Th3 Core

Why We Are Here => Economics & Investing => Topic started by: dogboy on April 14, 2012, 11:56:02 PM

Title: The cost of virtual goods in a hyperinflation environment...
Post by: dogboy on April 14, 2012, 11:56:02 PM
Humor me, and let's suppose the U.S. currency hyper inflates, and the cost of commodities rise at an increasing rate.  What would happen to the value of virtual goods and, say, Second Life Linden Dollars? Is it theoretically possible to protect real wealth by converting it into a virtual currency?  I think at some point, people with real life needs, would dump Lindens for real money... but maybe I'm wrong.... maybe Second Lifers when faced with a financial cris panic INTO Lindens and flee the dollar?
Title: Re: The cost of virtual goods in a hyperinflation environment...
Post by: littleman on April 15, 2012, 12:56:15 AM
I think its important to think of what Lindens will be worth if we had hard times.  If there were serious hyperinflation then times would be tough and I imagine Second Life would be a lot less on people's minds as they worry about how to pay their electric bill.
Title: Re: The cost of virtual goods in a hyperinflation environment...
Post by: dogboy on April 15, 2012, 02:45:38 AM
so then you don't think Second Lifers, when faced with a financial crisis, might panic INTO Lindens and flee the dollar?  I don't either.  But then again I would have told you Second Life would never get off the ground:)

Ok, same question, but bitcoin, if that takes out the 'game' element for you... it there a shelter in a virtual world from a real world dollar collapse?
Title: Re: The cost of virtual goods in a hyperinflation environment...
Post by: Gurtie on April 15, 2012, 11:49:48 AM
if, in theory, bitcoin is a stand alone currency, wouldn't investing in it be the same as investing in GBP or Euros or any other currency? Value might rise or fall against the dollar but whether it would rise or fall in a dollar crisis is going to depend on all the other circumstances.

I would have thought that IF bitcoin were widely accepted outside of the US and IF the financial crisis was only devaiuing the dollar rather than all currencies and IF you wanted to spend on virtual goods or things that could be imported it would be a great place to have a few thousand. Thats a lot of IF's though - and I don't see a way that you could cobvert that back into dollars, unless you go into the import business, in any cost effective way?
Title: Re: The cost of virtual goods in a hyperinflation environment...
Post by: ergophobe on April 15, 2012, 08:42:39 PM
I'm not an economic historian, but one of the things I remember from medieval and early-modern economic history is that as European economies converted to cash economies, inflation and ultimately bubbles appeared on the scene.

Before that, only the vagaries of weather really changed things. In other words, if your rent is 200 bushels of barley on your 25 acres of land, all that matters is the productivity of your land.

Once you go to cash, anything can get overvalued, whether gold, real estate or tulips. I would think of common and useful commodities, like copper, as safest, meaning that it can't go to zero, but just in the last five years we've seen prices as low as about $1.50/lb and as high as $4.50/lb

But the value of a currency is ultimately like a stock, so its current value is a measure of confidence in its future value and I would think that would be true of government sanctioned currencies as well as alternative currencies.

So, if it's not too convoluted to say it this way, I guess the question would be how confident are you in the confidence that others will have in the future of bitcoin?

Me, I think this stuff will be jetisoned like Confederate dollars if things go bad, but like you, it blows me away that Second Life even exists, so what the hell do I know.
Title: Re: The cost of virtual goods in a hyperinflation environment...
Post by: grnidone on April 17, 2012, 01:24:14 PM
>but like you, it blows me away that Second Life even exists,

Huh.  Only 10 rooms:  http://secondlife.com/destinations/adult/clubs

Title: Re: The cost of virtual goods in a hyperinflation environment...
Post by: grnidone on April 17, 2012, 01:25:56 PM
And yet, two whole pages of the Duran Duran worlds...

I don't get it.  And I don't even feel old...