Okay this post goes here then: repost the Linden Dollar Depression

I know this topic has been covered in a few other posts/threads, but I see things from different points and come up with theories. A few weeks after I joined SL I discovered what IGE and GOM was. I used IGE at first because I heard of it first. I got my first delievery from a IGE Wheeler and then saw how much Linden IGE Wheeler held on the leaders board. Soon after I was told about GOM and how people could sell and basically set there own price according to the current exchange rate (give or take). I thought that the IGE system was actually a benifit to the SL economy because it had such a huge amount of Linden locked up thus keeping inflation down. Unless you knew you could buy Linden from IGE the money it remainned in locked up.

With all this Linden locked up the Linden dollar was strong. Just like with any currency the less there is the more its worth. Along comes new players who use their real world wealth to buy their status in SL. They buy up hundreds of millions of Linden and run about dumping it and being sucked on by leeches. All of a sudden the once locked up Linden is now circulating and everyone with their new wealth curtiousy of the Newbie Tycoon rush to sell the Linden for real dollars thus killing the Linden exchange rate. So the next time you see some Newb account throwing Linden about like its no bodies buiness realize that your new wealth will indirectly lead to your future downfall.

However with the Linden dollar so weak we are now seeing the price of things in SL go up. Will people bring up their price to match the Linden dollar? If so we can pull ourselves out of this resession?

Is the decrease of the Linden dollar inevitable? If you think of Linden money as a sink. You put a plug in the drain and turn it on and what happens to the water? its overflows... Hence why the US government takes money out of cycle. Will Linden change this? They dont make any money off linden dollar sales but they will lose if there is no recovery of the Linden dollar. It will be playing a game with the cheat code to infinity money (rosebud:;!:!:!:!)

Jenna Fairplay~ I made my thread to get info on my theory

Can someone educate me on this point? I'm aware of the fed's actions with interest rates. And I'm vaguely aware of "the money supply". But honestly, I have no idea how this stuff works in a real economy.

How does the US government take money out of cycle? It would probably help me to understand the SL situation if I knew more about how a real economy works.

Why do you think they post dates on money as to when it is made, and why do you think you see fewer and fewer of the older money. Every year they start printing a new year and the previous is gradually taken out of cycle. They dont like go beating down doors to take up the money. As it passes thru their hands it is melted down and used to make the new year. Bills I'm not sure how they process, I believe they're incinerated.

http://www.federalreserve.gov/generalinfo/faq/faqmpo.htm

The fed doesn't really directly alter the money supply .. The congress/president does that with new debt and various spending bills. In theory this doesn't change the money supply as they're supposed to pay all that back but that doesn't really look like it's happening..

They might have printed money at some point to pay for things, but I'm sure that they don't do that anymore. If someone has a link, I'd be interested..

The fed does make sure that banks have enough money to meet withdrawals by their customers, though.

It would spark a panic, for example, if you went to withdraw money and found out they didn't have the cash on hand.. But that's not realy changing the money supply because in theory all that money exists, just in the form of some number in some computer.

The fed does affect the overnight rate by buying/selling fed securities. Buying them increases the rate and selling them decreases the rate. They buy until the market rate hits their target and vice versa for the sell.

By lowering the overnight rate it makes more sense to have money in moneymarkets rather than bonds as bonds become less attractive and the flexibility of moneymarkets outweighs the lower interest rates being given for bonds.

Vice versa for increasing the overnight rate.

I personally won't be raising prices yet...basically I charge money for my things just because other people do (so other people don't get pissed off about them charging and me not lol), and it's a game, so why not spend the money you get on things in the game. I haven't cashed out any Lindendollars yet.
I admit I take a very lackadasical attitude towards economics, even though I do find it very interesting. I find most things about people very interesting (myself included ).

I agree I still have yet to sell Linden for real dollars. I turn around and invest it cause lord knows I dont know how save. There are the meny who rely on SL for real world income or for just a little extra cash to spend. Nothing wrong with either way of playing the game

Shreded and recycled

Money is collected by banks and sent to treasury dept who then shreds it and recycles it into more mint paper and made into new bills

I've heard this a few times and I've always wondered... People cash out their L$ ... And use it to pay real world bills, etc... How much do you think some people are taking in, USD wise on a regular basis?

I know exactly how much people are taking in on a regular basis.

During Jamie's panel discussion at Accelerating Change 2004 last weekend, we disclosed that one of our traders has made "in excess of a full-time job at the average U.S. wage", and well over a dozen have made the equivalent of a part-time job. Those are based on the U.S. department of labour statistics I grabbed off the web, and trading stats I pulled from our database. Not too bad for a "game".

That is, of course, not counting those people who have sold L$ through our comeptitor.

I don't know about others, but I believe many have the same aim as I do - and that is to exactly cover their land tier fee with their L$ earnings, no more, no less.

And once I have a stable connection and a regular RL schedule, I might actually reach that target - if I can resist buying more land!

I'm going to post an example by which the 'average' player might plan a L$ budget for a week:

Income:
Stipend - $500
Bonus - $375
Delta bonus - $375
Dwell - $50
Object Sales - $500
Linden support for trivia event - $250
Bingo/trivia wins - $300
Raffle wins/free money balls - $150

Outgoings:
Purchases - $200
Bingo pot donations - $150
Rating others - $50
Mall rent, two locations - $50

Total income = $2500
Total outgoings = $450

Net income = $2050. At an average exchange rate, about US$8 for the week.

This is nicely positioned to support a 4,096+512m2 tier of US$25/month.

Thus my hypothesis that the resident who attends several events a week, and creates and sells a modest amount of items can live on a nice 5,608m2 lot on their Second Life income.

^^^
yes, that's true.
the only way a lot of people would be willing to or can pay for land is by being able to cash lindendollars out.
Makes me worry if people will start trying to sell off a lot of land now if they cant' earn any money here.

Ricky, there are other L$ inputs other than GOM

They could be-

a) buying money from IGE and then selling on GOM
b) buying land from LL, selling land in world for l$ and then selling l$ on GOM

Unless you are intimately familar with how they are making their money (possibly!), then you wouldn't really know exactly how much money they are making based on GOM data alone.

Unless you're saying they are purely making the money based on arbitrage.. if so, zowie!

I'm simply basing my numbers on the amount of cash we've paid out to each individual (less the amount they may have deposited initially). So it's not scientific in the strictest sense, but gives a good ballpark.

So does that mean

a) they made the money based on buying/selling l$ on GOM alone?

or

b) you are including l$ that they are depositing via the GOM terminals?


If b) than it's not even ballpark, it's orthogonal to their net income.


If a) .. that's damn impressive.

Feedback on those points please but ty for the information regarding the U.S. Currency Sytem

I don't understand the point being made. Could you clarify?



I disagree with the statement that the US goverment takes money out of cycle. From what I can tell, it has very little influence on the value of the US$.

I'm not sure what you want LL to change. The two areas that would be easiest for players would be:

1) have more auctions in L$.
2) make it practical to pay tier fees in L$.

A related area is land price. My belief is that falling land prices have contributed to a fall in the L$. LL has some power to control land prices by controlling the availability of new land.

LL could do something in these areas without adversely affecting the game experience, but it would affect *their* bottom line.

I strongly take issue to suggestions by some that we should institute taxes or fees as "$ sinks". IMO, this will only worsen the situation.

But in the end, these are only my opinions. Your mileage may vary. IMO, it's too early to tell if there is a real problem. So far, it looks like a natural correction after a shortage of land has been alleviated.

I posted my theory about the linden dollar depression and just got a notecard in game about what linden is doing in regards to this.





^^^ that is what killed There

yes there is a problem with the sink's drain but fix the train dont turn off the source that will only make the water stagnent.

Really? I managed to make $20 USD total this week. A drop in the bucket in facing out bills and cost of living IRL, but at least maybe we can get a pizza this week instead of eating ramen or maybe I could get something nice for our cats and ferret to play with. It's not much, but it's something. And really, what Jenna said there seems rather one sided. Yeah, people are buying up lindens, but they're also selling them too. Where do you think IGE gets all their lindens from? They buy them from players! There's still just as much in as before, it just gets cycled from player to player from those who have saved to those who can't save so good and want more. The economy isn't changing because of internet buying and selling of game money. The SL economy isn't so rigid that it can be taken down by such as it can be in other games like Everquest or such. In Everquest, people will camp high paying mobs simply to sell the game money and as such, newbies get tweaked out weapons and go around messing things up in general, not to mention the people who want the high treasure kills for using in game have that taken away. Who is losing out here? Do you see a newbie running around stealing monsters they shouldn't be able to take on? No. If anything, I would think it would stimulate the economy. More people will buy from vendors, raising the drive to build more new things and boosting the creativity drive of the game. I really see no downfall here in selling and buying game money for Second Life where there is the trouble in other games.

Steals Satu's Ramen.. what u gt pizza!

well the buying of linden was apart of a few theories I posted about. Its good for people to buy and sell linden yes, but when one person buys say 500k and its spent in a matter of days u now got people with their chunk of that 500k trying to sell it all off at the same time bringing the prices down. Thats just my thought/theory on that. I have a hard time sticking to one topic or point. I just feel that yes we need a way to stop inflation but...





was not what I had in mind

I watched There die. I was a There member from the Beta. I watched them make mistake after mistake, and I see Linden Labs following in their footsteps with this decision.

They had so many ways to take money out of the game but the only way they had to put it in was to buy it or be one of the top sellers which was hard to do without first investing a crapload of money.

IF Linden Labs goes through with these changes, here is what they will notice in response.

1. The clubs will fall. Simple as that. Managers work at clubs to host fun events AND TO MAKE MONEY! Without the support from events, the clubs wont survive, because the managers who don't have dwell to fall back on, aren't going to pay out of pocket. Nor should they be expected to.

2. The malls will notice a massive drop in traffic and will no longer make enough sales to be able to afford land fee's thus having to close. Also the price in renting stalls for vendors will sky rocket, because the demand for vendor space will go up. Because the only way to make any money will be to own a vendor. Thus making the price for products go up.

3. The price of Linden bought from online sites will sky rocket, thus killing the market for that.

4. The smaller players who don't own vendors, and aren't artistically inclined Who NOW wont make money from hosting events. Who now don't even have stipends to count on, will suffer. The game wont be as fun for them, because now can they not only make money, but the clubs they went to for entertainment wont be there, and they no longer have shopping to look forward to because they dont have money to spend.

5. The bigger players will no longer be able to justify playing SL because they play it to sell Linden for RL money. Without the smaller players the bigger ones fall too.

Essentially the Economy will sink into a depression, an they will lose, by my estimates, a MINIMUM of 40%-50% of their customer base.

Anyone got an 'I'm for LL petition'? I'd be happy to sign it.

Yup, I don't understand anyone thinking that penalizing the player base is a good thing for SL. I think your wise.

I too witnessed the demise of THERE. Alas, I feel the same lack of confidence in SL as I saw in THERE.