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There's alot of angst in the SL forums about inflation and the SL economy. Let's clear up a few things...
INFLATION has to do with how much money is in the system. In RL, too much money means that prices go up; in SL, this doesn't seem to be happening, as the Linden is not "commoditized" -- tied to any particular commodity like gold or silver.
However, we do have a monetary exchange rate, and in classical econo-speak, when the amount of money in the system increases, the exchange rate changes -- and this is, in fact, what we are seeing in SL, when the exchange rate of the Linden fluctuates up or down. Right now, it seems to be hovering between 250-350 Lindens to the dollar.
The primary sources of the Lindens in the SL economy are:
 -- stipends
-- business income
-- land sales
The primary cause of the devaluation of the Linden (which is, in fact, what all the screaming is about in the forums) is not, however, stipends, it is LAND SALES -- resident-to-resident land sales, not Linden-sponsored auctions (money paid to LL for land is effectively removed from the economy, but does not affect the money market via Lindex as it is not "cashed out" via Lindex).
The Lindex market for Lindens is dominated by SL merchants who are the primary "money sinks" of SL (using a popular forum term). The more tattoos, hair, clothing, weapons, prefabs, and other products are bought in SL, the more USD these merchants can "cash out" of the system. This drives the value ot the Linden down for EVERYONE.
The more Lindens sole through Lindex, the greater the fluctuation in the USD/L exchange rate. If there are more Lindens in the Lindex system than last week, the Lindens go down in value, and someone BUYING Lindens gets more Lindens per each USD.
Another major contributor to the devaluation of the Linden via Lindex are those residents who "farm" their stipends. These residents have a primary account/identiy and a number of legal "alts", PLUS a number of "illegal" alt accounts (extra BASIC accounts opened "illegally" with reference to the LL TOS -- using different credit cards, using the names of relatives and friends and alternate email addresses in order to evade having to pay for the account as a "legal" alt identity. These residents collect the stipends from these accounts and sell them on the Lindex market. These "stipend capitalists" are the second level "money sinks" of SL.
New BASIC accounts (established after Mondy, 29 May) will no longer receive a stipend; however, all BASIC accounts should be audited/monitored by the Lindens to establish whether they are valid independent accounts or if they are unauthorized "alts". BASIC accounts which are 'primary' identity accounts of residents should be given another 90 days to upgrade to PREMIUM and then terminated if not upgraded; those which are unauthorized "alts" (which are not being paid for as "legal" alts tied to a PREMIUM resident's primary account) should be terminated out of hand.
As most members of SL are on broadband internet lines, their IPs should be on record or can be established (logged in a separate database file when the resident logs in) and linked to their primary account and paid alt accounts. Unauthorized alts can thus be identified and tied to the identiy of the resident who has established them.
Someone is bound to claim that their wife is using a BASIC account and their teenage son has one, so does their daughter, so does their best friend who comes over to log on since his computer can't run SL, and so on and so on....
All of which is very likely bullshit. Claiming that you have 4 brothers living with you and they ALL have BASIC accounts is not really credible, nor is claiming that your computer is being used by half a dozen of your best friends to access SL (even if you're a college kid living in a dorm or frat house). If you're living with someone --whether it's your wife, your girlfriend, your boyfriend, your best friend, or another /relative, you should be paying for at least one account and should be able to definitely name the people who are using the other accounts which use your IP to access SL.
Any IP that can be linked to multiple account names should be montitored and all identities should be verifiable. In particular, those accounts which upgrade from BASIC to PREMIUM should be monitored for at least 90 days -- some residents are establishing alternate BASIC accounts, upgrading to PREMIUM status for a month or two -- just long enough to buying a FIRST LAND lot (which is reserved for REAL "newbies" not fake ones), then selling the land, cashing in the Lindens from the land sale, and then downgrading the account to BASIC; they then start the process all over again with a new, unpaid-for BASIC alt account.
If you cannot account for the number of accounts associated with your IP, you are defrauding Linden Labs of income. That means you can and should be terminated forthwith and blocked from any further access until you have reimbursed them for your unauthorized accounts.
The SO-CALLED LAND GLUT:
The other part of the economy equation in SL is LAND. The geography of SL is divided into 2 main sections (excluding the teen grid): the mainland and the islands. Most of the islands are privately-owned sims. Most of the mainland is owned by newbies and the "great unwashed" of SL -- the smaller merchants and businesses who cannot afford to buy their own private island and relocate. There is no "civic planning", the roads do not run continuously across the sims, and there is no organization with regards to land use policies. The mainland is developmental anarchy run amok.
One of the most notorious characters of SL, who has been banned from posting to the forums due to his/her/its disruptive behavior, is waging a war of words about the so-called "land glut". The land glut is a bogus issue; it is an ACCOUNT GLUT that is the real issue.
Land is produced in SL as either island or mainland sims. The mainland sims mostly begin as First Land. Much of the land which is bought as FL plots by newbies is re-sold to other neighboring newbies who decide they need a bigger lot and buy out a neighbor. Much of the FL sold by newbies, however, has been bought up by agents of "land barons" such as Anshe Chung, to be re-packaged and/or redeveloped as rental property. Alot of the First Land plots have been sold by their original newbie owners who have apparently left SL, never to be seen again.
These latter cases are the source of the land glut in SL: land bought by bogus "newbie" accounts, established as "unauthorized" alts by people who are scamming LindenLabs by upgrading from BASIC to PREMIUM solely for the purpose of buying a FIRST LAND plot for immediate resale. The creation of such bogus alt accounts not only inflates the numbers of real SL users but deflates the value of SL land and the value of the Linden. The more bogus newbies buying FL, the more land is created by Linden Labs the next month to keep up with the bogus membership numbers, and the more Lindens put into and taken out of the system, creating a circular inflation/deflation cycle with respect to both land and Lindens.
As mentioned above, anyone whose BASIC account has recently been upgraded to PREMIUM should be monitored for a minimum of 90 days after the upgrade -- bogus accounts are unlikely to be maintained that long without some form of "cashout", probably of land.
What is really interesting about the ruckus in the LAND/ECONOMY forum about the devaluing Linden is that the most screaming is being done by those people who are most likely to be the cause of the problem: the stipend farmers and those residents who are scamming LL using bogus alt accounts to buy & sell FIRST LAND lots. Anyone getting hysterical in the forums should be the first candidates to have their IPs closely monitored to account for bogus alt accounts.
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