Fiat Currency

[Enzius 485]

But what you describe is impossible. Hoarding doesn't happen during periods of inflation.

 

 

 

 

 

If silver deflates, then the buying power goes up, and less silver goes into the economy.

 

Less money will be generated by traders, deeds will shrink and decline in number. The number of premium players will decline. The market for goods and services ingame will decline. People will hoard silver and stop buying, instead resorting to bartering. 

 

If it deflates enough, then a lot of people are going to quit, a lot of settlements will be abandoned or shrink, and less income is generated by the game.

 

 

Deflation = bad.

 

 

It's going to cause gradual deflation long term though. A gradual spiral will be always there unless more money is created than destroyed.

 

If it gets worse enough, then prices might be upped again and cause the problem to worsen.

 

 

Your view of economics is too one dimensional. There are more factors than inflation and deflation that come in to play to determine saving and investing.

 

 

 

How does it cause a downward spiral? Currency isn't even destroyed in Wurm. It all goes to the king to be redistributed to traders, or to players.

Edited May 7, 2013 by Enzius

[Jarosz 189]

But what you describe is impossible. Hoarding doesn't happen during periods of inflation.

 

 

 

 

 

If silver deflates, then the buying power goes up, and less silver goes into the economy.

 

Less money will be generated by traders, deeds will shrink and decline in number. The number of premium players will decline. The market for goods and services ingame will decline. People will hoard silver and stop buying, instead resorting to bartering. 

 

If it deflates enough, then a lot of people are going to quit, a lot of settlements will be abandoned or shrink, and less income is generated by the game.

 

 

Deflation = bad.

 

 

 

It's going to cause gradual deflation long term though. A gradual spiral will be always there unless more money is created than destroyed.

 

If it gets worse enough, then prices might be upped again and cause the problem to worsen.

I don't think I can pry your head from the sand.  It doesn't take a rocket scientist to realize that at any given time, in any give scenario, someone will horde money.  The masses won't, that is what you are basing your "fact" on.  But those who understand the cycle, and know that having a lot of money when an economy is in a deflationary phase will have more buying power, and they will horde it away (if they can afford to).

 

Your understanding of economics is of very few constant variables.  The truth of economics lies with those who understand those variables are not constant.  They can be manipulated in any direction with good or bad intentions.

 

Those who want monetary power horde during inflationary periods.  If you don't, and you retire right around the time the economy tanks back into deflation, you have no money for retirement.

 

But your understanding is of mid-lower tier salary earners.  Yes, during inflation they can't afford to horde.  But the top earners aren't effected by either inflation or deflation (those making over $400K a year)  They are more effected by the ebb and flow of skilled/unskilled workers and government contracts.  (in a deflationary scenario, less government contracts are issued)  They are effected by the uncertainty when a government thinks it must cut back in some programs and expand in others.

 

in wurm terms, this is where Rolf would decide to continue paying out to traders (established contracts) or expand payout through other means and take away a little from traders.

 

I just find it fascinating that the Wurm economy is facing the same kinds of questions that current world governments are... and just as States are figuring out how to revalue their currency off the Chinese Yen revaluation, we have Wurm players arguing more or less the same sides.

 

You can essentially equate the "Trader" system to the US's "Defense Budget" (an established currency recirculation mechanism).  Its funny to, that states within the US like Arizona and Utah are passing legislation to print their own money in the form of Gold coins.

 

Just saying.

 

(you might want to research who has been buying up all the US currency for the last 30-40 years... I've give you a hint... it starts with a C and ends with Hina)

Edited May 7, 2013 by Jarosz

[Hussars 511]

To be fair, once you break the $200-250k annual cap, you're fairly insulated against short term market trends (inflation/deflation) as long as you're not "pissing" money away on stupid "stuff".  You can fairly safely ignore the trends as long as you live below your means and earn more than $100-150k annually (live on $50-75k a year), but much below that, you need to start exploiting the social systems as well (which top income holders can do as well).

 

This doesn't mean that anyone living on less than 50k is screwed, or that you can't live on less, you just have a lot less options to do so stably unless you're growing your own food and/or producing your own consumables (gas/fuel, electricity, etc...)

 

[side note] these numbers are based on current US national averages, however, individual market areas may be more or less costly to live in at lower income levels. [/note]

 

::Edit Insert::

There used to be a basic economic idea taught in grade school, that might be something to consider if this is to become a general econ/99% discussion... Bank 1/3 of your paycheck, live on 1/3, houshold bills/general expenses on the last 1/3.  That 1/3 banked, you don't touch, the other 2/3's you adjust if you need to, and anything left over goes into the bank.

 

If you cannot live comfortably on this ratio, you need to reevaluate your income/earning potential (get a second or even a third job), place you choose to live, and/or your lifestyle (i.e. stop buying iPhones every year).

 

This is the same way I play Wurm.

Edited May 7, 2013 by Hussars

[Sobotnik 365]

Your view of economics is too one dimensional. There are more factors than inflation and deflation that come in to play to determine saving and investing.

 

 

 

How does it cause a downward spiral? Currency isn't even destroyed in Wurm. It all goes to the king to be redistributed to traders, or to players.

 

Half of the currency given to the king is destroyed, and other half goes to traders.

 

If less money goes to the king, less money goes to the traders.

[Jarosz 189]

To be fair, once you break the $200-250k annual cap, you're fairly insulated against short term market trends (inflation/deflation) as long as you're not "pissing" money away on stupid "stuff".  You can fairly safely ignore the trends as long as you live below your means and earn more than $100-150k annually (live on $50-75k a year), but much below that, you need to start exploiting the social systems as well (which top income holders can do as well).

 

This doesn't mean that anyone living on less than 50k is screwed, or that you can't live on less, you just have a lot less options to do so stably unless you're growing your own food and/or producing your own consumables (gas/fuel, electricity, etc...)

 

[side note] these numbers are based on current US national averages, however, individual market areas may be more or less costly to live in at lower income levels. [/note]

This is very true.

 

Half of the currency given to the king is destroyed, and other half goes to traders.

 

If less money goes to the king, less money goes to the traders.

Money can infinitely be traded between players face to face without every being taxed.

[Sobotnik 365]

I don't think I can pry your head from the sand.  It doesn't take a rocket scientist to realize that at any given time, in any give scenario, someone will horde money.  The masses won't, that is what you are basing your "fact" on.  But those who understand the cycle, and know that having a lot of money when an economy is in a deflationary phase will have more buying power, and they will horde it away (if they can afford to).

 

Your understanding of economics is of very few constant variables.  The truth of economics lies with those who understand those variables are not constant.  They can be manipulated in any direction with good or bad intentions.

 

Those who want monetary power horde during inflationary periods.  If you don't, and you retire right around the time the economy tanks back into deflation, you have no money for retirement.

 

But your understanding is of mid-lower tier salary earners.  Yes, during inflation they can't afford to horde.  But the top earners aren't effected by either inflation or deflation (those making over $400K a year)  They are more effected by the ebb and flow of skilled/unskilled workers and government contracts.  (in a deflationary scenario, less government contracts are issued)  They are effected by the uncertainty when a government thinks it must cut back in some programs and expand in others.

 

in wurm terms, this is where Rolf would decide to continue paying out to traders (established contracts) or expand payout through other means and take away a little from traders.

 

I just find it fascinating that the Wurm economy is facing the same kinds of questions that current world governments are... and just as States are figuring out how to revalue their currency off the Chinese Yen revaluation, we have Wurm players arguing more or less the same sides.

 

You can essentially equate the "Trader" system to the US's "Defense Budget" (an established currency recirculation mechanism).  Its funny to, that states within the US like Arizona and Utah are passing legislation to print their own money in the form of Gold coins.

 

Just saying.

 

(you might want to research who has been buying up all the US currency for the last 30-40 years... I've give you a hint... it starts with a C and ends with Hina)

 

Except these won't really be impacting the suggestion I have, which is basically a simple currency system used by players to help facilitate trade. 

 

Hoarding during inflationary periods won't happen because this sort of thing can't happen in games like wurm. If some player decided to hoard a lot of cash, and more was printed, his money would lose value.

[Sobotnik 365]

This is very true.

 

Money can infinitely be traded between players face to face without every being taxed.

 

But all silver eventually ends up going into deeds or premium time.

 

Ultimately, to justify the price changes, more money must be created than destroyed.

[Enzius 485]

Half of the currency given to the king is destroyed, and other half goes to traders.

 

If less money goes to the king, less money goes to the traders.

 

Perfect. How does this cause deflation? Where are your numbers? How much currency goes into Wurm? How much gets destroyed by the king? How do you know less will come in than will go out. How do you know we aren't already having inflated values?

 

You don't.

[Sobotnik 365]

Perfect. How does this cause deflation? Where are your numbers? How much currency goes into Wurm? How much gets destroyed by the king? How do you know less will come in than will go out. How do you know we aren't already having inflated values?

 

You don't.

 

http://jenn001.game.wurmonline.com/mrtg/economy

 

So far it's peaked just below 1800, and is presently sitting at around 1780.

 

Given that already we had very gradual inflation, a price increase of 60%, whilst quite a shock, will take a while to get going because money moves somewhat slowly in wurm.

[Enzius 485]

http://jenn001.game.wurmonline.com/mrtg/economy

 

So far it's peaked just below 1800, and is presently sitting at around 1780.

 

Given that already we had very gradual inflation, a price increase of 60%, whilst quite a shock, will take a while to get going because money moves somewhat slowly in wurm.

 

So what you're saying, you're concerned about a 60% price increase causing something to happen that didn't happen. and that's why we need to change a working system.

[Sobotnik 365]

So what you're saying, you're concerned about a 60% price increase causing something to happen that didn't happen. and that's why we need to change a working system.

 

No, I'm concerned because it's going to cause problems in the near future, and will start to become especially bad in two or three months time.

 

The system only worked because the euro has been gradually inflating. That's why more players eventually bought silver and premium time, because it was getting cheaper to do so.

 

Now that prices are up massively, both the number of players and silver going in is going to drop.

[Jarosz 189]

Except these won't really be impacting the suggestion I have, which is basically a simple currency system used by players to help facilitate trade. 

 

Hoarding during inflationary periods won't happen because this sort of thing can't happen in games like wurm. If some player decided to hoard a lot of cash, and more was printed, his money would lose value.

I'll give you an example of how China has been manipulating the currency in the US and the rest of the world, and I will tell you exactly how I'd do it in wurm to horde Funny Money.

 

China early on set its Yuan to the USD in 1985 (14 years after the US abandoned the Gold Standard for good and fully adopted the fiat system we use now, look up the term "Nixon shock" dating from 1971)

 

in 1981 the exchange was 1:1.71 and sunk to about 1:8.64 in 1994 (when outsourcing started to hit and people started really investing in China)

from 1999-2004 the exchange stayed flat at 1:8.28.

 

from 2005-2008 in crashed.  going from 1:8.19 to 1:6.95.

 

If those numbers don't mean anything to you, and their ratios during key economic times, then you need to study up on some world economics.  China doesn't base its currency on interest rates.  It bases it on government set standards for the amount of currency needed to be held in reserve, or handed out.

 

Now, here is where it ties in to exploiting Wurm.

 

I am in the US.  My currency floats against the Euro.  The Silver is pegged to the Euro. The Silver also has a "fiat" type value based on what players perceive its value as. You want to set up a Funny Money Fiat currency in wurm.  I have several avenues of approach in economic currency where I can exploit in "horde" mode. 

 

If the USD does well against the Euro, I buy silver from players. (which it is doing right now) (Results in More silver per USD)

 

If the USD loses ground on the Euro, I sell silver for Euro and convert the Euro to USD (resulting in more USD per Silver)

 

With those 2 currencies fighting each other, I can make a pretty good profit margin. (and I have in the past, I purchased people premium in exchange for silver when the USD was strong, and sold silver to players when it lost ground).

 

If Silver never loses its purchasing power in game, and only the Funny Money fluctuates, I can continue that model in game as well as out side the game.  With an army of alts I could very well earn Funny Money from players, or setup a system to extract it from the game (however it would be circulated fastest).  When the silver was strong against the FM I would buy up FM until it ran its course and stabilized.  I could even sell premium for FM and cut out silver all together.

 

Point being, at some point I could have large amounts of currency in all 4.  USD, Euro, Silver (from Rolf) I wouldn't be able to manipulate.  However, I was able to get the Fiat Silver (re-circulated) as high as 75-85 Euro to 100s,  when it was 1:1 from the shop in 2006-2010ish.  I could very well manipulate it back up there again, its not that hard.  I could also crash it just as fast given enough capital (USD or Euro).  Silver to Euro went down to 100:65 because I stopped selling premium to people, and Rolf started the in game option shortly after I stopped playing (arguably to support the 70+ accounts I had been supporting).  In other words, I manipulated the Fiat Silver by 20+% (before I was selling premium in 2006, the price of 1 gold was not as static, it was all over the place in fact people would buy 1 gold for 20 euro in the first few months of Gold 1).

 

So, yeah... Its not that hard to manipulate a game currency.

[Enzius 485]

No, I'm concerned because it's going to cause problems in the near future, and will start to become especially bad in two or three months time.

 

The system only worked because the euro has been gradually inflating. That's why more players eventually bought silver and premium time, because it was getting cheaper to do so.

 

Now that prices are up massively, both the number of players and silver going in is going to drop.

 

Yes. And how does a fiat currency fix that? 

 

 

The price is up whether we like it or not, naturally people are going to leave. Those who are still there will continue to do what work they can to get dosh.

[Sobotnik 365]

Yes. And how does a fiat currency fix that? 

 

 

The price is up whether we like it or not, naturally people are going to leave. Those who are still there will continue to do what work they can to get dosh.

 

But they have to work harder to get the same amount of silver as before. There will be less premium players and the player-base is going to shrink, along with the game economy and wurms revenue.

 

At the very least, a fiat currency makes trading among players easier, and makes them more willing to engage in trade and do transactions. It will be easier to invest and develop industries, and eventually, in the long run, to help a lot of players engaged in crafting and trading (as it stand now, this is going to get harder to do).

Edited May 7, 2013 by Sobotnik

[Jarosz 189]

But they have to work harder to get the same amount of silver as before. There will be less premium players and the player-base is going to shrink, along with the game economy and wurms revenue.

 

At the very least, a fiat currency makes trading among players easier, and makes them more willing to engage in trade and do transactions. It will be easier to invest and develop industries, and eventually, in the long run, to help a lot of players engaged in crafting and trading (as it stand now, this is going to get harder to do).

People who work for silver in game do not directly add revenue to Rolf's Pockets.  The Premium accounts you will see going away are the 3rd, 4th, 5th + alts that someone has or the "working class" that have never bought premium or silver directly from the Wurm Store.

 

A rich man could fall in love with Wurm and save us all from the doom and gloom.

 

Like I said before, buy 200 gold and lots of deeds.  You could claim to be the savior of wurm!  (but most will call you an elitest land baron)

[Enzius 485]

But they have to work harder to get the same amount of silver as before. There will be less premium players and the player-base is going to shrink, along with the game economy and wurms revenue.

At the very least, a fiat currency makes trading among players easier, and makes them more willing to engage in trade and do transactions. It will be easier to invest and develop industries, and eventually, in the long run, to help a lot of players engaged in crafting and trading (as it stand now, this is going to get harder to do).

How? Why is less silver bad? Fiat currency can't be used for premium without cutting game revenue, so that's out. Is how does it help?

[darthryan 588]

But they have to work harder to get the same amount of silver as before. There will be less premium players and the player-base is going to shrink, along with the game economy and wurms revenue.

 

At the very least, a fiat currency makes trading among players easier, and makes them more willing to engage in trade and do transactions. It will be easier to invest and develop industries, and eventually, in the long run, to help a lot of players engaged in crafting and trading (as it stand now, this is going to get harder to do).

You don't understand... all money is just theoretical anyways.

[Sobotnik 365]

How? Why is less silver bad? Fiat currency can't be used for premium without cutting game revenue, so that's out. Is how does it help?

 

Less silver means less deeds, less trade, less premium players, overall the game will be smaller along with the internal economy.

 

 

You don't understand... all money is just theoretical anyways.

 

And?

 

 

People who work for silver in game do not directly add revenue to Rolf's Pockets.  The Premium accounts you will see going away are the 3rd, 4th, 5th + alts that someone has or the "working class" that have never bought premium or silver directly from the Wurm Store.

 

A rich man could fall in love with Wurm and save us all from the doom and gloom.

 

Like I said before, buy 200 gold and lots of deeds.  You could claim to be the savior of wurm!  (but most will call you an elitest land baron)

 

 

But because the price of gold is now much higher, the chances of some rich bloke doing that and pumping some life into the game are pretty slim.

 

To be honest, the prices, at the very least, should have kept in line with real life inflation, instead of this sudden 60% jump.

Edited May 8, 2013 by Sobotnik

[Kadore 926]

Can we wait until the sky actually is falling before we run around flailing our arms?

 

I've yet to see drastic changes since the price increase.

[Jarosz 189]

 

Less silver means less deeds, less trade, less premium players, overall the game will be smaller along with the internal economy.

 

 

 

And?

 

 

 

 

But because the price of gold is now much higher, the chances of some rich bloke doing that and pumping some life into the game are pretty slim.

 

To be honest, the prices, at the very least, should have kept in line with real life inflation, instead of this sudden 60% jump.

 

Rolf is probably attempting to expand the number of those working under him.

 

If he can support 6-7 people on the last budget, on the new budget he could hire 4 more, minus 1 for all the new taxes he'll have to pay.

 

Wurm has a way of convincing money out of people.  The game grabs you and shakes the loose change right out of your pockets if you aren't careful.

[Jarosz 189]

Can we wait until the sky actually is falling before we run around flailing our arms?

 

I've yet to see drastic changes since the price increase.

You won't for 3-6 months.  Many players purchased surplus premium and silver on the old costs.  Until that surplus runs out, you won't see much doom and gloom.  Its only when it runs out and they can no longer get it for that cheap that the sky shall falleth.

[Sobotnik 365]

Rolf is probably attempting to expand the number of those working under him.

 

If he can support 6-7 people on the last budget, on the new budget he could hire 4 more, minus 1 for all the new taxes he'll have to pay.

 

Wurm has a way of convincing money out of people.  The game grabs you and shakes the loose change right out of your pockets if you aren't careful.

 

It would have been much wiser if he made the price changes more gradual (at the moment, this price change is going to have severe consequences down the line, I already know people whom have begun hoarding silver).

[Myriad 52]

Maybe a deal with Second Life can be made. Since we have Linden trees, maybe they could drop Linden dollars? (ba'dum tish ^^ )

[Jarosz 189]

It would have been much wiser if he made the price changes more gradual (at the moment, this price change is going to have severe consequences down the line, I already know people whom have begun hoarding silver).

People have been hording silver long before this.  One of the biggest issues that Wurm has had was convincing people to spend those silvers.  Premium in game was really the first successful money sink.

 

If you want people to spend silver, let them have MORE than 1 deed per character.  That would drain the system of silver pretty quickly, and guarantee a steady/predictable return of silver into the system (upkeep/trader circulation)

[Eldurian 86]

What I haven't really seen explained is how will deflation hurt us? People will get paid less silver for goods and services but they will also pay less for goods and services.

The only thing that will increase in value is deed/premium/trader item costs. But that was the intention of the price hike.

So before we talk about combating deflation I would like to pose the question... why should we?