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Ithica Ramlix
Phantom Squad
Atlas Alliance
Posted - 2008.02.05 22:44:00 - [1]
 

As the most players will quickly realize when they first start playing eve, everything in this game is player driven, from the market, to the great wars of the 0.0 alliances. This is what makes eve special, but it is also a problem because eve is subject to the same negative forces that exist in the real world as well.
Specifically, I’d like to talk about inflation.
Inflation happens when governments print more bank notes (dollars for example) then they have hard currency (gold, silver, etc) to bank those notes. This results in a depreciation of the dollar bill because as more notes are printed and find their way into the hands of the people, those people spend more freely, so the supply-demand curve shifts and marketers start to charge more for their goods.
In eve inflation is caused when ever an isk enters the game, because once that isk enters, it is much more difficult for it to leave. Isk enters whenever an NPC bounty is collected, a mission completed, or an insurance contract collected (and a few others). Isk only leaves the game when players buy insurance, buy from the NPC market (like pos fuel), or they buy something from the LP store(and a few others). Though it may be counter intuitive, isk does not leave the game when ships or modules are destroyed. Because this things are player made, whether mined for or made from minerals bought from the market, the source of this minerals is always a player. Because of this when a ship is lost, only the time spent mining the minerals for that ship is lost, not the isk, because the isk used to buy it is still in the hands of the player that made the ship in the first place.

It works like this:
Miner mines the minerals for a Battleship. (No isk generated)
Builder takes 80 m of his money and buys those minerals and builds a BS, and sells for 100m. (no isk generated)(How he got it doesn’t matter)
Fighter buys BS with isk that he got (assuming from bounties)(100m generated)
Now the fighter has no isk, the builder has 100m, and the miner and 80m.

Let’s assume that the fighter doesn’t insure the ship and loses it. He still gets the 50 % payout (50m generated). If he did insure it (30m isk lost) then lost it, he gets the full payout of 100m (100m generated)
Now the fighter has 100m, the builder has 100m, and the builder has 80m.
The net gain in terms of isk entering eve assuming he did insure his ship is (+170m), 100m is in bounties he worked for, and the rest is from the insurance contract. Once in the game that isk will be passed around from person to person until it finds an isk sink. However as this example shows it is easier to generate isk then it is to lose it.

This results in inflation.

Cpt Fina
Red Dwarf Mining Corporation
space weaponry and trade
Posted - 2008.02.05 22:52:00 - [2]
 

Just because there is more ISK in the system doesn't automatically mean that there's inflation.
Just because more is isk generated than destroyed doesn't automatically mean that there's inflation.
Just because "it is easier to generate isk then it is to lose it" doesn't automatically mean that there's inflation.

Akita T
Caldari Navy Volunteer Task Force
Posted - 2008.02.05 22:59:00 - [3]
 

Meh, you use way too many words to describe something simple, and you make quite a few mistakes along the way too.

For instance, the base payout is 40% not 50%, in your example the "builder" is actually left with 20m extra, not 100m (since he already had 80m), and the miner is the one with 80m, and if the "fighter" loses the ship after getting a platinum insurance, he's left with 70m (100m payout minus 30m insurance) out of nowhere, not 100m.
Yes, we do know that overall, ship insurance is an ISK faucet (unless you insure your ships repeatedly yet somehow manage to NOT lose them for a long while), made up of one sink (the insurance itself) and one faucet (the insurance payout).

But a single ISK faucet does NOT constitute "inflation".
Also, there's plenty of other ISK faucets (missions, NPC trading, ratting) while at the same time there's plenty of ISK sinks too (skill books, NPC-sold POS consumables, classic POS gear, trade taxes, repair fees, clone costs, etc).
Overall, right now, the faucets do spit out more ISK as the sinks gulp down, but the population in EVE also does steadily increases.

Nova Fox
Gallente
Novafox Shipyards
Posted - 2008.02.05 23:00:00 - [4]
 

Actually according to the last economic report we are suffering from a deflation problem, the buying poewr of the isk is getting to high and killing the older business that arent used to the brand new lower prices and supply of materials just making the isk a all more powerful commodity, battleships used to be 300 million isk but though combination of increased market supplies compeitition demands and suplly these ships are now low as 30million off the bat. Thats deflation, Inflation is the devalument of isk so instead of 300million isk battleships wed be seeing 700million isk battleships instead.

Ithica Ramlix
Phantom Squad
Atlas Alliance
Posted - 2008.02.05 23:02:00 - [5]
 

A Possible solution to this problem could be to drastically decrease the raw isk generated from bounties and mission rewards and replace them with loot. By doing this the player that is ratting will still get a smallish income from a kill, but the lion’s share of the isk that players will obtain will have to come from other players, slowing inflation.

This should only happen to lvl 3, 4, 5 missions and 0.0 rats, because the bounties in lvl 1 and 2 missions is insignificant when compared to the billions of isk that can be gained in a short time when ratting in 0.0. Additionally, the inexperience of the players that run the low level missions makes it hard enough as it is for them to get started so nerfing their bounties would only further hamper new players entering eve.

As for the isk generated by insurance contracts… I dare not suggest nerfing that too… the flames from I will get from first suggestion will be quite enough I think. ugh

*Ithica puts on flame resistant suit.*

Nova Fox
Gallente
Novafox Shipyards
Posted - 2008.02.05 23:04:00 - [6]
 

Edited by: Nova Fox on 05/02/2008 23:05:22
... I take it nobody read the ecnomic report at all, we are suffering from deflation in unhealthy amounts.

And until they fix the loot tables a hell no to the increase loot drops. T1 items suck for hauling around now.

Ithica Ramlix
Phantom Squad
Atlas Alliance
Posted - 2008.02.05 23:05:00 - [7]
 

30 m for a BS.... where are you shopping?!

DubanFP
Caldari
Caldari Provisions
Posted - 2008.02.05 23:07:00 - [8]
 

Edited by: DubanFP on 05/02/2008 23:13:30
Originally by: Nova Fox
Actually according to the last economic report we are suffering from a deflation problem, the buying poewr of the isk is getting to high and killing the older business that arent used to the brand new lower prices and supply of materials just making the isk a all more powerful commodity, battleships used to be 300 million isk but though combination of increased market supplies compeitition demands and suplly these ships are now low as 30million off the bat. Thats deflation, Inflation is the devalument of isk so instead of 300million isk battleships wed be seeing 700million isk battleships instead.


What he said. It doesn't work that way. Contrary to popular belief the US DOES NOT have an equal amount of hard material "silver, gold" to match all the US bills. It's based mostly off the fact that people believe the US bill is worth this much, therefore it is. Very strange stuff.

Items are worth what people are willing to pay for them. You get X amount of isk for every bit of work "more or less". Isk just stores your work really. People are willing to pay X amount of work/isk for items, so they buy the cheapest item and the more expensive items remain so prices rise.

Also it's about what items enter the market. People add items at a slightly lower price then the current one which causes the price to drop. If people aren't willing to put X amount of work into getting an item they don't buy and new items are added "at a slightly cheaper price" so the price drops.

In truth the value of ISK is based entirely 100% on what people want their effort to be worth. It's all about the fact that people trust the isk to hold their money.It's a bit more complicated then that but that's the general idea.

Radix Salvilines
legion industries ltd
AAA Citizens
Posted - 2008.02.05 23:09:00 - [9]
 

one thing is being missed... there are more and more players in eve... they need iskies too :)

besides there are taxes on the market (a big think taking iskies from the game... A BIG ONE) :)

Also i dont see the prices to be rising at all. In fact everything seems to become cheaper and cheaper over time... perhaps the reason may also be that there is a lot of new stuff coming into game in expansions and excess iskies are being allocated there.

Eve universe is expanding and it needs more iskies :)

Well im not a trader and dont know how it is exactly but its how it feels from my point :)

Nova Fox
Gallente
Novafox Shipyards
Posted - 2008.02.05 23:10:00 - [10]
 

30 million battleships are no profit margins included usually there about 10-20million isk addon to help preserve the old prices but you can usually get great bargins between industrial pvp market wars trying to drive each other into the ground out of business.

Ithica Ramlix
Phantom Squad
Atlas Alliance
Posted - 2008.02.05 23:12:00 - [11]
 

I like the responses so far. I am interested in finding more out about how/why deflation is occurring. I have seen this myself in that BSs have dropped in price 20m since I started about 1.5 years ago. But with as many faucets as eve has it is very counterintuitive that eve would still be suffering from deflation.

Actually now that I think about it… is deflation really bad thing? Cheaper ships are a good thing… are they not?

Nova Fox
Gallente
Novafox Shipyards
Posted - 2008.02.05 23:16:00 - [12]
 

Edited by: Nova Fox on 05/02/2008 23:24:11
well you can only call it that big if you been watching market form the beginning.

My I suggest the OP topic to be changed to something like inflation vs deflation or somethng since we evolved the topic.

Deflation can bad when industry can no longer gain profits from thier sales because the isk is to powerful giving them little leverage to compete with as they have to squeeze every bit of thier own isk to stay competitive with such low low low prices.

Deflation is the worst however with bits of inflation traits tossed in on certain products such as certain modules prices skyrocketing one example could be datacores tech 2 products and decoders as these have limited supply thus the only direction these things are going are up as demand for them is ever increasing.

Overall lower competitive prices means they cant fund research as much (price is still the same in most places unchanged though the years fuel is still just as expensive it was back then for pos's), pay thier own workers, isk spent on obtaining new blue prints and skills and many one time investments, and overall combating isk sinks from contract fees to war delcartions to clone costs as none of thier prices hasn't changed either.

Ithica Ramlix
Phantom Squad
Atlas Alliance
Posted - 2008.02.05 23:17:00 - [13]
 

Originally by: DubanFP
Edited by: DubanFP on 05/02/2008 23:13:30
Originally by: Nova Fox
Actually according to the last economic report we are suffering from a deflation problem, the buying poewr of the isk is getting to high and killing the older business that arent used to the brand new lower prices and supply of materials just making the isk a all more powerful commodity, battleships used to be 300 million isk but though combination of increased market supplies compeitition demands and suplly these ships are now low as 30million off the bat. Thats deflation, Inflation is the devalument of isk so instead of 300million isk battleships wed be seeing 700million isk battleships instead.


What he said. It doesn't work that way. Contrary to popular belief the US DOES NOT have an equal amount of hard material "silver, gold" to match all the US bills. It's based mostly off the fact that people believe the US bill is worth this much, therefore it is. Very strange stuff.

Items are worth what people are willing to pay for them. You get X amount of isk for every bit of work "more or less". Isk just stores your work really. People are willing to pay X amount of work/isk for items, so they buy the cheapest item and the more expensive items remain so prices rise.

Also it's about what items enter the market. People add items at a slightly lower price then the current one which causes the price to drop. If people aren't willing to put X amount of work into getting an item they don't buy and new items are added "at a slightly cheaper price" so the price drops.

In truth the value of ISK is based entirely 100% on what people want their effort to be worth. It's all about the fact that people trust the isk to hold their money.It's a bit more complicated then that but that's the general idea.


If what you say is true Duban then why is the vaule of the dollar dropping like a rock? This has a lot of us Americans worried.

Radix Salvilines
legion industries ltd
AAA Citizens
Posted - 2008.02.05 23:19:00 - [14]
 

Originally by: Ithica Ramlix
I like the responses so far. I am interested in finding more out about how/why deflation is occurring. I have seen this myself in that BSs have dropped in price 20m since I started about 1.5 years ago. But with as many faucets as eve has it is very counterintuitive that eve would still be suffering from deflation.

Actually now that I think about it… is deflation really bad thing? Cheaper ships are a good thing… are they not?



maby macroers had to do with that - they cause mineral proces to drop :) And peoples liked the new bc's... which were quite sufficient to be able to run 4lvl missions... take a drake or myrmidon (the last one not anymore after the nerf).

Ezekiel Sulastin
Gallente
Shiva
Morsus Mihi
Posted - 2008.02.05 23:20:00 - [15]
 

Edited by: Ezekiel Sulastin on 05/02/2008 23:23:11
*edit: wow, that was quick!*

I think part of it is that people LIKE the deflation. Although it means yes, you no longer are a pimp in your Vexor and cruisers are no longer t3h ub4r, people like being able to use larger ships without spending a life of grinding ...

Increasing loot drops while decreasing incoming isk would be a bad thing though - you'd wind up with inflation of value of loot, and you as a non-mining-ho would have one hell of a time of it.

Mara Rinn
Posted - 2008.02.05 23:25:00 - [16]
 

Originally by: Ithica Ramlix
If what you say is true Duban then why is the vaule of the dollar dropping like a rock? This has a lot of us Americans worried.


Since the value of the US dollar was based on perceptions, all it would take is a few traders to lower their perceptions, and a few others to notice, before it turns into a downhill slide to the "real" value of the US dollar.

Look on the bright side - if the US dollar devalues enough, China will be outsourcing to the USA and you'll all get your jobs back!


DubanFP
Caldari
Caldari Provisions
Posted - 2008.02.05 23:26:00 - [17]
 

Edited by: DubanFP on 05/02/2008 23:54:30
Originally by: Ithica Ramlix
If what you say is true Duban then why is the vaule of the dollar dropping like a rock? This has a lot of us Americans worried.

What i said is mainly relevant to internal matters. There is no other currency besides isk in EVE but the same basic things are involved somewhat. Like i said it's all about trust in the currency's value. Lets say we added the ksi into EVE, it would all depend on what people would rather own. If people would rather own a Ksi to buy the goods then isk then the value of a ksi would go up relative to the isk.

As to the Dollar. After the wars the trust in the US "with the big new overhead" dropped which decreased the trust in the dollar. People become less certain of the value of the Dollar "compared to other currency" so they try to "sell" it for other currency. Now we have dollars entering the market faster then they leave the market so the price drops "just like items in EVE". Even worse is that once it drops a little bit people panic and become less trusting of the dollar so they try to trade out to something else dropping it even more. We end up with more dollars going out "just like items in EVE", so it's value drops.

The net effect is in the US we have an all dollar enviroment, since there is no "outside" in this local market it doesn't really effect us with American made goods. It's just that the value compared to currency outside the US isn't as good as it used to be since people would rather own other currency then a dollar in the global sense. It might have some effect on imports though.

Akita T
Caldari Navy Volunteer Task Force
Posted - 2008.02.05 23:30:00 - [18]
 

Why deflation is occuring ?
It has almost nothing to do with ISK volume in play, I'll tell you that much.

Well, for starters, the opening up of the new drone regions, where you "mine with guns", so the influx of (cheap highend) raw materials from there is heavily overshadowing previous 0.0 highend mineral mining influx.
Folowing that, most lowend prices spiked (ship prices tend to remain as constant as possible), so more people took up mining in highsec too... especially since tritanium upper caps were relaxed by "fixing" some cheap reprocessing alternatives.
Overall, percentually speaking, a lot more players became interested in the "creation" side of things than in the "destruction" side... so, more miners, more manufacturers, and increasingly experienced ones to boot.
As a direct consequence, all T1 prices have started droping, some fast, some slow... there's also some minor fluctuations on demand spikes (big wars, patch days, etc) but all in all, it's simply getting cheaper to make T1 stuff.

As for T2 prices, well, invention happened.
The supply volume was almost completely decoupled from the "fixed volume" of BPO production, and it's now simply a matter of wether manufacturing some T2 item is worth the bother or not... volume manufactured can easily increase to accomodate almost any demand level, as long as enough T1 BPCs and datacores exist.
As such, lab copy slots and datacores became the new limiting factor in volume (extra lab slots available in POS labs, datacores harvestable passively by just about any char that bothers getting the skills and standings), so it's only a matter of cost in the end.

Faction gear and various implants also suffered a dip in prices as soon as the LP shops where introduced.
Heck, since NPC buy orders for nexus chips were removed, prices for faction stuff dropped even more.


All in all, it's simply a matter of "stuff got cheaper to get", not because there's less ISK, but simply because the amount of work required to get them has decreased.
So, I'm not even sure we should be talking about inflation or deflation in the first place when we mention T1/T2/faction items/ships, since we're talking about heavily regulated cost items.

DubanFP
Caldari
Caldari Provisions
Posted - 2008.02.05 23:56:00 - [19]
 

Uhm, i'm sorry. Did i just blow your mind with the fact that the entire value and existance of currency "today" is based entirely on trust? Also what Akita said is true, but note that it entirely goes through what I said to become true first.

Jakk Graiseach
Trotters Interstellar Traders
Legion of The Damned.
Posted - 2008.02.05 23:59:00 - [20]
 

There is no inflation. There is deflation.

Simple example.

If we really had inflation, isk would be worth less so the price of GTCs would be rising - but they're dropping. In the last month the price of 30 Day GTC has fallen from 200M to around 180M. GTC sellers would not take less isk for their wares if there was so much of it about.

Soon the price of GTC isk is going to rise significantly above the price of GoldSeller isk (they spam the prices every day - it's no secret, we all see them and /petition /block them). That will make gold-seller isk look more attractive to the saddos who try to get away with buying it.

It is, therefore, to the GoldSeller's advantage that GTC prices are falling.

Now - my idea for the conspiracy part here. Twisted Evil

What if the economy is actually fairly stable, but the GoldSellers are deliberately flooding the market with GTCs to drive the price down and make their own wares look more attractive, hmm? These people run a business and that action would - in the long run - make good economic sense if it drove their sales up.

Just a thought - and yes, they are all watching me... Laughing

Venkul Mul
Gallente
Posted - 2008.02.06 00:21:00 - [21]
 

Originally by: Ithica Ramlix


If what you say is true Duban then why is the vaule of the dollar dropping like a rock? This has a lot of us Americans worried.


A lot of deficit spending, low faith in the capability of the government to help economy.

So people has not faith in the capacity of the dollar to maintain his value. And the dollar lose value. So people has even less faith and the cycle continue.



 

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