Dragons, as that's my thing - at 2K-3K a piece). HOwever, if that in game value dropped to 15-20 dollars for such an avatar, I'd be waving goodbye and saying "screw this...".

All I'm saying is I dont mean to demean your hard work, but I am saying at the end of the day the consumer is the one who decides what is worth, and what is not worth, spending their american dollar on.

And if this trend continues, they will buy less things with the same amount of money until they no longer feel its feasible to stay and/or buy at all. They will then have the choice of learning creation themselves, or quitting - either of which puts you guys with less profit.

Whereas to me, 300 per 1 US dollar seemed a good fair trade amount - I have no ecnomoic reason for this it just didn't seem like too much Am. Dollars to get anything of value. 250 starts cutting things off at the knees ;).

again, just my opinion, one average consumer I guess.
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Koriani Ixchel
Dragoness and Nerd Queen :)
Found in other worlds as Frith-Rae
Alienware Pitts
Registered User
Join date: 16 Jun 2006
Posts: 57
09-04-2006 09:37
From: Koriani Ixchel
First off I"d like to say I'm a "dudette" :) Trader :)


Secondly, I didn't mean any disrespect to your hard work by calling it 'pretty little digital pixels". Not at all, SL building is frustrating to me to say the least, and that's with little simple things. What I do Mean to say though is that they really are "Just that", and just like there is a limit to the value of what anyone is willing to pay for ANYTHING, much less a "game" where you don't actually have to "have" things to "play" (unlike say a more typical MMO where progression requires money on a monthly basis), there is a "profit limit" that your average SL player will place.

And much like Trader later said, if things get too pricey no matter how cool or how complex or how hard to build the item in game is - ultimately its a bunch of pretty little pixles that aren't worth whatever it is that personal "limit" is.

A 10 dollar avatar seems worth it to me, when its nice and well done (ala for myself thinking of Darth's Dragons, as that's my thing - at 2K-3K a piece). HOwever, if that in game value dropped to 15-20 dollars for such an avatar, I'd be waving goodbye and saying "screw this...".

All I'm saying is I dont mean to demean your hard work, but I am saying at the end of the day the consumer is the one who decides what is worth, and what is not worth, spending their american dollar on.

And if this trend continues, they will buy less things with the same amount of money until they no longer feel its feasible to stay and/or buy at all. They will then have the choice of learning creation themselves, or quitting - either of which puts you guys with less profit.

Whereas to me, 300 per 1 US dollar seemed a good fair trade amount - I have no ecnomoic reason for this it just didn't seem like too much Am. Dollars to get anything of value. 250 starts cutting things off at the knees ;).

again, just my opinion, one average consumer I guess.


You are forgetting one thing, though. In world sellers are not stuck selling at one set price. They can lower or raise their prices at anytime. When the L$ began to lose value and hit 330, I know a good number of content creators and land sellers, etc. which raised their prices. Even a script writer I know raised his rate. The exact opposite thing happens when the L$ gains value, people begin to lower prices. If the value of the L$ went to 500/1, all prices in game would simply go up the same percentage that the L$ lost value, thus you wouldn’t be able to buy anything more than if the value were 250/1.

Someone even scripted and built a selling mech which automatically adjusts your prices based on the current value of the L$. I can't remember the name of it though.

If LL would stop changing policy every other week in regards to the L$ and the LindeX, these crazy swings in value would stop and the L$ would find equal Librium itself. If more and more people kept joining the game, the value would grow slowly, but who cares? Better than a massive swing in value every other week because LL can't make up their mind on what policy to follow. And this whole selling L$ on the LindeX is BS. Give us our adds back if you want to keep the value of the L$ crappy. Don't take our adds just so you can sell L$ on the LindeX.

Before LL was telling us that they needed to take our stipends and dwell to slow the devaluation of the L$, all while they were planning to make free registration possible. They knew than the new massive influx of players would drive the value back up. They just wanted to set it up for them to make money at the expanse of the "residents" and try and be like, "it is for your own good." LOL

I also liked to watch the LindeX because it was interesting to follow a true free market of currency sales. Now it is just another manipulated market controlled by some corporation. I say we start a new in world currency. In fact, I hear SL Bank is planning to release SL Bank Dollars which will be pegged at the USD penny. So 100 SL Bank Dollars will = 1USD and can be traded in anytime at the bank. But I only heard that and know no info.
Koriani Ixchel
Draconic Mistress
Join date: 9 Dec 2005
Posts: 23
09-04-2006 18:44
Well I will agree a stable linden value would be better than this wild swinging (logged in tonight, it went up 13 Lindens per dollar from yesterday...I bought some! heh).

Which just has me reiterating what another has said before, if LInden wanted to ensure some stable market value - it would jsut be plain easier on everyone if they set it at something and left it. Permanently. Period.

Because in the period I watched from May to now, where I thought it was stable around 300, but as you say was actually high - prices didn't fluctuate. When it droped to 275 it didn't change prices. So how long DOES it have to stay at a certain price for SL prices to be effected? And like sellers have said, they never adjust their prices anyway.

So while in a perfect SL world if the economy swung the prices and such should swing the same - this is not what's happening. What has happened steadily, or what is predicted to happen in the past (as past behavior is best predictor of future behavior). I mean if the price has to swing one way for 6 months before prices change, that helps noone at all in the here and now who want to purchase things at prices that are now inflated for the linden value (or deflated depending on the market).

Enough of that babbling - like I said, Economic theory is like the building in SL to me - a dead foreign language :). I may have a doctorate degree in psychology but this might as well be astrophysics! LOL

(though I do have a slightly on but off topic question)

Someone in this thread mentioned earlier that there was a way I could buy linden's only that sold at a certain amount. As in I could put I had an order to fill at say "295" linden a dollar or whatever. As this is my first L$ purchase, I went to do that, but all I got when I clicked on "buy now" was a direct purchase of lindens at somerate (i'm not sure exactly I guess the one on the page before I clicked buy now), for my exact dollar amount.

Nowhere did it ask me to specify at what rate I wanted to buy. Did I miss something? I went ahead and bought some but I'm wondering what to do for later to set it up that way - or if I misunderstood previous poster :).

Thanks ahead of time, and PM me if this is too much thread hijack! :)
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Koriani Ixchel
Dragoness and Nerd Queen :)
Found in other worlds as Frith-Rae
Svar Beckersted
Registered User
Join date: 14 Apr 2006
Posts: 783
09-04-2006 19:06
From: Koriani Ixchel
Well I will agree a stable linden value would be better than this wild swinging (logged in tonight, it went up 13 Lindens per dollar from yesterday...I bought some! heh).

Which just has me reiterating what another has said before, if LInden wanted to ensure some stable market value - it would jsut be plain easier on everyone if they set it at something and left it. Permanently. Period.

Because in the period I watched from May to now, where I thought it was stable around 300, but as you say was actually high - prices didn't fluctuate. When it droped to 275 it didn't change prices. So how long DOES it have to stay at a certain price for SL prices to be effected? And like sellers have said, they never adjust their prices anyway.

So while in a perfect SL world if the economy swung the prices and such should swing the same - this is not what's happening. What has happened steadily, or what is predicted to happen in the past (as past behavior is best predictor of future behavior). I mean if the price has to swing one way for 6 months before prices change, that helps noone at all in the here and now who want to purchase things at prices that are now inflated for the linden value (or deflated depending on the market).

Enough of that babbling - like I said, Economic theory is like the building in SL to me - a dead foreign language :). I may have a doctorate degree in psychology but this might as well be astrophysics! LOL

(though I do have a slightly on but off topic question)

Someone in this thread mentioned earlier that there was a way I could buy linden's only that sold at a certain amount. As in I could put I had an order to fill at say "295" linden a dollar or whatever. As this is my first L$ purchase, I went to do that, but all I got when I clicked on "buy now" was a direct purchase of lindens at somerate (i'm not sure exactly I guess the one on the page before I clicked buy now), for my exact dollar amount.

Nowhere did it ask me to specify at what rate I wanted to buy. Did I miss something? I went ahead and bought some but I'm wondering what to do for later to set it up that way - or if I misunderstood previous poster :).

Thanks ahead of time, and PM me if this is too much thread hijack! :)



Go into your account and click Currency Exchange Settings whick will give you the option to select advanced options. That screen will allow you to select an exchange rate.
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