Bring the Rate Down

We can bring the exchange rate down to 260L/$1.00.
Remove any offers to sell high, and place offers at 260L/$1.00.

Furthermore, stop charging that rediculous 3.5% commission, and start using this as an opportunity to sink the economy.
Destroy about 10% of the Ls in any exchange.

For example:
Sell Rate: 260L/$1.00
10,000L = $38.46

Buyer pays $38.46 to Seller.
Buyer receives 9,000L.
1,000L destroyed in the process.


I'm completely against the absurd 3.5% commission as well as some of the wacky ideas for sinks presented such as preventing basic players from getting 50L per week for logging on. This proposal I'm presenting here is a simple solution that will make everybod happy.

It's not a commission, it costs LL 3.5% to pay for those transactions (well, probably 2.4-2.9% but another 1% for fraud costs, etc)

Charging the buyer %% and then removing those L$ is a good idea though I bet that'll push people to other exchanges.

I could buy near 3million L$ to help raising the value of L$(it is also an investment) if there was no comission on selling L$.

Yeah me too Kazanture

I'd buy 20MM if they could make it profitable for me to do so

Right now there is over 28 million linden at 260 or above. Hypothetically, lets say that LL changed all those orders to 260L/$. It would take nearly 6 days for the market to sell that many lindens. If you suddenly had to sell a large number of lindens, would you park it behind orders totalling 28 million linden? No, you would sell them for less on another exchange.

And the thing is, each day on average, the supply of lindens is outpacing the demand. If it was forced to be parked no higher than 260, then it would grow each day, not decline. The larger the total number of orders, the more pressure would build for people to move those orders to another exchange.

Let's all say this together: you cannot artificially force the exchange rate to be stable. It can't be done. You can make changes to the market fundamentals which will affect the rate, but you can't simply force the linden to trade at a fixed rate.

let's all say this together: www.federalreserve.gov

Exactly, they massage the money supply, they do NOT fix currency exchange rates.

In all of these discussions about the falling Linden (and some others, too) the Federal Reserve is often mentioned as a kind of perfect solution for SLs somewhat instable economy.

While it might be true, that a kind of neutral institution committed to the stability of LLs economy is a good idea, it is often forgotten, how the Federal Reserve (or the Bundesbank, or the ECB or ...) works. The most important instrument for influencing the "temperature" of the economy (and inflation) is the control of interest rates ("The Federal Reserve implements monetary policy largely by attempting to steer the federal funds rate, also called the overnight rate.". We don't have banks (and interest rates) in SL.

So the introduction of a Federal Reserve might be a little premature.

if I pay for 10k Linden dolalrs..I want 10k Linden dollars

your proposal does not make everyone happy, I would exchange currency elsewhere to avoid losing lindens I paid good money for

I agree with most of this. I'd like to add, however, that there *is* an effective interest rate one can calculate by (you guessed it) considering the premium stipend.

If I pay $72 for a premium account today, I'm guaranteed 52 weekly payments of L$500. We can, therefore, think of stipend as coupon payments on a bond. This bond would have a face value of zero and the aforementioned coupon schedule for a net present value of L$26,000 (the L$ can't be easily reinvested for additional return so I'm ignoring the compounding interest for eash coupon as it is paid). So, today I would need to invest $72 worth of L$ (=L$72*x, where x is the exchange rate is L$/US$) to realize an annual return of L$26,000. The effective continuously-compounded interest rate would then be ln(26,000/(72*x)) per year. With x=L$250/US$, the rate becomes a whopping 36% p.a. A more modest 8% p.a. interest rate would require an exchange rate of x~L$333/US$.

Interest rates could easily be controlled by (a) modifying some combination of the premium account price and premium account stipend, or (b) starting a "stipend market" similar to the currency market where users could post their remaining paid-up stipend for sale.

Interesting view on things, Ricky. I agree, you could see this difference and the delayed payment of stipends as a kind of interest rate working.

I just see two small problems with that as steering system for the SL economy:

1. It is a kind of hidden interest rate. The fun thing with more obvious interest rates is, that they have a strong psychological effect, too, besides the purely rational considerations. Thats no so effective if you are not aware of the rate. Changing this "hidden interest rate" would yield results in the market very slowly - while you can see consumer reactions to changes of highly visible interest rates usually within a quarter.
   
2. This interest is heavily dependend on the exchange rate. If you compare that with RL it would be like investing in a foreign country. You never have a guaranteed interest but a high exchange rate risk when those two countries have currencies with wildly fluctuating exchange rates. Thats not very attractive to most investors.

I know that it is your unshakeable opinion, that the premium stipends are the most important influence for the exchange rate. I am not so sure about that. If you look at the plain numbers: say we have 10,000 basic accounts (I am using simplified numbers). These residents get 5,000,000 L$ every week in stipends at a "reduced price", admitted.

But the 100,000 residents on basic account get 5,000,000 L$ too; at a cost of nearly 0 (Zero)!

I am not sure if this model really can describe a plausible target for an equilibrum of the exchange rate.

Why's everyone talking about this L$5M+ being paid out to Basic accounts as if it's all in one person's hands, or even 10 or 100? If that were the case, THEN there'd be a problem.

Let's put it this way, as I'm the perfect 'leech': one who has had a basic account and hasn't yet bought any L$...

When I started, I got a grand total of L$300. Of course, I looked like a standard newb. The avatar I was looking to get (new furries are in general worse off when starting, as it costs more for a decent furry av than a decent human skin/clothes/hair will run) was L$900.

Let's do the math:

L$300 starting, + L$50/wk, and without making ANY money at all in the meantime (and at the same time spending none either), it would take 12 weeks to finally come up with the money. That's 3 MONTHS. Even now I wouldn't have it.

However, I lucked out. A friend (who, in fact, actually referred me) won a L$1,000 contest, and loaned me the L$900 to get it (had that not happened, I woud have gotten the loan when she got her bonus), which I've long since paid off. I've also managed to accumulate a small amount of funds with a decent portion of it in Ginko, earning even more.

On the same vein, I'm an avid Slingo player, but yet because of my situation, I follow a strange plan to ensure I don't go broke. Whenever I win a pot, I will without fail put in anywhere between 1/3 to 1/2 the winnings into the next game (I've only broken this 'rule' once, at a place where they mandated a pot contribution. Needless to say, I played there once and then never again after that. I did win the L$300 pot, but only put L$75 back in). If my luck is terrible, as is often the case, it costs me nothing but time. Call me a hypocrite if you will, but I will be the first to bitch out a player who wins and puts nothing back in.

However, should the stipends be cut out for Basic accounts, I may have to become the kind of person I just complained about for reasons of necessity. Currently, I have a fairly small, but nice apartment, which the stipend covers almost exactly (slightly more than, actually, thanks to the group's dividends daily). AS much as I'd like to have a job, the current most prevalent types of jobs available just don't float my boat (I have no desire to be an escort, regardless of their pay). Content sale is out, as I've yet to build anything I've really considered salesworthy (and I have no scripting talent). And I absolutely DESPISE camping chairs and their devil-spawn kin, the 'dance pad'. I came here to DO something, not just sit and drool while my av does the same thing or jumps around like he has a carp in his shorts.

In closing, that L$50 to basic account holders only sounds like alot because there's so many of us. If you took it away, I can GUARANTEE you your revenues as content creators and distributors would see a drastic decline.

Sorry, Teberious, I obviously phrased my post in a way that invited misunderstandings. I was not arguing against the stipends for basic accounts. Actually I consider them a necessity.

The argument I am having with Ricky is something completely different.

But BTW: with regard to the effect these stipends have on the economy of "SL a a whole" there is not much difference of they are paid out to a 100,000, 1,000 or 10 residents.

Transaction costs are paid for in transaction fees. 3.5% is a commission.

The main thing I'm waiting for is buy orders. I have no interest in buying $L if I can't get the price I want.

This may be nieve but if I think of the Linden$as a stock and I think it is undervalued, I just don't sell. Or at least, sell as little as I need to cover expenses.

I understand all the talk of facts and figures but at the end of the day if you think the Linden is worth $US<insert number> and plan to be in the game for a while don't sell for any less.

Just hold your nerve.

There is a lot of large economic stuff going through the pipe at the moment with land etc and I don't know how it will shake out but in the short 3 months I have been here I have worked out one thing - nothing stays the same in SL for long.

In a falling market, it's the ones that panic or follow it down cashing out that do their dough.

The Holders sweat but live to sell another day.

Psst - I have heard a rumour that Warren Buffet has 50 Million Buy Orders placed at $303L

lol

Personally I would be a lot more concerned if I was a big SL land holder at the moment, rather than a big $L holder.

$L does not attract tier to hold and you can even get interest on it...

Is there anybody that thinks that the rates can come back down to at least 260L/$1?
Or is it inevitable that the rates will continue to rise never to see 250, 260, or even 270 again?

It will eventually come back down, but only if LL takes a proactive stance to make it so.

And they are.

They just eliminated the $L1000 referral bonus for basic accounts, they're also in the process of phasing out DI, and they've already eliminated ratings bonuses.

So every indication is that they are being proactive.

I, myself, have every confidence in LL to make it happen.

Its just a matter of time I guess.

That nice log-on message yesterday telling people to buy Lindens did not exactly work. The LD is still weakening against the USD.
How will removing DI have an effect?

I placed my sell order at the rate of 260L/$1.00. I hope people would do the same. I wonder if this will ever be triggered. Or should I just exit now before it gets any worse?


On a side note for DI. I was wondering if this was an accurate example. I'll state for this purpose that 100% DI pot is $10,000 USD.

Dec05 paid Jan06: 100% = $10,000.00
Jan06 paid Feb06: 66.6666% = $6,666.67
Feb06 paid Mar06: 33.3333% = $3,333.33
Mar06 paid Apr06: 0% = $0.00

Give the players the chance to trade the money and make the charges. The plyers are in control of everything else in sl. why not let them be in control of the charges and bringing on new kinds of business opportunity.

Unfortunately (or fortunately depending on how you see it), LindeX is paying for several emplyees at LL.

LL takes a 3.5% 'cut' of the US$ sales amounts. The last time I computed a daily US$ turnover (about a month ago) it would be generating about US$180,000 a year for LL. A quick check shows its probably closer to US$190,000 now.

That will only increase as ways are found to increase the daily 'churn;' The side effect of which should include a return to the L$260 spot - and even more US$ generated for LL.

Nah, CC / PayPal transactions cost around 2-3%, and I'm sure there'll be some fraudulent transactions (people buying L$ with fake paypal / cc accounts, doing chargebacks, etc).

LL probably eats the chargebacks if they're not too big, but that does cut into any profit.

It's all at cost. At the most it might be paying Lawrence's salary but he's maintaining the thing so there ya go. It evens out

A very big chunk of that 3.5% is going to credit card charges, probably between 2-2.5%, so the actual amount it's bringing in is likely much less after expenses. I'd be surprised if Lindex is paying for one more than 1 employee.

Anyone can set up an exchange. In fact there are several ways to buy or sell lindens beyond lindex. Slexchange for one.

Linden Labs staff is paid by Linden Labs who gets revenue from various sources including membership fiees, land tier, and auctions to land barons.

Any transaction expenses LL incurs from Lindex are offset by revenue from transaction fees.
Anything more than 0% commission on Lindex transactions is unecessary.