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Faction currencies to mitigate inflation

First post
Author
GTN
BALKAN EXPRESS
Shadow Cartel
#41 - 2016-01-15 21:09:16 UTC
Danika Princip wrote:
You haven't actually given an advantage, just a situation which will literally never happen. How would ISK lose it's value when there isn't an alternative outside of some weird barter system?

Where is the advantage in forcing me to keep track of no less than five seperate wallets, maintain balances in five seperate currencies, and pay close attention to all the exchange rates and **** instead of just buying and selling what I want in ISK?

Complexity for it's own sake is not a good thing.


It has already happened. For me ISK has no value. I keep all my wealth in tritanium and try to keep my ISK to a minimum. Right now I have 50 million ISK in the wallet. If I need to buy something, I sell some tritanium for ISK and then buy the thing that I want immediately.
ISK will lose its value very fast once people realize that it has no value. What is keeping it from dying is the belief of miners that ISK has value. Once miners stop accepting ISK, it's game over.
Danika Princip
GoonWaffe
Goonswarm Federation
#42 - 2016-01-15 21:19:26 UTC
Surely if you want a place to store your isk, you do it in PLEX, not trit.

I remember when trit was 1.5 ISK/unit. We're more likely to go back to that than whatever you seem to think is going to happen any day now.

People mine to make ISK. They are not likely to suddenly stop accepting ISK for their minerals.

I build ships for sale. I am not going to stop accepting ISK for my ships.


Why do you think people are going to stop using ISK, and what do you think they are going to use instead?
GTN
BALKAN EXPRESS
Shadow Cartel
#43 - 2016-01-15 21:22:32 UTC
Danika Princip wrote:
Why do you think people are going to stop using ISK, and what do you think they are going to use instead?


Faction currency, because the value of ISK is zero.
Danika Princip
GoonWaffe
Goonswarm Federation
#44 - 2016-01-15 21:26:47 UTC
GTN wrote:
Danika Princip wrote:
Why do you think people are going to stop using ISK, and what do you think they are going to use instead?


Faction currency, because the value of ISK is zero.


There is no faction currency, so this is irrelevant.

If there was one, why would you think this was a good selling point for it?

Wasn't gold backed economics kind of ruined decades ago?
GTN
BALKAN EXPRESS
Shadow Cartel
#45 - 2016-01-15 21:26:57 UTC
Danika Princip wrote:
Surely if you want a place to store your isk, you do it in PLEX, not trit.

A PLEX is inconvenient when I need to buy small things like a battlecruiser.
GTN
BALKAN EXPRESS
Shadow Cartel
#46 - 2016-01-15 21:30:07 UTC
Danika Princip wrote:
GTN wrote:
Danika Princip wrote:
Why do you think people are going to stop using ISK, and what do you think they are going to use instead?


Faction currency, because the value of ISK is zero.


There is no faction currency, so this is irrelevant.

If there was one, why would you think this was a good selling point for it?

Wasn't gold backed economics kind of ruined decades ago?

When faction currency is introduced it will become very relevant. Also gold backed economics don't have a fixed exchange ratio, thus there is great risk for inflation, and gold doesn't have much value outside of electronics.
Takari
Resource Warring
#47 - 2016-01-15 21:32:19 UTC  |  Edited by: Takari
Previous poster correct. Your elaborate troll attempt caught me good. +1 Internets for you and good day.

"Roll the dice, don't think twice. This is the way of things. Welcome to EVE." ~ CCP Falcon

"Good luck, shoot straight and don't back down." - Serendipity Lost

Teckos Pech
Hogyoku
Goonswarm Federation
#48 - 2016-01-15 22:13:27 UTC
GTN wrote:


The userbase has determined that 1 tritanium is worth 6 isk, thus 1 caldari credit will be worth 6 isk. If the userbase determines that tritanium is worth 7 isk, then 1 caldari credit will be worth 7 isk.


For now. But it can and has changed for a variety of reasons, many of them linked to changes to the game from…wait…wait…patience…CCP. Used to be ISK was worth somewhere between 3-4 ISK. Then drone poo was removed and changes to refine rates for loot drops…viola 6 ISK/unit of tritanium.

So the price is determined by supply and demand, and that CCP does have some not inconsiderable influence over.

And that still does not answer the question of who decides that 1 Caldari Credit is backed by 1 unit of tritanium. Who sets that and what is to prevent them from changing that exchange rate?

And I don’t believe that nonsense about voting and not changing it. We see that kind of nonsense all the time. However, in economics there is a problem known as time inconsistency and such claims of “we’ll never touch it ever again” are usually not credible. Could CCP open it up to additional voting? Could CCP change it by simple fiat?

Isaac Armer wrote:

Exactly the problem. Now there are four more currencies to manipulate, making market fluctuation swing even wilder than they are now. It would do nothing for inflation, it would only line the pockets of those who care enough to play currency games. If anything, it would make predicting inflation/deflationary trends even more difficult than it is today.


In GTN’s defense, resource backed currencies are much harder to manipulate. However, Gresham’s law indicates that people would prefer to hoard such currencies than use them as a medium of exchange precisely because they can be an effective hedge against inflation.

As for the notion of runaway inflation, the rate of ISK growth in the economy has been remarkably stable and CCP watches it and are aware of what could happen if it gets out of hand. So the notion of ISK losing 90% of its purchasing power is just nonsense. Exactly what mechanism would cause this sudden hyper-inflation. Personally, I don’t see hyper-inflation as merely really high inflation, but a sudden loss in confidence in the monetary authority. They do something to cause that loss of confidence, typically they do something along the lines of monetizing a large debt. However, CCP has no in-game debt to monetize. So exactly tell us how the in game monetary system would fall apart. Is CCP going to suddenly multiply all rat bounties by a factor of 10 or 20? And why would they do that?

Most of the world’s currencies are fiat currencies—i.e. they are IOU nothing types of currency. Are we to believe the OP would use RL currency as toilet paper or burn it.

And ISK has value in game because CCP has set it up as the sole currency in the game. We have no other significant means of exchange. We could all decide to switch to barter, but barter makes exchange much, much harder than using an agreed upon (or in our case, CCP agreed upon) currency. The problem with barter is the dual coincidence of want—i.e. if I have tritanium, but want mexallon and you have mexallon and want tritanium we can trade, but if you have only isogen, we can’t trade. So off we go looking for the people who we can trade with. Basically, it adds a substantial transaction cost to trade. We could also decide that we’ll do all exchanges via contract and in terms of tritanium. But sticking with ISK is just easier as the markets are already set up to use it. And most markets in Eve that use ISK are quite liquid meaning there are lots of buyers and sellers so that we can get what we want much easier and sooner.

The guy is coming across as one of those RL kooky gold bugs. My advice, ignore him. Let this thread sink down to the second page and then into oblivion.

"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."--Friedrich August von Hayek

8 Golden Rules for EVE Online

Isaac Armer
The Soup Kitchen
#49 - 2016-01-15 22:20:13 UTC
Teckos Pech wrote:
In GTN’s defense, resource backed currencies are much harder to manipulate. However, Gresham’s law indicates that people would prefer to hoard such currencies than use them as a medium of exchange precisely because they can be an effective hedge against inflation.


In the real world, yes, but that isn't as applicable here. Resource based currency is based on a finite supply of that resource existing. In new eden, rocks continually regenerate, and are unlimited in supply. Someone trying to drive the value of silver up by buying it out works because we can't make more silver. Someone hoarding trit won't work because someone can mine more tomorrow.

Geckos as the resource we base it on? Yes. Rocks? No.
Teckos Pech
Hogyoku
Goonswarm Federation
#50 - 2016-01-15 22:44:29 UTC
Isaac Armer wrote:
Teckos Pech wrote:
In GTN’s defense, resource backed currencies are much harder to manipulate. However, Gresham’s law indicates that people would prefer to hoard such currencies than use them as a medium of exchange precisely because they can be an effective hedge against inflation.


In the real world, yes, but that isn't as applicable here. Resource based currency is based on a finite supply of that resource existing. In new eden, rocks continually regenerate, and are unlimited in supply. Someone trying to drive the value of silver up by buying it out works because we can't make more silver. Someone hoarding trit won't work because someone can mine more tomorrow.

Geckos as the resource we base it on? Yes. Rocks? No.


Actually that is exactly why tritanium would be a good choice.

During WWI countries went off the gold standard. Then afterwards their monetary and fiscal situations were often chaotic and a mess. So people reasoned, “We’ll go on the Gold standard and that will sort it out.” But once you go on something you can always go off. This created speculative pressure for when nations would go off the gold standard and the demand for gold rose dramatically as a safe harbor…thus the price of gold went up. But as the price of gold went up then the currency price of goods and services had to go down—i.e. deflation. Now using the equation of exchange again,

MV = PQ

If P goes down, then either T has to go up or M and/or V has to go down to maintain equality. The most likely thing to happen is for V to go down. Why? Well the longer you hold money the more you can buy with it in this case. Hold on to that cash long enough and soon it will have an effect on the real side of the economy—i.e people are holding their cash and not spending it on goods and services. So then monetary phenomenon start to have real effects and the solution is obvious. Ditch the gold standard and start printing money (increase M). Countries that did this earlier did much better than countries that hung on to the gold standard.

Now, in the game, the ability of people to mass produce tritanium means that the price is relatively stable with a given set of mechanics. We won’t see a sustained price increase for tritanium like with gold above. Trying to corner the trit market would be very hard and prohibitively expensive…and would likely fail anyways and could wipe out the person(s) that tried it.

Still, I don’t see any of the real world problems with inflation in the game (aside from maybe PLEX prices) to indicate we need to switch to a resource backed currency.

"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."--Friedrich August von Hayek

8 Golden Rules for EVE Online

Isaac Armer
The Soup Kitchen
#51 - 2016-01-15 23:01:58 UTC
Teckos Pech wrote:
Actually that is exactly why tritanium would be a good choice.

During WWI countries went off the gold standard. Then afterwards their monetary and fiscal situations were often chaotic and a mess. So people reasoned, “We’ll go on the Gold standard and that will sort it out.” But once you go on something you can always go off. This created speculative pressure for when nations would go off the gold standard and the demand for gold rose dramatically as a safe harbor…thus the price of gold went up. But as the price of gold went up then the currency price of goods and services had to go down—i.e. deflation. Now using the equation of exchange again,

MV = PQ

If P goes down, then either T has to go up or M and/or V has to go down to maintain equality. The most likely thing to happen is for V to go down. Why? Well the longer you hold money the more you can buy with it in this case. Hold on to that cash long enough and soon it will have an effect on the real side of the economy—i.e people are holding their cash and not spending it on goods and services. So then monetary phenomenon start to have real effects and the solution is obvious. Ditch the gold standard and start printing money (increase M). Countries that did this earlier did much better than countries that hung on to the gold standard.

Now, in the game, the ability of people to mass produce tritanium means that the price is relatively stable with a given set of mechanics. We won’t see a sustained price increase for tritanium like with gold above. Trying to corner the trit market would be very hard and prohibitively expensive…and would likely fail anyways and could wipe out the person(s) that tried it.

Still, I don’t see any of the real world problems with inflation in the game (aside from maybe PLEX prices) to indicate we need to switch to a resource backed currency.


Not disagreeing, but the part missing is that everything we are saying hinges on a central banking system to regulate and control (which is ridiculous in the context of EVE). In the absence of a central banking system, as well as the absence of a need to spend ISK (you have to spend money to survive IRL, you don't have to spend ISK in EVE), as well as EVE being an isolated environment (the original idea is useless without completely removing ISK), the idea of a resource based economy doesn't make sense.

Basing it on minerals simply makes it unnecessarily complicated (and easier to manipulate) without adding any discernible difference to inflation, basing it on a fixed quantity assets assumes there is control from a central authority, which is flat out counter to EVE.

I would argue a big part of why countries did better coming off a gold standard has a decent chunk to do with the fact that once your currency is backed the the faith of your government, rather than a quantifiable product, it is much easier to add leverage to that government's balance sheet.
Teckos Pech
Hogyoku
Goonswarm Federation
#52 - 2016-01-16 00:29:30 UTC
Isaac Armer wrote:
Teckos Pech wrote:
Actually that is exactly why tritanium would be a good choice.

During WWI countries went off the gold standard. Then afterwards their monetary and fiscal situations were often chaotic and a mess. So people reasoned, “We’ll go on the Gold standard and that will sort it out.” But once you go on something you can always go off. This created speculative pressure for when nations would go off the gold standard and the demand for gold rose dramatically as a safe harbor…thus the price of gold went up. But as the price of gold went up then the currency price of goods and services had to go down—i.e. deflation. Now using the equation of exchange again,

MV = PQ

If P goes down, then either T has to go up or M and/or V has to go down to maintain equality. The most likely thing to happen is for V to go down. Why? Well the longer you hold money the more you can buy with it in this case. Hold on to that cash long enough and soon it will have an effect on the real side of the economy—i.e people are holding their cash and not spending it on goods and services. So then monetary phenomenon start to have real effects and the solution is obvious. Ditch the gold standard and start printing money (increase M). Countries that did this earlier did much better than countries that hung on to the gold standard.

Now, in the game, the ability of people to mass produce tritanium means that the price is relatively stable with a given set of mechanics. We won’t see a sustained price increase for tritanium like with gold above. Trying to corner the trit market would be very hard and prohibitively expensive…and would likely fail anyways and could wipe out the person(s) that tried it.

Still, I don’t see any of the real world problems with inflation in the game (aside from maybe PLEX prices) to indicate we need to switch to a resource backed currency.


Not disagreeing, but the part missing is that everything we are saying hinges on a central banking system to regulate and control (which is ridiculous in the context of EVE). In the absence of a central banking system, as well as the absence of a need to spend ISK (you have to spend money to survive IRL, you don't have to spend ISK in EVE), as well as EVE being an isolated environment (the original idea is useless without completely removing ISK), the idea of a resource based economy doesn't make sense.

Basing it on minerals simply makes it unnecessarily complicated (and easier to manipulate) without adding any discernible difference to inflation, basing it on a fixed quantity assets assumes there is control from a central authority, which is flat out counter to EVE.

I would argue a big part of why countries did better coming off a gold standard has a decent chunk to do with the fact that once your currency is backed the the faith of your government, rather than a quantifiable product, it is much easier to add leverage to that government's balance sheet.


I'd argue that CCP is our central banker. They could, do things like add/increase ISK sinks, they could also change rat bounties. My guess is since they don't see much inflation in terms of game items they haven't seen much need to mess with stuff.

As for fiat vs. gold backed currencies it is much easier to inflate the currency in the former case. During the Great Depression the U.S. government actually shrank the money supply! In 1930s the Fed was out there selling treasuries--i.e. taking money in exchange for government debt. By today's standards it was nuts.

But all that aside I see literally no reason to do this. That one guy wants to consider ISK of no value in game and convert it all to tritanium...fine, whatever. I don't care. Everyone else appears to have sufficient faith that CCP is not going to go off the rails and increase rat bounties by 1, 2 or 3 orders of magnitude.

"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."--Friedrich August von Hayek

8 Golden Rules for EVE Online

Isaac Armer
The Soup Kitchen
#53 - 2016-01-16 00:45:19 UTC
Teckos Pech wrote:
I'd argue that CCP is our central banker. They could, do things like add/increase ISK sinks, they could also change rat bounties. My guess is since they don't see much inflation in terms of game items they haven't seen much need to mess with stuff.

As for fiat vs. gold backed currencies it is much easier to inflate the currency in the former case. During the Great Depression the U.S. government actually shrank the money supply! In 1930s the Fed was out there selling treasuries--i.e. taking money in exchange for government debt. By today's standards it was nuts.

But all that aside I see literally no reason to do this. That one guy wants to consider ISK of no value in game and convert it all to tritanium...fine, whatever. I don't care. Everyone else appears to have sufficient faith that CCP is not going to go off the rails and increase rat bounties by 1, 2 or 3 orders of magnitude.


I definitely wasn't clear enough, CCP is absolutely our central banker. I don't think it's a good idea to implement any policies in the game that would require more interaction from them with that role. What the FED did from that time through the 50s caused passive long term issues, it took Volcker's insanity to actually stop the bleeding caused by it.

Back to the issue, I'm still 100% convinced this guy is a troll, since there really is absolutely no reason for this idea.
ISD Decoy
ISD Community Communications Liaisons
#54 - 2016-01-17 15:50:08 UTC
I have removed a couple off-topic/troll replies.

Quote:
27. Off-topic posting is prohibited.

Off-topic posting is permitted within reason, as sometimes a single comment may color or lighten the tone of discussion. However, excessive posting of off-topic remarks in an attempt to derail a thread may result in the thread being locked, or a forum warning being issued to the off-topic poster.

ISD Decoy

Captain

Community Communication Liaisons (CCLs)

Interstellar Services Department

Lugh Crow-Slave
#55 - 2016-01-17 16:12:36 UTC
GTN
BALKAN EXPRESS
Shadow Cartel
#56 - 2016-01-18 05:32:00 UTC  |  Edited by: GTN
Lugh Crow-Slave wrote:
Lp?

The problem with loyalty points is that they can only be used to buy from a loyalty point store, they don't have a fixed value and you can't buy loyalty points from a faction.

Teckos Pech wrote:

Still, I don’t see any of the real world problems with inflation in the game (aside from maybe PLEX prices) to indicate we need to switch to a resource backed currency.

Again, I'm not advocating to switch to a resource backed currency, but just to add one in case players want to use it. Just give the option but don't force anyone to use it.
Rivr Luzade
Coreli Corporation
Pandemic Legion
#57 - 2016-01-18 09:09:39 UTC
GTN wrote:
Again, I'm not advocating to switch to a resource backed currency, but just to add one in case players want to use it. Just give the option but don't force anyone to use it.

GTN wrote:
So let the empires issue their own currency, backed by resources. In my opinion it would allow for a more fair exchange of goods and services.

UI Improvement Collective

My ridicule, heavy criticism and general pale outlook about your or CCP's ideas is nothing but an encouragement to prove me wrong. Give it a try.

Xe'Cara'eos
A Big Enough Lever
#58 - 2016-01-18 09:40:42 UTC
OP - have you actually sat down and read all the replies that people have made, gone away and thought (coldly and dispassionately) about your idea before making your reply?
it seems to me that you're defending your idea because it's your idea and you want it.... if it was a good idea, other people would step in and at least HELP you defend it..... instead I see you against the world

Also - nullsec empires CAN and DO manipulate the cost of base minerals - I remember a few expansions ago something happened to zydrine, and so they stockpiled it immediately before, raising the price, then gradually sold off their stockpiles...... presumably making several trillion in the process.......

For posting an idea into F&I: come up with idea, try and think how people could abuse this, try to fix your idea - loop the process until you can't see how it could be abused, then post to the forums to let us figure out how to abuse it..... If your idea can be abused, it [u]WILL[/u] be.

Teckos Pech
Hogyoku
Goonswarm Federation
#59 - 2016-01-18 18:47:20 UTC
Well I was hoping this thread would slip to the second page and die, but guess not....

Ironically, I am actually reading up on free banking right now, in particular the Scottish free banking system which was amazingly innovative and stable. Yes, it was a system backed by gold.

But this raises another point.

Using something like tritanium is not good in that is is extremely useful in production. For this system to work the empires would have to hold massive amounts of tritanium to be ready to redeem notes backed by tritanium. That tritanium cannot be used to produce Stuff™.

This is why gold and silver were used as a form of money. The other uses were limited and it was also in limited supply.

Further it would make hauling tritanium completely disappear from the game. I'd simply go buy Caldari Bucks or whatever, and then in my noob ship fly to wherever I want the tritanium and dock up and convert my Caldari Bucks to tritanium. And if this is a true resource backed currency it wouldn't matter what station I docked at so long as it was a station affiliated with one of the empires.

Further, production of tritanium is inflationary.

This can be seen by looking at banking systems that were backed by gold in RL. When there was a new source of gold found the money supply had to increase (since the exchange rate between notes and gold is fixed, to maintain equilibrium the quantity has to adjust). And if the supply of gold did NOT increase at the same rate as the economy did, then you'd get deflation. Yes, there were periods where people worried that the world was not producing enough gold to keep up with economic growth.

Could that last point be something players somehow manage to take advantage of? Kind of like the Goon ice interdiction? I don't, know, but having a resource backed currency does not mean the system cannot be manipulated. Look at what France did in the late 1920s.

"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."--Friedrich August von Hayek

8 Golden Rules for EVE Online

Adunh Slavy
#60 - 2016-01-18 20:31:09 UTC
Curbing monetary inflation in Eve is simple, and it does not require multiple faction currencies. Eve's economic problems come from the fact that shooting rats, in all its forms, produces too many kinds of rewards, ISK being one of them.

Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves.  - William Pitt