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Akita T
Caldari Navy Volunteer Task Force
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Posted - 2008.05.03 01:36:00 -
[1]
I was recently arguing with somebody over the whole "minerals are free" issue (you know the type), and I got carried away in the argument.
And then, as I was discussing the basic concepts of value and profit, and arguing how money (in this case, ISK) can be considered a good in itself rather than the absolute indication of value, and how you can make a profit or incurr a loss even if 100% of your assets are in form of liquid ISK (due to inflation or deflation)... and then it hit me slightly... the concept of the gold standard, where did it come from (or better said why).
In real-life, the only type of "thing" that never actually increases nor decreases in value significantly is gold (and precious metals in general).
The price of gold usually reflects the state of the economy, my mimicking the influence of inflation... currencies can valuate or devaluate, the actual value of gold remains (barring the natural ups and downs of a trade market) relatively stable even if the "price" in a certain currency can change wildly.
The REASON is that most of the gold in existance is already in circulation, and that only a negligible quantity of "new" gold is being generated from mining new gold ore (compared to the quantity already in circulation).
It doesn't matter what practical value gold actually has (it was simply used for luxury products a long, long time), it's all a matter of scarcity.
I was just about to say that we simply do not have such an item in EVE, one that exists in ample supply, yet significantly limited... and has some kind of economic value, but not a great economic value.
And then it hit me again.
WE DO HAVE such an item.
Actually, we have plenty of such items.
EVE's gold standard exists. EVE's gold is T2 BPOs 
Just think about it for a second.
It all makes suddendly sense.
The reason why T2 BPOs increase in value even if there's a risk they will be "nerfed" in the future, the reason why the profit margins for T2 BPO purchase-and-use are smaller and smaller... it all makes sense once you start considering that we have (subconsciously) created the EVE gold standard, without even realizing it 
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Akita T
Caldari Navy Volunteer Task Force
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Posted - 2008.05.03 01:51:00 -
[2]
Edited by: Akita T on 03/05/2008 01:55:14
Well, it's the closest thing we have to a "gold standard", that's all I'm saying
Not quite the real-life gold standard, but close enough 
...and coincidentally one of the better arguments against changing (removing) T2 BPOs from the game.
Like Shadarle put it, the most important thing about the "gold standard" was that gold was universally desirable.
T2 BPOs universally desirable ? Check.
Sure, they might not have the same value as they had before, but they're still universally desirable.
The second part of the gold standard was the fact the supply is limited, almost completely fixed.
The closing of the lottery (and introduction of invention) has provided the "fixed supply" condition, while significantly lowering the value.
Still, the price of T2 BPOs hasn't plummeted to the level where you'd have expected them to plummet given their potential ROI.
And the only reason that huge price drop hasn't been seen is we have actually turned T2 BPOs into EVE's version of gold 
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Akita T
Caldari Navy Volunteer Task Force
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Posted - 2008.05.03 02:09:00 -
[3]
The problem with using consumables (Morphite, Dysprosium) as gold standard is the fact they are... well... consumables.
You wouldn't want to have a "chicken egg" nor a "loaf of bread" economic standard, would you ?
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Akita T
Caldari Navy Volunteer Task Force
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Posted - 2008.05.03 02:48:00 -
[4]
Chatlog slightly trimmed and rearranged.
No use in re-making the same point all over again in different words
Siigari Kitawa > it's more like, why such a large post over such a small issue
Akita T > oh... well, it's a fresh "pro-keep-BPOs" argument :p
Akita T > even if I personally have none :))
Siigari Kitawa > i'm all down for keeping t2 bpos
Siigari Kitawa > but the thread should have been thought through a bit more
Siigari Kitawa > tech 2 bpos do not create a gold standard for the simple fact that they can be copied
Siigari Kitawa > you can have any number of tech 2 blueprints in existance, however you cannot have the materials in a gross number
Akita T > so.. SK.. what else do you propose is closer to the "gold standard" in eve if not T2 BPOs ? :)
Akita T > you can't have consumables be the equivalent :p
Akita T > not in EVE anyway :d
Akita T > we don't "need" one... we got one accidentally :p]
NeoNeTiC > Why do we need a gold standard at all? :|
Akita T > the only benefit of a gold equivalent would be a proper track of inflation/deflation
Akita T > not much more
Siigari Kitawa > moon minerals are not consumables
Siigari Kitawa > they are static
Akita T > the potential supply is static
Akita T > the actual supply is dynamic
Siigari Kitawa > ok akita look
Siigari Kitawa > if nobody is mining moon minerals
Siigari Kitawa > what happens to demand
Siigari Kitawa > the simple fact is
Siigari Kitawa > gold in the united states treasury is never consumed, it just sits there
Akita T > in real-life, gold is mostly unused... it just sits there as jewelry or gold bars in some safe deposit, etc
Akita T > in EVE, highend moon minerals only have a value because they're being used up :p
Siigari Kitawa > right
Siigari Kitawa > same with the moons that produce the material
Siigari Kitawa > they just sit there.
Siigari Kitawa > but they represent what makes tech 2 bpos have their value
Akita T > and the demand for them increases the more people get in :p
Akita T > the demand for gold in real life is minimal compared to the supply
Akita T > and it's mostly reusable
Siigari Kitawa > you have the right idea but the wrong implementation
NeoNeTiC > I don't need a gold standard in EVE and I don't want one either.Things just work the way they do and it's either fun or not.My simple-minded view on economics in EVE.Have a nice day. :3
Akita T > we don't need one, we don't have one, it's just that T2 BPOs are the *closest* to one :p
Akita T > and the only benefit of them being close to that is to track inflation/deflation
Well, that was the gist of it anyway
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Akita T
Caldari Navy Volunteer Task Force
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Posted - 2008.05.03 02:55:00 -
[5]
That would be pretty much the "steel standard" right there
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Akita T
Caldari Navy Volunteer Task Force
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Posted - 2008.05.03 03:19:00 -
[6]
Oh, real-life countries have abandoned the "gold standard backing" of their currency a long time ago, decades ago for most of them.
Going back to the "gold standard" would be completely unfeasable, since there's simply not enough gold to back up all the fiat money, let alone all the "virtual" currency that's floating around.
Still, the price of gold remains a steady indicator of a currency's "power", with gold prices in a certain currency almost perfectly reflecting economic ups and downs, inflation and deflation periods and so on.
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Akita T
Caldari Navy Volunteer Task Force
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Posted - 2008.05.03 09:29:00 -
[7]
Edited by: Akita T on 03/05/2008 09:30:38
 Originally by: Shakuul
As people have pointed out, gold does have use. Also, gold fluctuates a LOT. People tend to like it during recessions and crises and so forth, so it is a hedge against that. However, it is not a hedge against inflation, as the following links show
That was a very interesting read (the posted links I mean).
Observe the following section in your second posted link:
"Notice that in 1930 inflation since 1913 was up about 64% ... is it any coincidence that FDR raised the Gold price 69%?
NO! That one time adjustment just brought it in line with inflation. But that didn't solve the problem permanently. It just postponed it. By 1970 inflation was up 306% and gold was still officially $35 an ounce. Once again the price of gold needed adjusting."
However, take a look at the very end of the second link, to discover another little gem : Linkage
Quoting from it:
"Gold is a high profile metal that acts almost as a Government Report card showing how well a Government is doing managing the economy and risks of its citizens.
This high profile turns out to be a disadvantage for Gold. No one likes a "bad" report card least of all Governments. So rather than clean up their act, they will go to great lengths to eliminate the report card itself."
In other words, if the world governments wouldn't expend great effort to "correct the gold price", and if everybody would be allowed to own gold (like nowadays pretty much anywhere on the globe), barring a situation of crisis (when gold prices snap), the price of gold WOULD follow inflation quite nicely.
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Akita T
Caldari Navy Volunteer Task Force
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Posted - 2008.05.03 16:47:00 -
[8]
Originally by: Block Ukx
What about insurance pay out? I fixes mineral value to a fix isk amount.
It only bottom-caps the basket price of minerals to little over 70% of "base price", the top is free-floating and subject to normal supply/demand rules... but each individual mineral is free to fluctuate according to its own individual supply/demand (mostly based on ore/compound/loot reprocess ratios, and ratio of people "working" in that specific area).
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Akita T
Caldari Navy Volunteer Task Force
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Posted - 2008.05.04 13:05:00 -
[9]
Corrected thread title and added "clarification" edit at the bootom of the OP
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Akita T
Caldari Navy Volunteer Task Force
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Posted - 2008.05.04 16:13:00 -
[10]
Originally by: Moran Trayga
So basicly what you're now saying is that Gold is a valuable commodity... and so are tech II BPOs?
You needed an epiphany for that? :P
Loaded question, but... the answer is YES
Epiphany : a sudden manifestation of the essence or meaning of something ; a comprehension or perception of reality by means of a sudden intuitive realization.
And it's so much more than just saying "T2 BPOs are a valuable commodity"... but anyway... I already tried to explain why this is important.
Last but not least, it's one of the better arguments against the removal of T2 BPOs
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