Deflation about to hit big time

[Stouter]

Now I know someone’s going to try and be smart and say that RMT increases the problem but it doesn’t. Sure gilsellers raise the prices sometimes on their items, but if the market is unable to sustain a higher price, the items won’t sell. This is apparent by the Christmas fiasco on AHs across all servers. For example, on Leviathan Evasion Torque was worth about a million gil before Christmas. During Christmas and up until that Friday it was at a solid three million or higher. Just a week later, it’s down to 2.5 million, and it keeps falling.

Gilsellers do contribute to the problem, but they're not a major part of it the way everyone thinks. Anyone remember the early gilsellers? Farming gigas in delkfutt for gil drops, farming tigers in glacier to turn in fangs for quest gil and sell hides to NPC. Gilsellers have brought in gil from nowhere, and sold it to players. Here's your increase in currency.

Now they don't farm gil, they farm drops. They sell those drops for gil, then sell the gil. This adds to inflation in two ways. One, by selling gil to players they give more players more buying power, so those players are able to spend more. Two, their gil becomes essentially liquid, going straight through them without any potential money sink like other players, ie crafting, etc. In other words, it leads to more gil being spent, even if it is the same gil being spent multiple times. This decreases supply.

 

[dedalius]

Gilsellers do contribute to the problem, but they're not a major part of it the way everyone thinks. Anyone remember the early gilsellers? Farming gigas in delkfutt for gil drops, farming tigers in glacier to turn in fangs for quest gil and sell hides to NPC. Gilsellers have brought in gil from nowhere, and sold it to players. Here's your increase in currency.

I didn't play before December '05 so I can't say anything about gilsellers back then but today they don't do that anymore (I'm pretty sure, except for exploits like Rabao. But many people besides just gilsellers exploited Rabao.).

Now they don't farm gil, they farm drops. They sell those drops for gil, then sell the gil. This adds to inflation in two ways. One, by selling gil to players they give more players more buying power, so those players are able to spend more. Two, their gil becomes essentially liquid, going straight through them without any potential money sink like other players, ie crafting, etc. In other words, it leads to more gil being spent, even if it is the same gil being spent multiple times. This decreases supply.

By selling the gil to the players, they only move the gil around. Money, by nature, is a liquid entity. Money sinking to other players, or crafting doesn't bring out any money from the economy. It simply moves it around. Trading real money for gil is very similar for trading something in game for gil. It's just that in RMT the gil is being traded for something out of the game, so you see no representation of the two-part trade in game.

If anything, breaking crafts actually hurts the economy because there is less item per gil. But that's marginal. Money moving around in an economy is very healthy, that's why the government lowers interest rates. If people save too much money then the economy starts to die, and the government lowers interest rates to get people to spend more. This is when you start to see the differences between real and game economies. In a real economy, people also need to save because they need to be able to spend it later. In a game you never have to retire and can always make more money from someone. Spending money is always healthy in a game economy.

The problems arise when gil depreciates in value (not percieved value, actual value). The percieved value by gilbuyers decreases because they have no sense of worth for the gil because they spent no time getting it. Actual value is how much each gil is worth per capita. For example, in the US average inflation is about 3%. That means that next year your dollar will have the buying power that 97 cents would have today. Gilbuying causes people to have an incorrect percieved value of the gil, but the actual value of the gil is exactly the same unless inflation takes place. I have about 600k gil on me. A year ago that would be a ton of money, able to buy many things with it. But today gil is much more readily available. Many people have 600k. The average gil/person has gone up, just as the costs of things have gone up. This is natural when you have a liquid economy (money coming in and going out). FFXI's economy isn't too liquid, there is a good amount of movement of gil.

The problem is that every day gil is worth less and less. So instead of my dollar losing 3% a year, it's losing say 1% a day. In a week my dollar will only have the buying power that today's 93 cents has. In another week, only 87 cents. In another week only 80 cents. It goes on and on until each individual gil is virtually worthless. The same thing is happening in FFXI because there is too much money coming in, and not enough leaving.

 

[Stouter]

Yes, rusty caps were a bigger cause of inflation than gigas/tiger farmers, and that was mostly done by normal players.

Money sinking to other players, or crafting doesn't bring out any money from the economy.

Have you ever leveled a craft? You buy a lot of consumables from NPC's, and then sell your product to NPC's. You end up getting less gil back NPC's than you give to them. This is a money sink.

By selling the gil to the players, they only move the gil around. Money, by nature, is a liquid entity. Money sinking to other players, or crafting doesn't bring out any money from the economy. It simply moves it around. Trading real money for gil is very similar for trading something in game for gil. It's just that in RMT the gil is being traded for something out of the game, so you see no representation of the two-part trade in game.

Gilsellers do add to inflation in this way. Take o-kote for example. They get the drop, sell it for gil. They then sell that gil. Big picture they are selling the item for RL currency. This adds RL currency to the total gil in the economy.

 

[Palum_Q]

The auction house should have never been modified the way it was.... inflation increased a lot after they changed the tax.

As much as I would like to see the prices go down...I would think that's a little too optimistic in my view. But I want to be proven wrong..lol. It'd be nice to see those HQ staves go down again.

 

[dedalius]

Have you ever leveled a craft? You buy a lot of consumables from NPC's, and then sell your product to NPC's. You end up getting less gil back NPC's than you give to them. This is a money sink.

Yes leveling crafts does take money out of the economy. But as far as I know, 99.99% of people don't skill up on stuff like Hauby, or SH, or other big ticket items etc. Personally, I find crafting boring and mundane, which is why I don't do it. It doesn't matter how little or how much money I have, I refuse to craft because I don't like it. I know I'm not the only one that doesn't like crafting. Now in no way am I rich in game, but I wouldn't level up a craft even if someone offered to bankroll my way all the way up. It's just too boring.

But that's beside the point. The crafting I thought we were talking about is stuff like synthing Weskit, or other high level items. As far as I know all this is taken care of by already leveled crafters. Stuff like SH and Weskit aren't synthed to skill up on unless the person is insane.

The kind of crafting you are talking about in this post is a sink for gil, which is good. We need more of this kind of sink to balance out the flow of gil.

Gilsellers do add to inflation in this way. Take o-kote for example. They get the drop, sell it for gil. They then sell that gil. Big picture they are selling the item for RL currency. This adds RL currency to the total gil in the economy.

RL currency isn't comparable to gil. It's more similar to an item in that, when was the last time you bought 1 million gil for a million gil? But I could go "buy" a million gil with my erase scroll. When a gil buyer buys gil they "convert" something into gil, just as when a person selling an item "converts" that item into gil. RL currency has no effect on the "actual" value of a million gil. 1 million gil in the hands of a noob, or in the hands of an experienced player will have the same buying power. All gilbuying and selling does is make the economy more fluid, which isn't bad from a purely economic standpoint. Gilbuying is only bad because it gives people the "Uber" items they shouldn't have. It decreased the "percieved" value of the gil by the person who bought it. If I bought a million gil in 5 minutes online, I personally wouldn't place the same amount of value on that million gil that someone who spent 2 hours farming it would. While in reality, both million gil have the same exact buying power.

Edit: I don't want to sound demeaning in any fashion, but I invite all of you to read this. It's a very informative read about how inflation, interest rates, and economies work.

 

[Stouter]

RL currency isn't comparable to gil.

Yes, but when it's used to buy gil, and through proxy items, it needs to be added in to the total currency in game. Compare this to RL. Let's say that all of a sudden there's a flood of tourism from europe to the US. To accomadate this there are currency exchange locations popping up everywhere (comparable to gilsellers) and now there's more cash being spent. There isn't any more US cash here, and that's all that anyone takes, but there's still more people buying more things, and it leads to inflation from increased demand per supply. Everyone starts charging more for tourism related expenses, and as some normal people also use those things, their cost of living increases, and prices go up everywhere to compensate.

 

[dedalius]

That's not inflation though, thats an increase in demand causing an increase in price. In order for those changes to stay permanent more dollars would have to be pumped into the market.

Say theres only $1000 dollars in a given economy , and it costs $100 per week to survive. 10 people live in said economy and spend all $100 per week, divided amongst all people. Now everything is in balance. Say a person comes in and "buys" $200. Now we have 11 people there, still costs $100 per week to survive, and one person has $100 extra. That means that there is a total deficit of $200. Prices will ultimately go down because we only have about $91 per person per week. That means the places charging $100 to survive won't be able to stay in business because they can't get customers. If that 11th person then leaves and takes $0 with them, the prices will return to $100 a week per person. If the person leaves with say, $100, then prices will stay at $91/week. This, just as extreme inflation, can lead to recessions and even depressions. The closer to a net gain of $0 every day, the better the economy. Too much coming in or too much leaving are both bad.

This is bad also, this is what happens when the amount of money/person decreases. Ideally that 11th person would bring exactly $100 to that economy. It would cause everyone to have $100 per week, keeping prices exactly the same. No more money has come in to the economy, and none has left.

The situation you described is alot like what happened over Christmas. There was a massive amount of outside funds suddenly thrust into the market, your tourists. Their percieved value of the gil causes them to spend more than they should on a given item. This creates a temporary hardship for the citizens of said economy. But, since those "toursits" are leaving (gilbuyers are out of gil) then the prices will return to a level appropriate to the actual value of a gil.

 

[Stouter]

That's not inflation though, thats an increase in demand causing an increase in price. In order for those changes to stay permanent more dollars would have to be pumped into the market.

It's price increases due to gilsellers. And more and more dollars are pumped in every day.

 

[dedalius]

The gilsellers raise prices, not cause inflation. They are two different things. If gilsellers tried to raise prices beyond what the market can sustain then their stuff wouldn't sell. Just like the stuff isn't selling today. The only reason they can raise prices is because more gil is coming into the economy. Inflation allows the gilsellers to raise prices.

Edit: I would also like to add, Gilsellers and regular players both raise prices. Pointing the finger at only one of them is flawed and a bad argument. Players and gilsellers both get greedy and both put items up for more than the last. Personally, I put my stuff up for equal to, or less than the previoius sale.

 

[Stouter]

But the gilsellers create more buyers in the marketplace with funds. More demand. The gilbuyers also don't need to farm to pay for things, so there's less items for sale, lower supply. That leads to higher prices across the board, aka inflation.

 

[dedalius]

The higher prices are different than the inflation though. The higher prices wouldn't sustain themselves if it wasn't for inflation. If there is only 1000 gil in an economy, total prices can only reach a certain point before they start to not sell, regardless of how many people want them simply because there isn't enough gil in the economy. If another 100 gil is put in, prices can raise again.