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Bank Run in Second Life
Jamie found an interesting bit about a bank run in Second Life. The recent ban on gambling combined with a $12k theft from the 2L stock market has caused people to try to get their money back. The article mentions that this could supposedly affect 8.5M players even tho most estimates of actual hard core players in the system are in the 5 to low 6 figure range.
The article is lighter on details than it should be for an article that spans two pages, but it looks to me like someone set up yet another "bank", promising high returns (and actually delivering for awhile), that was actually just a pyramid scheme. Once the pyramid gets big enough the creator always grabs the money and runs, and people cry and write articles about it.
Really people, there is no reason to invest in these "banks" in SecondLife (or any other game). Your money is safe in your own account. It's not like it's any safer in one of these "banks", in fact the opposite is true since you're forced to trust a random guy on the internet who has absolutely no laws or regulations backing him up.
The ban on gambling shouldn't have made too much difference. Everybody knows that every form of gambling in SL was fixed anyway. I don't know anybody who actually used them.
I read the internet for the articles.
it's "SL" in 1337 speak. ("2" is an approximate mirror image of "S")
If I went around claiming I was an emperor...they'd put me away!
Money works in the same way as any other commodity. It's like coffee or oil. High demand and low supply increases the value of the currency compared to other commodities, everything appears to become cheaper (deflation). High supply of the currency or reduced demand for it reduces the value of the money with respect to other commodities and everything appears to get more expensive (inflation). You have inflation at the moment because the US government is paying for Iraq by printing (sorry, "borrowing") money.
Now that's been explained, go look up "fractional reserve banking" and "debt based monetary system" on wikipedia.
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Yes and no. That's a subset of the reason. The larger reason is that it's illegal in general to demand payment in some other form of currency in preference to the US dollar. That's what the phrase "this note is legal tender for all debts, public and private" means. It means that, if you're going to do business in the US, and if you're going to engage in a financial transaction, you may not refuse the US dollar as a currency to complete the transaction.
It is not legal to require payment in pounds sterling, gold bars, or years of indentured servitude.
Basically, the US dollar is worth anything because the government says it is...which is, ultimately, a function of the citizens of the US saying that it is. Which, ultimately, makes it no different than gold (except, of course, that the finite supply of gold is imposed by the universe, while the finite supply of dollars is imposed by the Fed).
Reality has a conservative bias: it conserves mass, energy, momentum...
Um. Nope. The US dollar is worth something because it has a limited supply.
My snot has limited supply too, but it's not worth anything.
The GP was right for the question he was answering: why do the unbacked, limited-supply US dollars have value? Among other things, because you can pay taxes with them. I would add further, that so many debts are denominated in US dollars. This cascades into a sort of network effect: X people accept dollars, because they can pay debts with them, so MOST people accept dollars because they will be buying from someone, somehow connected to those X people.
And no, debt in and of it self is not morally objectionable. There's nothing wrong with businesses taking out loans for productive purposes for example. The reason a lot of economists like currency based this way is that you don't have to hold productive commodites (like gold, which can be used for hi-tech equipment) out of production, just so it can be used as money.
Your point about government inflating the currency is well-taken, but you're exaggerating its impact. As long as people know the approximate range by which it will expand the money supply, they will demand an interest rate on their lending that eliminates this effect. It's only the *ununsually excessive* expansions that can have distortionary effects, and people's expectations are pretty well adapted based on history.
Apology to Ubuntu forum.
That's not what "price point" means. Sony is failing because their price is set above attractive price points.
Anyway, nowadays everyone says "Sony's failing because they make the PS3 SKU's price point too high." Where are you writing from -- two weeks ago?
What I'm listening to now on Pandora...
That's not quite right. Legal tender laws don't say "You must accept dollars while operating in the US." They just say, "If you declare that you accept 'US dollars' as payment, you must accept *these* notes." That is, you can't agree to accept dollars, and then not accept dollars. If you specify a contract that references gold, the law doesn't change that -- after all, how would contracts regarding gold mines operate?
"You are contractually obligated to dig one ton of gold from this mine."
"Hahah! Invalid! I just have to give you US dollars!"
The reason most US prices are quoted in dollars is because that's what most people deal in. You can still require "tokens" for arcades, chips at gambling tables, Jack Cash at Jack-in-the-Box, etc.
Apology to Ubuntu forum.
Apparently it was an inside job. Someone involved with fixing the ATM system hacked it. Full story here.
The gold standard is terrible, leads to recessions, and in general unnecessarily constrains the economy. Here's a hint: if you think money is generally created by printing more currency, you obviously don't know what the hell you're talking about. Even if you understand how money is created, you still may not. For a thorough debunking of the gold standard, read this: http://web.mit.edu/krugman/www/goldbug.html
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For an introduction on how money is created, try this: http://ingrimayne.com/econ/Banking/Commodity2.htm
Of course there wasn't! GOLDGOLDGOLDGODLGOLDGOLD!!!!!!!!111
I'm fairly certain that those who base their entire dislike of the movement away from "gold standards" in currency matters overlap to a great extent with those who don't really understand economics on some imaginary Venn diagram.
"this could supposedly affect 8.5M players even tho most estimates of actual hard core players in the system are in the 5 to low 6 figure range"
Oh give it the fuck up already. It was just 2 weeks ago we covered this. Second Life does not have 8.5M active subscribers. It does not have 5-6M active subscribers. IT DOESN'T HAVE HALF THAT.
Second Life has 20-30,000 active subscribers, THAT IS ALL.
I'm so goddamn sick of this media blitz on Slashdot by Second Life's lame fanbois. You're damn right this is inflammatory, because I and a good number of the rest of the readers here are sick and tired of seeing these folks abuse Slashdot with their little fake media drama, as often as several times a week, to benefit the bottom line of Linden Labs.
At least give us someway to filter these stories out. People who want to stay abreast of the latest little events in this insignificant virtual "meeting place" can read the fan sites instead; I'm sure they do.
Just to pick nits but LindenLabs doesn't really publish an exchange rate, at least not in the sense that you would seem to imply. What LL really does is act as a middle man between two players exchanging LindenDollars for US Dollars. The person selling the LindenDollars sets the sell rate at whatever they wish and their money goes into a big pool with a tag for that exchange amount. When another player wishes to purchase LindenDollars they set the buy rate at whatever the maximum is that they are willing to pay and if there is anything in the pool at that sell value or less it is purchased at the sell value originally tagged. LL makes a little bit of money from the deal as a brokerage fee.
The exchange rates published by LL are the low, high, and average exchanges of the day so the values aren't set at all by LL. Now technically, yes, you are correct when you say LL publishes an exchange rate but the implication in that statement seems to me to be that they set that exchange rate. In this they no more set the exchange rate than, say, the Wall Street Journal when it publishes the exchange rate of the US dollar against the Yen. The value isn't really arbitrarily set but is set by the faith people hold in the currency.
None of which is to really say that people investing large amounts of money into LindenDollars aren't being foolish. It seems to be a very high risk investment. Just that there is a bit more backing up the value of the LindenDollar than a company saying 'this is it'.