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blankseplocked Isk - inflation or deflation?
 
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Kaivar Lancer
General Exports
Posted - 2011.03.16 16:43:00 - [1]
 

Looking at the price of PLEX, it seems like ISK is an inflating currency. Thoughts? I've just started creating my own trading empire, and am thinking of ways of protecting my monopoly money from devaluation by buying PLEXs and using them as "bullion". Not everyone can use minerals, modules or BPOs, but everyone can use PLEX.

Edwin Rothbard
Interstellar Arbitrage
Posted - 2011.03.16 17:03:00 - [2]
 

Originally by: Kaivar Lancer
Looking at the price of PLEX, it seems like ISK is an inflating currency. Thoughts?


I remember paying about 80m for a raven in 2004. Today they are 88m in jita. A couple months ago they were in the high 60s. The price of ravens today is about the same as it was 7 years ago. Measured in ravens the purchasing power of your isk hasn't changed much.

Sure some things are substantially more expensive than in years past. Other things substantially cheaper. My gut feeling is the aggregate price level in is probably falling not rising.

Interestingly governments+central banks usually like creating inflation as a way of monetizing debt. Concord doesn't have any debt to monetize.

Letrange
Minmatar
Red Horizon Inc
Cascade Imminent
Posted - 2011.03.16 17:12:00 - [3]
 

Old news you know. Dr. E is on record saying the faucets are larger than the sinks at the moment (since the introduction of ihubs and anomalies in 0.0 and the removal of towers from npc supplied stuffs). So we know the isk supply is on the rise relative to the population of EVE.

Look for some adjustments to the isk faucets or the introduction of new sinks in the next major expansion. Your idea of using plex as a "gold standard" is not exactly original but does have merit. The only problem with using plex atm is that it's a passive investment not guarantied to appreciate forever (especially as re-balancing of the economy mechanics happens as CCP patches the game). Also look a historical seasonal variations in plex prices.

Jagga Spikes
Minmatar
Spikes Chop Shop
Posted - 2011.03.16 17:19:00 - [4]
 

both and neither. rare stuff is getting expensive. common stuff will stay the same.

Adian Grey
Posted - 2011.03.16 17:56:00 - [5]
 

Used to be you could get 90 day GTC's for 285Mil in 06 and 07. CCP took those out and brought in the 60 day cards/PLEX system and the price sky rocketed since it became so much easier to get the time. When they annouced the possibility of a PLEX for things like a remap, being able to use two PLEX for character transfers (A rip off if you convert them to dollar value compared to paying for a transfer) the prices shot up even more.

What this means is that the PLEX is really not a good choice as a "gold standard" because it is affected by outside forces. If ISK inflation matched PLEX inflation we would be paying 200Mil+ for things like the Raven.

Durin Sarga
Posted - 2011.03.16 19:12:00 - [6]
 

Edited by: Durin Sarga on 16/03/2011 19:13:28
Wouldn't R0 materials be a better hedge against inflation?

Their value will always be >= export tax from the planet they were extracted from, because the individual needs to make back their expenses + margin in order to make money. So if you buy up R0 at export tax rates, you'll almost be guaranteed to recoup that in the future (assuming CCP keeps the export tax).

Just hypothesizing. Not making a definitive statement.

EDIT: Scratch that, this would be an example of hedging against market fluctuation, not specifically inflation. My bad.

Hieronimus Rex
Minmatar
Infinitus Sapientia
Hav0k.
Posted - 2011.03.17 02:56:00 - [7]
 

PLEX aren't a great measure of inflation because you can't freely exchange them for any other currency (they aren't really worth USD, since USD buy anything, PLEX only buy gametime and charitable contributions).

If for example CCP allowed you to sell PLEX on paypal for cash, the price would skyrocket, even though no inflation had occurred at all.

Voogru
Gallente
Massive Damage
We Are John Galt
Posted - 2011.03.17 06:59:00 - [8]
 

I heard that Yachts are an excellent hedge against inflation. Cool

The thing is, in video games, there is usually little chance for the game to experience hyperinflation (unless there is a bug), real inflation is when the amount of ISK in the game increases, but there is no additional products to buy.

More ISK > Fewer Goods = Higher prices/Inflation

As long as the amount of products increases along with the amount of ISK, prices for the most part will remain stable. Even though you have ISK farmers grinding the hell of the missions, missions also pay in products and LP rewards that increases the amount of products players have available to buy.

Adunh Slavy
Ammatar Trade Syndicate
Posted - 2011.03.17 16:13:00 - [9]
 

The traditional ISK/PLEX rate is the closest measure we can get for inflation in Eve, and it is not a perfect measure; expressions of demand come from more than one direction. Faucet/Sink ratios can give us some indication of what the expected pace could be, but again is not a perfect measure.

The money supply changes are driven mostly by player ability to generate ISK within the constraints, dare I say regulations, of the faucet and the sinks. Demand for ISK changes not only with player age, but player population. ISK supply is largely driven by population and player age as well. They tend to balance one another out.

An overall money supply increase in Eve is not as a reliable measure of inflation as in the real world, mainly due to a generally corresponding increase in population, and likewise, demand and supply for ISK. There are few players in Eve that require more ISK than their age (skill points) allows them to generate for their needs, again driven by the age of the player.

Another difficulty for measuring inflation in Eve is that measuring overall economic growth is somewhat problematic. Business Cycle Errors in Eve are not fully expressed. The purchase of a BPO, capital equipment, in Eve can be fully liquidated where as in the real world, rusting capital equipment in a shamble of a factory can not be liquidated at full value. There is no expression of depreciation in Eve, except in the realm of illicit information.

It would seem, the best measure we could get for monetary inflation in eve is, the change in the average amount of ISK per player weighted against average player age to come up with some sort of weighted mean. We take this weighted mean and compare it to changes in the faucet/sink use ratio. This may give us some indication of "disposable ISK", for lack of a better term.

Sito Jaxa
Posted - 2011.03.17 17:24:00 - [10]
 

Through whatever action the relative value of isk when compared to individual items has remained relatively flat during the years. But what has changed is the average value of ships players use. 5 years ago a battleship that cost you 80m was a major investment, representing significant effort. T2 hacs displaced the battleship and cost 20-50% more. And while they cost more, the level of effort to attain they represent is not significantly more then battleships. T3 is yet another tier of pricing. Alliances used to field just a handful of carriers and dreads, now they are just fodder.

The scale of eve is expanding in time to keep inflation flat.

Railman85
Posted - 2011.03.20 03:19:00 - [11]
 

Edited by: Railman85 on 20/03/2011 03:20:22
On my website I run indexes, which covers more than 50% of total market and most of them have risen for the last 3 months, so you must right - we have inflation :P

However i don't understand your movement - ISK will eventualy deflate, which mean you should now sell all your stuff?
I guess the inflation can't rise more, because people will start buying stuff from NPC's (like shuttless) and refining them into minerals.

Sealiah
Minmatar
Coffee Lovers Brewing Club
Care Factor
Posted - 2011.03.23 08:55:00 - [12]
 

Edited by: Sealiah on 23/03/2011 08:55:55
You can't measure inflation based on one good, if it was done like that, Poland would have a 120% or so inflation in the past year if we chose sugar as the way of measuring. In reality, it was just the sugar price that changed that much, inflation stayed as usual.

To measure the inflation rate you need to create a "basket of goods", that's direct translation, not sure if it's also used in english officially. In this basket you need to put practically every commonly used thing in EVE and check its price last year and this year. If there is a gneral average nominal price increase, you count the averages and ta-da, you have how more/less the single unit of a currency is worth.

An average basket of goods used for counting inflation should not be less than 200 items in the real world, I guess for EVE it can be limited to 100 or so most commonly used items...


Also - they msut be from different fields. If we just took the most commonly used things, we'd land with a "basket" full of ammo.

Adunh Slavy
Ammatar Trade Syndicate
Posted - 2011.03.23 23:51:00 - [13]
 

Edited by: Adunh Slavy on 23/03/2011 23:52:48
One thing we have to do in these conversations is settle on a definition for inflation. I, like everyone else in these threads, is guilty of using more than one definition at times.

If we want to speak in purely monetary terms, yes, the money supply is bigger. The money supply has inflated.The population has also increased, this tends to increase at a rate, in both account numbers and skill points, that, for the most part, keeps demand for ISK at a rather constant rate.

It would seem that is what needs to be measured, the demand for ISK. PLEX, although a direct mechanism for ISK, demand "notes" if you will, have factors other than ISK demand that effect PLEX price.

In Eve there is nothing quite like gold that can be used as a baseline. There are a few rare items that can be somewhat used to gauge the value of ISK, but they are far too rare to be widely held, and as such can't fully express sentiment.


Money Supply to Population/Skill Point ratio, in my view, is about as close as we'll ever get.

Mister Rocknrolla
Posted - 2011.03.24 04:51:00 - [14]
 


I've been keeping track (weekly) of isk cost for POS fuel for the last 8 months or so and use that as my "inflation gauge."


Rasz Lin
Caldari
Uitraan Diversified Holdings Incorporated
Posted - 2011.03.24 04:55:00 - [15]
 

When i started playing cal navt invuln cost 200mil, today it costs 450mil.
Faction items are a lot better than plex when it comes to retaining value.


 

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