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.

Comments

Re:Vast exaggeration

[Control Group]

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).

Re:Fiat currencies have several problems.

[Shelrem]

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

For an introduction on how money is created, try this: http://ingrimayne.com/econ/Banking/Commodity2.html