Argent Stonecutter

The latter does not follow from the former. What evidence do you have that money is stagnating? That people are sitting on large numbers of L$? The L$ is not increasing in value against the US$, but the US$ is not a good investment these days... which means the L$ is no better an investment than a mattress.

You'd do better converting US$ to Euros.

Hypatia Callisto

Just look at the LindeX behavior. You can see the amounts of L$ that sit on the buy/sell orders.

And that's not even a good indicator of how much that we can't see, that the big currency players are holding. I've listened to T Linden's speeches on this stuff, and the only description of my stomach I can make after watching him on Metanomics was nausea. I was physically sick after hearing that podcast.

Go listen...

ps. not talking about the exchange rate to the US dollar or the Euro. I am just talking about what is happening inside SL.

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Desmond Shang

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Argent Stonecutter

So what is the motivation for someone sitting on large amounts of L$ instead of putting the money into something that will actually make a profit (or even keep its value)?

Free Xue

Being a financial idiot seems like an excellent motivator.

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Hypatia Callisto

since exchange rate was brought up:

it's not getting a better or worse exchange rate that is an issue. It's having a currency that doesn't fluctuate a lot - that observes the nice kind of randomness that is the signature of an "equilibrium" state. However you want to call it, the normal distribution, idealised Brownian motion, etc. You don't really want the L$ to change a lot in its exchange rate, and the prices will normalise to their correct value.

While the printing of more L$ is a bit tangential to my original point, counterfeit content sales also impact the L$ by exerting deflationary pressure on account of more L$ getting swept into bank accounts of currency speculators. They are exploiting the fact that many people buy through the viewer, and never use buy orders on the website, so they automatically get a worse price on their dollars without realising it.

Now, my point is also, as it seems to be getting lost, that counterfeit content sales is destabilising the community. If people leave SL at some point for whatever reason... (and these reasons are hard to predict, but it can happen for any multiple of reasons, not even relating to SL's worth as a product) there will be less people buying L$.

Less people buying L$, a huge amount of L$ being sat on by speculators, people trying to cash out like crazy, you can figure it out. It's not rocket science, although the phenomenon is not well understood. Stock and currency market crashes have been discussed in many books I have about the topic, by enough of a variety of reputable authors in different fields of expertise for me to take this very seriously.

Ann Otoole

Perhaps people who used fake reg info and then became successful so now they have a big stash of L$ they can't cash out lest they lose it all when they are permanently banned.

If LL held a 90 day amnesty program so people could correct reg info i bet a lot would do it rofl.

Ann Otoole

Oh look what the big movie studios say it is...
5 million Star Trek pirates vs. 1 FCC broadband plan - Ars Technica

Piracy and copyright theft. And they are pissed off at Google and suggesting Google is complicit lmao.

Gigs

You are right to worry, but some of your facts are a little off.

In October 2009, there was 125 million in sinks against 107 million in stipends and referrals sources.

On top of that Supply linden printed 100 million new L$ for a total of 226 million in sources against 125 million in sinks.

Reducing stipends into the deflationary territory was the intended goal.

The reason that the situation is the way it is now is because Linden Lab listened to me.

SL Forums

It's interesting to look back and see how people said it wouldn't work. It did work. It's not ideal, but it worked.

In 2006, we were seeing inflation of the L$ because stipends were effectively giving away L$ below market value, undercutting the market.

The choice was to let the L$ rise to 360/1 or reduce stipends to put deflationary pressure on the economy and start selling L$. Linden Lab chose the latter, under the guidance of Lawrence Linden, and at at least partially due to my urging.

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Gigs

Apathy.

There's 50 million in "other" sinks last month... I'm not sure, but I think a large portion of that is accounts that were canceled for inactivity or out of date billing information.

Jesse Barnett

I see Yumi was just as much fun back then

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Ned Easterwood

You've got a version of COBOL with a COMPUTING DIVISION? Dude - which compiler have you got?

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Argent Stonecutter

The one that was in beta when they took that picture.

Desmond Shang

I'm probably a fool to get into this, but... there actually is a way.

Since you brought it up, strictly speaking, there is a mechanism where people earn 'better than real world market' returns on $L.

Well, technically, not *strictly* $L, but $L at offer on the exchange, at the very best sell rates. I suppose there is a difference, as there's opportunity cost and certain inherent risks should the market change suddenly.

The way it worked was like this: there is roughly a 10 point gap between the typical buy and sell rates, reflective of the 3.5% fee that Linden Research takes for the exchange. But people do stupid things, and a sharp currency trader can capitalise upon it.

For instance, every time someone needs a 'fast sale' they will sell their $L for $L 260 to the dollar, or worse. Currency traders will have open buy orders for that, or better. Also, they will have open sell orders for $L 258 or worse.

None of this means much until you work in the $L 1 million plus range, or even better, $L 5 or 10 million.

Let's take the most basic case, where you might offer $L 1 million at 258 on the dollar, buy $L at the most advantageous limit buy rate, and keep cycling it. Each pass, I think you only make a third of a percent or something on your money, but if you can cycle your $L 1 million once a month through the system, that's something like a positive 3.6% annual return. Better than the banks!

Now, Zee was well aware of this, and something like two years ago he nerfed it via changing Supply Linden's selling point and volume or something; the return used to be a lot better. Something like 10% annual return, because you could get many more cycles through, back in the day, and for a while there you could get that 'extra point' fairly frequently.

Currency traders were also keen to capitalise on certain times, like the first and 15th of the month, when the demand pressure for $L was highest, and occasionally someone fell asleep at the stick of Supply Linden, as happened Christmas day 2008, when Supply Linden stopped exerting negative pressure on the value of the $L for a few hours. The exchange rate momentarily spiked and tripped its breakers, allowing a few opportunists to get *amazing* returns until everything halted.

Now, who would bother putting $L 1 million into the system? Well, some of us... have to anyway. Caledon soaks up $L 3.6 million monthly, most of which goes to tier.

But say I had more than a month's reserves (which I do) ~ why not offer that $L at 258/USD, buy it at reasonable rates, and offer it again at $L 258 before paying tier?

By doing so, pumping $L 3.6 million x 12 (over $L 42 million) annually through the system would generate about 5800 extra USD at current LindeX volumes/activity (call it money velocity).

And that 5800 USD would slightly more than cancel out the 3.5% that Linden Research charges me to use the LindeX.

* * * * *

Incidentally, while I've known about this a loooong time, I've never done it. Why? Well, let's just say that I don't want to get caught with my pants down, having say $L 10 million of financial exposure at any given time (over 35,000 USD) is enough to ruin my sleep at night. So I've never done this.

But... others do it all the time. And really hate when people talk about it, because the more that do it, the longer the cycles take, degrading the return. Look at all the $L for offer at 258; I can't prove it but I'd daresay a very high percentage of it is by currency speculators, not just greasygrinds who want to make another thirty cents by waiting a month for their transaction to process.

Desmond Shang

Gigs, I don't know what we'd do without you, because none of the rest of us hicks never would have ever figgered out all them complicated mathymatikal implicashuns.

Thank u Gigs 4 saving us from ourselves!




Edited to add: you know what, maybe it *is* entirely possible that someone there needed Gigs to point this out. In which case, it might be time to panic a little...

Charles_D

Ah, so it's Gigs' fault I would only get 300/wk if I went premium.

Thanks a lot, you bastard.

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Hypatia Callisto

so, 226 million in sources vs. 125 million in sinks, you realise you just said that my facts were off and then you said exactly what I said after that quote?

226 million in sources
125 million in sinks

101 million new Lindens printed into the economy.

WHERE ARE THEY GOING ?!?!?!?!?!111111111

Lets clear the fog a wee bit.

Ok, since you claim to be an Austrian, lets talk about the money that's not moving.

In REEL LYFE you put your money into a BANK.

Now, in that BANK your money does not sit there waiting for you to find some poor moron who didn't know to play the spread. (information asymmetry)

No, the bank does something entirely else!

The bank gives you a modest interest rate on your money. They also charge you fees for storing that money. Not high ones, but they're generally called "maintenence fees" ... banks are good at those.

Then... the bank takes your money and makes loans with it! The money does not stay in the bank! The bank collects interest on these loans, and in turn is charged interest by the government, and the government uses their interest rate to control the money supply.

In the LindeX, this ain't happening. That money is sitting in bank accounts, and it's NOT moving as much as it should be.

It LOOKS like deflation right now, and technically it is deflation because the money is effectively out of circulation. Unfortunately for us, that money is not gone into the neverland of Linden Lab, its still in the economy! It's actually inflating and continuing to inflate!!!!!111111

I would say, if we were to correct it even a little bit, the least that Linden Lab could do is start charging demurrage for storing the L$. That's probably the easiest corrective as I doubt they want to get into the crazy world of lending and interest rates, given that system has shown itself on many an occasion to be less than ideal, too.

well, your "solution" is a bandaid. dont say I didnt warn you.

that being said... I agree that Linden Lab needed to sell L$, but the amount printed needs to be roughly equal to the amount leaving, and it needs to be in proportion to the economically involved population.

eku Zhong

weeeell....
the US dollar against the Japanese Yen for example..

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Gigs

To be honest, I don't think many people had thought about it at the time.

At least, the level of public discussion was pretty low. I'm sure the currency trader types and people looking to exploit the system were well aware of these numbers.

I know what I said before sounds kind of egotistical, but I really believe that I helped influence that decision.

Gigs

In the Austrian sense of the word, yes. In the modern sense of price inflation... no, at least not that I can tell.

In a way they already do. When accounts are canceled, L$ are destroyed.

But if they did take more drastic actions, what would you do when the L$ starts valuing up, and eventually hits like 50/1? Efforts to curtail the monetary base will have an effect on the exchange rates. You and I don't see this as a bad thing, but the users who weren't around when the L$ was still floating will flip the fuck out if the L$ makes a big move.

I don't know if you remember, but people were complaining about the movements of the L$ a lot. They didn't like having to adjust their pricing so often. Because of this there was a vendor that pulled real time exchange data, and let users put in prices in USD. I don't know if that's very popular anymore.


It was absolutely a band-aid. It was intended to make the uncontrollable supply inflation of premium stipends into a controllable flow that could be reduced or eliminated without violating contracts with users. It accomplished that.

When they ended gambling there was a sharp drop that supply linden was able to compensate for by reducing new supply, for example.

There's a problem. Lawrence Linden quit Linden Lab. He was the only one that I really think had a handle on the L$ economy. This system that he put into place with Supply Linden has worked so far, because the stipend reduction has biased the exchange enough toward the deflationary side, and new user growth has been high enough that we haven't had any inflationary breakouts.

Once the new user growth falls below a certain amount, there will be inflationary side breakouts on the LindeX. Linden Lab has said they would accept tier in L$ as an emergency sink. I hope they have the balls to do this early enough in the process that it doesn't get away from them.

Gigs

Newb!

Actually my proposal was to eliminate premium accounts and premium stipends entirely. LL only took it down half way.

Gigs

It's just currency arbitrage. While more people that doing it make the return worse for the trader, more people doing it make the market more liquid for the normal joes buying and selling. It also keep the various currency exchanges within a reasonable range of each other.

It's a pure example of Smith's invisible hand, where the self-interested actions of one group inadvertently serve the interests of the whole.

Cindy Claveau

Forfucksake, you've never heard of Deborah Ann Woll?

GTFO.

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Hypatia Callisto

you never heard of Milton Friedman I guess. Or say, Copernicus, or David Hume, who proposed these ideas previously.



Why are you concentrating on Second Life accounts? I guess you didn't realise an important fact. They take actual money for those accounts. People are putting in dollars for getting lindens.

Same as they do when Supply Linden fires off a buy order. I don't think your scenario would happen with a demurrage fee. Simply because the demurrage percentage rate can be adjusted to deal with market conditions exactly like the Fed does with interest rates.

Gee whiz, Gigs, didn't you know that?

That's what demurrage is supposed to combat. Duh. It's a negative interest rate.

Here, it works like this.

You have 100 lindens in your account.

If you don't use those 100 lindens in a month, LL charges a 10 percent demurrage fee. (I'm using this number for easy math, it can be any number)

So if you don't spend those lindens or trade over the LindeX, you have 90 lindens in your account. It takes money out of the game as an additional sink. It will speed up the velocity of money, which is the issue at the moment. Yeah, you will feel more compelled to do those trades now!

The LindeX and other currency exchanges are the last gambling machines, and sooner they stop being gambling machines, the better.

You just told LL to reduce a hard cash flow, wow! You're so smart.



Likely one more "smart guy" like Zee they could do without. LL will get over it. Sooner the better for all of our sakes.

Yeah... less trade so that goods and services can be bought tends to cause inflation. It's not the new user growth as much as its the users who actually buy lindens. Once these go down beyond a certain level, the cycle is likely to come totally apart. Although its related to new user growth too, converting new users to paying accounts, which is why I am against getting rid of unverified accounts entirely, merely a small restriction for those who don't intend to participate in the economy (limit TRANSFER)

ETA: the reason it causes inflation is that the people holding money no longer will hold it as a store of value, so you will be seeing the actual money supply situation. The inflation however was there all along. Eventually prices will stabilise but we'll have a mess of too much money on our hands and difficulty figuring how to price our stuff for a while, which may end up with people using other kinds of money. (probably switching to something like Paypal payments)

Gigs

I'm sorry, I really don't know how to respond to that. You aren't making a lot of sense.