Market Discussions

"...As the increased money supply wasn‘t increasing trade to the same degree, the result was a lower velocity of money. An important factor in this was probably the absence of a trusted banking sector, which could offer interest and distribute the unused ISK to those in need of funds..." - CCP Recurve, Dev Blog: Price Indices – February 2012
http://community.eveonline.com/devblog.asp?a=blog&nbid=9115

Note: I'll be discussing this on the EVE Morning Report Weekend show, if you'd like me to touch on counter-arguments, please add them to the thread.

I think I can explain what this means, but I need to explain something first.

During the height of EBANK, there was a phenomenon I noticed that freaked me out. A handful of people know about this, they can confirm it if they'd like to. The phenomenon was that for several months we were tracking deposits significantly exceeding withdraw requests...so much so in fact that they covered interest payments. In theory, so long as people had confidence in the Bank, deposits would always cover interest payments in perpetuity. The more we grew, the more true this became.

Most of us would say this the perfect setup for a Ponzi (http://en.wikipedia.org/wiki/Ponzi_scheme). I would agree with that assessment, that's why it scared the hell out of me when I realized what was happening. But I also began to form a theory on the money supply.

So, the 2.4 Trillion ISK question is; why would CCP be interested in a trusted banking sector?

It's all about the money supply. In a player-run bank, people deposit their funds in the bank and draw them out when needed. If a bank ran long enough, a certain percentage of it's funds in any given year are "freed" due to characters leaving and never returning but not being bio-massed. Normally this would simply add to the money supply, but in a EVE Bank this would drive down the fractional reserve requirement (Any Bank in EVE MUST have an ability to draw truly massive amounts of ISK in the event of a run. Runs are not an "if", they are a "when".) and ultimately route a portion of "dormant money" to active players. The Bank would actually be presenting an even larger money supply that what money is available on paper.

A bank operating in such a way would increase the velocity of the money supply and act against deflationary pressures on the major Price Indexes. I'm leaving out some details here, but that's the gist of it.

If CCP allows for API enabled money transfers, it would be an order of magnitude easier to build banks. As it is, the only scalable solution is a "crowd-sourced distributed withdraw" solution. It's sufficiently complex that no one has built it. If CCP is interested in more player Banks, we need to be able to do character to character money transfers through some kind of API.


edit: I did a follow up post to clarify a bit, find it here
https://forums.eveonline.com/default.aspx?g=posts&m=958794#post958794

Monster show incoming, I think.

I think you are reading this wrong, or at least reading into it. In a RL economy people don't store their money under their beds, they put it in banks. Banks then lend it out, therefore the amount of money in the economy is a meaningful measure. But since in Eve we all keep our money under our mattresses (or if you prefer, the only trusted bank in Eve, the wallet which doesn't make loans) the quantity of money is pretty much meaningless and doesn't correlate to any measure of inflation. That is all he is saying.

If we all had to put our money in player banks, and if those banks had to lend out most of that money to stay in business, the price of everything would go wacko. Just please put this silly idea out of your head. We don't want your bank.

As claire wisely, as usual, put: he's describing the nature of the economy, not advocating the need for player run banks to save the game from inflation.

I'm not in the banking business, I'm in the accounting business. I'll leave it to someone else to build Banks for now. Just wanted to be clear about that particular point.

I would never advocate an NPC Bank, I have never advocated an NPC Bank, and I'm entirely against the idea of NPC Banks.

Trust is a much more complex and nuanced topic. If someone tries to launch a Bank I'll probably talk about it more then, however I will say this; EVE is more about managing risk then managing trust.

Not exactly on topic, but I was thinking about my last point on how the absence of banking in Eve creates a disconnect between the money supply and inflation. The popular idea of the day is that incursions are creating inflation by generating excessive isk and the evidence can be seen in rising PLEX prices. I would argue that incursions are giving players a higher income so more players are able to afford PLEX to pay for their subscription and the higher demand is driving up PLEX prices. This is not the same as inflation.

Remember that every Eve player has to pay for their subscription one way or another (or quit the game) and increased PLEX demand is simply a result of players making an economic decision to switch from one form of payment to another. As an analogy, everyone has to eat. You can either buy food at the grocery store to prepare for yourself or eat out at a restaurant. As disposable income increases more people choose to eat out, driving up the price of restaurant meals. Meanwhile, the price of groceries could very well be falling. Is this inflationary?

Dr. E has been on his isk sink kick for a long time, warning the devs of the dangers of inflation in Eve. Meanwhile he has included the price of PLEX as a huge chunk of his consumer price index in a failed effort to hide the inevitable decline in prices. If inflation is too much money chasing too few goods, what we have in Eve is a money supply that can barely keep pace with the ever increasing stockpile of goods we have in our hangars.

Well what we're getting into here really in terms of the creation of semi trustworthy banks is whether or not ccp is going to create more complicated tools for what have been up to this point completely voluntary and trust based transactions. Ultimately ccp is the only completely trustworthy auditor (at least if they aren't you're screwed anyway so don't worry about it).

But we need some tools, a functioning stock market, or bonds, loan contracts, something like that.

Having to rely on external tools and markets, although there are a couple, they don't have much wide spread use, they're not very visible, and in the land of constant scams there's a huge hurdle there as it is.

Well humanity thought they were the top chain food now for a few century, they were wrong.

They have the worst predator they could ever imagine that kills humans every day by millions: bank and their weapon is monetary system.

Their technique is now better than first vague in 1930's, much better because since then they don't really need world scale conflicts to kill entire populations, even thou they still do it, but this time a little bit everywhere.
You know it, you see it, you probably have friends or family already victim of those but you do nothing afraid that your turn is next.

Your money has no other value than the one they decide it worth, you can't do whatever and you will not do whatsoever because your worthless clueless money junky leadership is dependant of a predator that put them in place and depend like a junky depends on his daily heroin dose.

Another failure: Madoff everyone?


And you want to come feck me in the game with that crap again? - go die

No need for in game banks, never.