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SecondLife Bans Unregistered In-World Banks
GuruBuckaroo writes "Virtual Ponzi schemes — pardon, "Banks" — have finally been given the boot by the policymakers at Linden Lab's Second Life. According to the company's latest blog post: 'As of January 22, 2008, it will be prohibited to offer interest or any direct return on an investment (whether in L$ or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter. We're implementing this policy after reviewing Resident complaints, banking activities, and the law, and we're doing it to protect our Residents and the integrity of our economy.'"
LL should have had exclusive control over their currency and the exchange thereof to begin with. Allowing other parties to do this for them was an open invitation for them and their users to get shafted.
Morons.
Still waiting on Serviscope_minor to wake up to fucking reality and realize that Jessica Price isn't going to fuck him.
The thing that I have trouble conceiving of is how people could trust these virtual banks/investment schemes in the first place, especially since there's real money involved. I find Second Life interesting, but like the internet, it's still a bit of the wild west. I barely trust my real world bank to do the right thing with my money, to say nothing of trusting some virtual bank.
To the making of books there is no end, so let's get started
The "virtual" in virtual worlds means it isn't real. Once you leave the bounds of the physical world here on earth, you're in uncharted waters. After that, you might as well be living in the old west where the only justice you get is the justice you take.
The crooks may still wear black, but they pack all new weapons now.
8==8 Bones 8==8
I have never, EVER, met a person who 'plays' this game, I am probably the only one in my circle who has even heard of it, and I only hear about it here on slashdot.
Of course what really just happened is that they have triggered a massive run on the banks now. Is it better to wait for all the different banks to fail or ban them causing everyone to withdraw their money at once? You are giong to see every bank going the way of Ginko in the very near future now. (even that tiny minority that wasnt offering ponzi scheme style interest rates)
In the US, the Federal Reserve has the right to create money out of thin air. They don't want anyone encroaching on that power. In SL, Linden has the power. They should be cracking down. Both worlds need some hard currency in my opinion.
Being a bank in Second Life isn't very attractive to real banks, because they can't create money in Second Life, like they can in the real world.
First, a minor point, banks don't issue money (they used to but that creates undesireable barriers to trade) and thus making banks adhere to the gold standard is meaningless. Governments make currency standards.
Second, gold doesn't have intrinsic value at all. The value of gold fluctuates all the time. All the gold standard did was fix the price of gold. While the gold standard was tenable for a time it didn't work in the long run because it's not stable. Your money supply is dependent on your gold supply which in turn limits your economy. You can't have more dollars than your fixed ratio to gold. New discoveries of gold can also create deflationary shocks.
There's nothing special about money at all. It's a medium of exchange. It has what value we agree it has, no matter if the medium is a piece of paper or a string of bits or a hunk of metal.
Anybody that converts real world assets to virtual ones deserves what they get. Seriously, what's on your mind when you convert your hard earned cold cash into bits in some virtual world ?
Don't you have a better way of spending your money ? Most fads on the internet I can sort of understand what they're about and what their 'pull' is but second life is one step too many for me to follow.
MP3 Search Engine
Now it's the banks.
What good is 2L if you can't virtually explore the things there that aren't possible, safe, legal, or some combination of all of these virtually? I don't need every part of my life to have training wheels.
So how long before virtual sex entirely is gone too?
Followed by avatars who are too sexy, or provacative.
2L was a place were you could learn life lessons by being stupid. Now it seems intending to become one of the more restrictive Middle East countries instead.
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
Does this mean I can get a new simulated job as a simulated chartered accountant or simulated banking regulator! Oh goody, where do I sign up?
Brett
That's more like a law of government than like a law of nature.
We're seeing the exact process by which people create governments to protect our rights. Since SL already had what was equivalent to tribal and voluntary governments, we are seeing something much like the process SL'ers learned about in history.
--
make install -not war
The word you want is 'currencies'--and aluminum is just as shiny. 'matter of fact, at one point, aluminum (or 'aluminium' for our foreign friends) was worth -more- than gold.
In the end, currency is only worth what people agree it is worth. It bears repeating: Currency is only worth as much as someone else will give you for it. It's a symbol--it's like a variable, as it were.
I find gold to be more or less worthless in my life, save only as a plating agent for electrical contacts. I don't see any reason why a currency should be based on something that's pretty much useless outside the electronics and jewelery industries. If you want to base a currency on something intrinsically valuable to a large number of people, how about, say, fresh water? Sure, it's not worth that much, but if you don't have it you'll certainly notice it.
Do not mistake the symbol for the thing. Currency of any sort--even gold--is only a symbol for a certain amount of a product or service that you can trade it for with someone else.
In Xanadu did Kubla Khan
A stately pleasure dome decree
Any guest worker system is indistinguishable from indentured servitude.
The only intrinsic value it has is it's perceived rarity and the fact that you can't just pull it out of thin air. There is no way anyone can go back to the gold standard with the WTO in existence, but that doesn't mean we shouldn't try to find a way to make the currency system actually work.
The way it's set up now every country in the world is gunning for bankruptcy in the end. You can't sustain a system of constant debt growth forever. We need to find something to base money on that isn't a commodity controlled by the few and also isn't debt. Or we can just continue to fight wars and reforming nations and start over every time the debt ceiling is too high.
In regards to the article, I find it hilarious that you can't even run a virtual bank without a real life charter. That just slays me. I think the line between virtual and real just blurred beyond recognition.
You're nothing; like me.
I must disagree. There are any number of ways in which a 'gold-based' currency could be rendered completely valueless, not the least of which (but the one that would make the best movie, in my opinion) would be the forcible removal of said gold from whatever repository it was being held in. In addition, the currency will be a fiat currency de facto in that it will be the world of the government in question (or organization, if it is a non-governmentally issued currency) that:
A) There is enough gold to 'cover' it (because really, how can you be -sure- that there's really a dollar's worth of gold in there?) and
B) Said currency or gold will be accepted as a valid form of payment by anyone within the country. Fiat currencies are at least honest about this: there are various laws on the books that state that the currency is to be considered valid payment for debt. Legally, in the US, I must accept a dollar as valid payment; I need not accept any amount of gold as payment, as there is no legal requirement that I do so--I might choose to deal only in platinum, or iridium, or some schist or other.
In Xanadu did Kubla Khan
A stately pleasure dome decree
XenoPhage
Technological Musings
"What is the intrinsic value of gold?"
The value is based on the the belief of the millions of idiots that spout the line about "intrinsic value of gold" - it's effectively self sustaining.
"As God is my witness, I thought turkeys could fly." A. Carlson
1. Fiat currency isn't based on debt growth. The US has a debt because we sell treasury bonds (t-bills) to bring more money into the country from foreign sources (largely, lately, China)
2. Adam Smith solved this problem about 300 years ago... Tell me: What is China going to do with that money except buy things from us? Fiat currency is only valuable if you spend it. The doomsday scenarios people here love to espouse where China intentionally devalues the US dollar make absolutely no sense. They simply wouldn't be in Chinas best interest.
3. Fiat currency really works remarkably well. It's based on the potential of an economy, not the potential of the gold supply. Just use right now as an example.
People here lament the weak dollar. But everything pushes and pulls until it's all back in balance... As the dollar weakens, American-produced products are more affordable overseas. So, they purchase more of our products, which puts more Americans to work and increases American GDP. This results in the dollar rising in value. It will continue to rise until American products become too expensive, which depresses demand for American goods, which causes the dollar to stabilize or weaken again, and the cycle continues...
In all cases, charging interest on money or property lended causes problems. Many economists attribute the existence of interest as the sole cause of inflation, and inflation causes all kinds of other issues. It's a slippery slope to financial ruin for an entire economy, and SecondLife was headed that way. Glad to see them do something about it before many more people lost their money.
I'm not a very religious person, but even the bible states that charging interest is akin to theft. It's simply making money you didn't make, which just isn't good.
http://video.google.com/videoplay?docid=-9050474362583451279
Watch it. Learn. Our system of currency is based on nothing more than a pile of lies and a mechanism for transferring wealth into the hands of the wealthy. It is also based on perpetually accelerating the rate of growth, which is so laughably unsustainable that it's amazing it has lasted this long.
And you do it with fake money.
.999 fine silver officially by the government, with a gold standard following.
In the olden days "dollar bills" wire actually silver or gold certificates. You could trade these paper certificates for the actual gold or silver. Prior to this, you'd carry it in a coin purse. But the paper money while more subject to wear, was lighter and literally more flexible and therefore comfortable. A US Dollar was based off the Spanish dollar and was settled on 371.25 grains of
This limited inflation (the only way to deflate the currency was to send bankers to the hills to mine metals) and was real value.
Then in 1913 two things happened: we got the Federal Reserve and the 16th amendment. These two institutions, both once non-existent, rule the country today. With the creation of the FR the US borrowed money from the FR ]]at interest[[ setting up a positive feedback loop of inflation. In order to do this they also had to decouple the money from the metal backing, which was completed in 197[2?] under Richard Nixon. If you want to see real inflation, it is measured in the M3 statistic, which the Fed stopped publishing recently. But you can see it here Instead of talking inflation, the Fed tries to talk CPI - which is an aggregate from several industries. Notably absent is the mortgage market, which ask anyone, its costs have doubled in the the past 5 years. But the CPI leaves this out, and only includes rents, which have stayed disproportionately low because of all the house seekers.
Today the paper you move about is as valuable as those bits in the computer. If the word "certificate" appeared on them it would be completely a different situation. You could go to the bank and get metal, whose value wouldn't ever go down. But now, you can't expect to leave $30,000 in the bank and have the same buying power 10 years later. Over the last 90 years, the dollar has fallen to just $0.04 of its original value, as valued by the silver market.
But getting back on topic - any kind of calamity that shakes the confidence of Americans will affect the buying power of the dollar. Not a new vein of gold, not a run on banks, not a stock market crash. The only absolute value is cold hard cash. And by cold and hard I mean a metal.
--Epilogue--
I often wonder what all this means int he grand scheme. If you have money, this is an issue. If you have debt, it is actually a good thing because debts are paid off with future, depreciated money, and they take that money at face value. (Which an old bill is rarely worth.) The key here is to have one foot in both areas: pay off debts with inflating currency and have your investments in metals-backed currency.
There has been a movement to inflation-proof currency, known as the Liberty dollar. These were negotiable certificates which actually were redeemable for metal. The Federal Reserve shut it down and seized all the silver, because this, while completely legal, are the one thing a person can do to retain control and live outside the system. If it ever got popular (and I believe it would, particularly in times of inflation) the Federal Reserve would have competition that couldn't be influenced by it. The important thing to note is that it would be no different of a situation than America, pre-1913.
Finally, note that the Federal Reserve is not Federal (it is private) nor is it a Reserve (it holds nothing - the gold it once held is unaccounted for.) The only worse-named entity is Social Security.
Slashdot's rate-of-post filter: Preventing you from posting too many great ideas at once.
No, its not. Even if it was, so what?
What fly-by-night idea are you referring to that Adam Smith came up with?
China may have leverage because our government currently wants to keep selling them debt, but they debt they already own gives us leverage over them, more than the other way around: they are counting on us to pay it, so who has the leverage?
Fiat currency has, on balance, everywhere in the world, worked better than commodity or representational currency ever has, because it isn't as subject to short-term extreme fluctuations based on the market for a single commodity of any commodity or representational system, doesn't have the exchange value problems of multicommodity systems, and doesn't have the limited range of values for which exchanges are practical and logistical issues faced by commodity systems, particularly single commodity systems.
This is independent, largely, of who is "holding cards". Clearly, anyone holding dominant power in the world economy or over critical resources can disrupt any fiat, representational, or commodity system—though this is easier with representational or commodity systems, where they are vulnerable to most of the same attacks that are possible against a fiat system (particularly a representational system) as well as efforts directed at disrupting or distorting the market for the underlying commodity.
No, the fact is fiat currency is real (and pure currency). Commodity and representational currency is far more unstable in the short-term because it is something other than currency, and is therefore more exposed to particular external uncertainties.
No on is being "robbed" of anything. Money is a medium of exchange. Failing to exchange it for something of value may result in its value changing before you do so. The extreme short-term volatility of commodity money is not preferable the gradual long-term decline in value of most fiat money, since the latter much more than the former can be managed by purchasing productive assets with the money in some reasonable time.
No, its much more volatile, though the more extreme fluctuations may have a greater tendency to average out over the extremely long-term. But short-term volatility is more damaging than long-term decline in value, because the long-term decline can be managed by purchasing productive assets, while the more extreme short-term volatility of commodity prices is harder to manage. There are plenty of long-term stores of value available to participants in the economy: the essential and indispensable role of government-issued money is in a medium of exchange, not a long-term store of value.
I am sorry, but that's simply incorrect. A check is a draft. As described by the UCC article 3, it is an order to pay. That's why all checks have the words "pay to the order of" on them. A check is a written instruction to a storage institution (ie, bank) to pay (or transfer ownership) of what you store with them. It is distinctly different from as a promise (such as IOU) in that you cannot be sued for writing a check. While it is against certain laws to write "bad" checks, the act of writing a check itself does not create a liability to the person to whom the check is written. No promise is made there. If you make a promise (as with an IOU), you do create a liability -- you can be sued for not fulfilling the promise. As for the claim that a check has to be drawn against a government-backed currency, that's pure fantasy. It is nothing but an order (a command) to pay to the presenter (or to the person whose name is written on the check).
You are correct that bank notes are in fact notes (ie, promises). But I wasn't arguing for bank notes. I was saying that some banks may be trusted enough that the notes that they issue will become "as good as gold" as the expression goes. But would only be because they have the reputation of paying out the gold upon presenting of the notes. The first time they fail to pay, their promise would become worthless. Bank notes would be rated in much the same way as the bonds are currently rated -- by their trustworthiness.
But since you are advocating undoing all those layers of solutions and going back to commodity currency.Not all those layers were solutions. Some did occur naturally to fulfill market-place needs, but some were not. Fiat currency did not solve any problem other than the government's need to issue as much money as they saw fit. That's bona fide debasement.
When I say that these issues have been resolved, I'm referring to the fact that the argument for the central bank (as proposed by Hamilton) have been thoroughly reviewed and consequently rejected by the writers of the Constitution. The banking system was perfected about fifty to a hundred years prior to the American Revolution. It was perfected in England where the practice of writing checks to banks and using bearer checks as currency started. Fiat currency is based on trust and trust is not something that can be demanded (as is the case with anything dictated by law). Trust is only something that results from people's own judgments. In the absence of trust, the exchange must involve something that has unquestionable value. The fungible nature of commodities makes them perfect as a medium for such exchange.Any guest worker system is indistinguishable from indentured servitude.
That's because people are stupid.
Changing to commodity or representational money will not change that (if anything, it will be a symptom that that problem has gotten worse.)
That's elitist and more importantly inaccurate. It's because people don't have a choice. If they don't invest, they lose their savings. That's what will change. It will remove the NEED to invest. So the only time that people will invest will be when they are sure. Given that the most damaging bubble (and its subsequent bursting) in the history of the US economy occurred while the US was on the gold standard with free convertibility -- and gold/silver currency is the only part here that isn't part of the current system, free exchange of property is not, contrary to your misinformation, illegal -- I see no reason to believe this. I assume you are referring to the crash of 1929. That is an interesting argument. But it only goes to prove that 1913-1933 we were on gold standard in name only. The largest effect on the general public from the crash was not loss of investment (most people didn't invest then). It was the collapse of banks. Had the fed not issued credit which was not trully backed by gold, the banks wouldn't be able to lend out so much money and wouldn't have collapsed. On a personal note, please, stay away from ad hominems such as "your misinformation". I wasn't aware you were advocating compelling people to retain their earnings as cash. But, feel free to make the case for that if you wish. eeehh... ad hominem. skip. People are arrested for no valid reason whatsoever. So what? I'll leave that one alone. By your own claim, this didn't happen until sometime after the 1980s, while the US dropped convertibility of gold in the 1930s. Something is out of whack here. The changes that have encouraged speculation as the main route of retirement savings have little to do with the monetary system. It is the confluence of trends that causes singularities. Had people kept their savings in gold, the trend of having to invest when everyone else is wouldn't be there -- people would be perfectly happy with moderate rate of savings their gold provided them. I don't know why you keep insisting that we were still on a gold standard until 1930s. Can you outline the exact procedure one would have to go through to get the gold equivalent of their money in 1925 from the federal reserve? Or at least provide a link to it? Because I haven't been able to find out if it was practically possible to actually get your dollar's worth in gold. To me that's an indication of zero trust.Any guest worker system is indistinguishable from indentured servitude.
You're not understanding the history. Let's say a farmer bought land in 1870. Under a rationally functioning market, the price of the land, either for sale or for rent, is a function of the productive capacity of the land. As measured in bushels of wheat, let's say the capacity of the land is 1000 bushels a year, and in 1870 dollars, let's say that was worth $1000 1870 dollars (my price levels are off). The rational rent for the land would be something like $1000 - the cost of producing and harvesting 1000 bushels of wheat. The rational sale price for the land would be some present value of the income stream of $1000 - the cost of producing and harvesting 1000 bushels of wheat over say, 20 years.
Now, imagine 10% annual deflation for 5 years. At the end of the five years, the farmer who bought the land has a mortgage that made sense when the land produced $1000 worth of wheat a year, except that now it only produces $650 dollars worth of wheat. His mortgage payment is the same, but his income, measured in dollars, has declined 35%. He's fucked. He can't make any more money renting the land, because the rental value of the land has declined as well. He can't sell the land for what he paid, because it's value has declined, due to the declining income stream associated with the land.
In your example, you posit that food prices would rise. In isolation, perhaps. You have to consider the overall purchasing activity, however. If your money supply is fixed, which is what a gold standard does, the overall price level, for all goods consumed, becomes a function of the size of the money supply. Food prices can't rise without reducing the purchases of something else, because people simply don't have the currency. So if food prices rise, demand for some other good falls, and that lowers the price of that good. Overall, if the supply of gold is small in relation to a growing economy, prices of goods in relation to gold will never catch up. The only way that the overall price level of a basket of goods can equalize with gold is if the size of the basket declines. That is, the size of the economy has to decline, either through emmigration or mass poverty.
This was a very real experience in the late 1800's, and led to the free silver movement, which desired to monetise silver to increase the money supply.
The lesson monetarists have learned from this is that the money supply needs to be roughly stable in proportion to the size and activity of the economy, or you get distortive effects as people try to not hold either money or property. Slight inflation tends to be more popular with the masses, as it favors those who hold real estate and are paying off loans.
Where this relates to fiat money is that if your central banker doesn't understand what is happening here, it is easy to screw this up by going too far in the other direction, ala the US in the 70's, or any of a dozen banana republic countries we have heard about. Paul Volcker, chairman of the Federal Reserve in the 1980's really understood this, and we all owe him a debt that few understand. People give Reagan accolades for the economic stability we enjoyed from the 80's on. Volcker was the one who is responsible, and Reagan fought him every inch of the way.
I was taught to respect my elders. The trouble is, it's getting harder and harder to find some.
A check is an order to the bank. To the recipient, it is a promise that there are sufficient funds in the account to cover the draft (and, on top of that, that the order will not be cancelled before the draft is presented through a separate communication with the bank), a promise which is, all too frequently, false; which is why, even with all the modern infrastructure to increase trust by allowing some degree of verification of such promises, checks have fallen out of favor for transactions where there are practical alternatives.
You can't be sued for issuing an IOU either. You can be sued for not paying on an IOU, just as you can be sued for not having the funds for a check.
If you think any of that has any truth to it at all, I've got another paranoid delusion to show you.
http://www.loosechange911.com/I'm the guy with the unpopular opinion