First let me start off by saying that overall I agree with Blizzard's actions. At the same time, I'm remembering all the classes I took for my Economics degree and its making me worry about my WoW wealth.
In a nutshell, inflation occurs in an economy when there is too much cash chasing too few goods. This phenomenon has an inverse called deflation, which occurs when there are too many goods/services chasing too little cash. On the macro level, we haven't seen deflation in America in quite a while, however there have been micro level instances of it. For example, a shitload of wealth was erased a few years ago when the markets crashed. The auto industry was one of several where the effects of deflation were clearly visible. Auto makers had been churning out cars like crazy during the boom. All of sudden a lot of Americans had to tighten there belts forcing car makers to slash prices to clear their inventory.
So why does this make me nervous about my WoW wealth? The answer has to do with my chosen professions - herbalism and alchemy. Assuming that WoW inflation was just a way of life I decided I needed to find a way to earn gold at a rate that equals or outpaces inflation. After all I want my epic mount, good armor and expensive potions. After watching the AH for a while I decided I needed to get into the Arcanite bar transmute business. I then waited for Arcane Crystal (the main ingredient) prices to bottom and sunk every gold I had into purchasing them. Over time I expect my profit margin to be 8-17 gold per Arcanite bar.
If Blizzard's removal of gold triggers inflation Arcane Crystals could hit a new pricing bottom well below their current historical lows. The same with Arcanite Bars. In this situation I would be forced to sell my stock a t a huge loss.
In reality I don't think this will happen. Chinese farmers will find another way to beat the system. Also the amount of gold they took out probably isn't large enough to make an significant impact. At the same time this scenario is still something WoW players should be aware of.
Slashdot Mirror
In a nutshell, inflation occurs in an economy when there is too much cash chasing too few goods. This phenomenon has an inverse called deflation, which occurs when there are too many goods/services chasing too little cash. On the macro level, we haven't seen deflation in America in quite a while, however there have been micro level instances of it. For example, a shitload of wealth was erased a few years ago when the markets crashed. The auto industry was one of several where the effects of deflation were clearly visible. Auto makers had been churning out cars like crazy during the boom. All of sudden a lot of Americans had to tighten there belts forcing car makers to slash prices to clear their inventory.
So why does this make me nervous about my WoW wealth? The answer has to do with my chosen professions - herbalism and alchemy. Assuming that WoW inflation was just a way of life I decided I needed to find a way to earn gold at a rate that equals or outpaces inflation. After all I want my epic mount, good armor and expensive potions. After watching the AH for a while I decided I needed to get into the Arcanite bar transmute business. I then waited for Arcane Crystal (the main ingredient) prices to bottom and sunk every gold I had into purchasing them. Over time I expect my profit margin to be 8-17 gold per Arcanite bar.
If Blizzard's removal of gold triggers inflation Arcane Crystals could hit a new pricing bottom well below their current historical lows. The same with Arcanite Bars. In this situation I would be forced to sell my stock a t a huge loss.
In reality I don't think this will happen. Chinese farmers will find another way to beat the system. Also the amount of gold they took out probably isn't large enough to make an significant impact. At the same time this scenario is still something WoW players should be aware of.