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Wyke Mossari
Gallente
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Posted - 2011.05.09 14:15:00 -
[1]
In the last QEN, Dr. EyjoG stated that he was concerned about the increase in the money supply, some interpret this as evidence of inflation, however most sources of data suggest we are actually witnessing deflation: (1) (2), (3), (4), (5).
That raises the question, how can we have deflation during a period of increased money supply.
The explanation is we are experiencing an economic Liquidity Trap. The largest source of new ISK in the game is 0.0 bounties, a significant proportion of this money supply is concentrated into the coffers of small number of Wallets through alliance taxes and rents.
The final result is economic stagnation, and decreasing the money supply will further compound the problem not fix the economic malaise.
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Skippermonkey
Suddenly Ninjas Tear Extraction And Reclamation Service
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Posted - 2011.05.09 14:19:00 -
[2]
too much liquid is indeed hazardous to your economy
- - - - - - - - - - - - - - - - - - - - - OLD FORUM I ♥ YOU, NEVER LEAVE ME AGAIN! |
clixor
Celluloid Gurus
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Posted - 2011.05.09 15:33:00 -
[3]
There was an always will be a Liquidity Trap in EVE. Unlike in real life we don't have any means to invest isk be it in the stockmarket, bonds or simply putting it in a bank where other people do the investing.
As a result people will just built up their wallets and the isk stays there. So unlike you're saying i'm talking about ALL wallets, ironically in EVE the people who do invest are the superrich (to diversify and speculate) as opposed to the RL Liquitity trap where the superrich stop investing.
Concerning suspected deflation, we as players only see the price levels and consumption, what we don't know is the total amount of new isk entering the economy (see the isk in wallets part), if the 'central bank' assesses that there is (was probably*) an increase in money supply, i see no reason why they should lie about that and as they are the only ones to know for sure, i believe them.
*With the summer slump and the changes in 0.0 anoms, it could well be that the changes had the desired effect and no further action from CCP is to be expected.
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Ghoest
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Posted - 2011.05.09 16:56:00 -
[4]
I suspect more of money is concentrated in Jita traders due to less than astute purchasing habits of most 0.0 gunslingers.
But as to liquidity traps - EVE has always had a ginormous liquidity trap like all economic MMOs. People like to get rich pretty much as goal unto itself in EVE.
Wherever you went - Here you are.
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Wyke Mossari
Gallente
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Posted - 2011.05.09 17:25:00 -
[5]
Originally by: clixor There was an always will be a Liquidity Trap in EVE. Unlike in real life we don't have any means to invest isk be it in the stockmarket, bonds or simply putting it in a bank where other people do the investing.
As a result people will just built up their wallets and the isk stays there. So unlike you're saying i'm talking about ALL wallets, ironically in EVE the people who do invest are the superrich (to diversify and speculate) as opposed to the RL Liquitity trap where the superrich stop investing.
Concerning suspected deflation, we as players only see the price levels and consumption, what we don't know is the total amount of new isk entering the economy (see the isk in wallets part), if the 'central bank' assesses that there is (was probably*) an increase in money supply, i see no reason why they should lie about that and as they are the only ones to know for sure, i believe them.
*With the summer slump and the changes in 0.0 anoms, it could well be that the changes had the desired effect and no further action from CCP is to be expected.
Inflation and Money Supply are NOT the same thing.
It is entirely possible the money supply can increase and we still experience deflation. That is my whole point, that is what the evidence suggests is happening.
Consider:
M(E) - ISK in circulation M(S) - New ISK supply. M(T) - Trapped liquidity.
M(E') = M(E) + M(S) - M(T)
Therefore if M(S) - M(T) < 0 Then M(E') < M(E) we have deflationary pressure.
If M(E') - M(E) < Growth in 'stuff' We can still have deflationary pressure.
My contention is therefore; since we have an reported increase in the money supply (QEN) and we have evidence of deflation (Price Indexes), there IS a liquidity trap.
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Ghoest
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Posted - 2011.05.09 17:53:00 -
[6]
EVE has always had a liquidity trap.
And your formulations are simplistic - they are obviously missing - SINKs
Im not saying you are completely wrong about deflation. Im saying your argument is full of holes.
Wherever you went - Here you are.
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Akita T
Caldari Navy Volunteer Task Force
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Posted - 2011.05.09 17:57:00 -
[7]
I don't think anybody here said a "liquidity trap" does not exist, they merely said it's not quite the same as in RL, and I tend to agree. "ISK hoarders" like myself are the very definition of liquid ISK traps I've also stated more than once that total ISK volume in the economy has very little to do with inflation (because of that, not in spite of that), with inflation being mostly tied to ease of obtaining new ISK for non-traders (i.e. ratters, mission-runners, etc). _
Make ISK||Build||React||1k papercuts
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Cetus Perle Rote
EVE Financial Services and Insurance
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Posted - 2011.05.24 14:33:00 -
[8]
Edited by: Cetus Perle Rote on 24/05/2011 14:34:44 EDIT: My bad on the necro
As it stands it seems some things are still 'deflating'
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