Bank Run in Second Life 336
Jamie found an interesting bit about a bank run in Second Life. The recent ban on gambling combined with a $12k theft from the 2L stock market has caused people to try to get their money back. The article mentions that this could supposedly affect 8.5M players even tho most estimates of actual hard core players in the system are in the 5 to low 6 figure range.
Looking for a decent exchange rate (Score:4, Funny)
Re:Looking for a decent exchange rate (Score:5, Funny)
FIXED.
Fiat currencies have several problems. (Score:4, Insightful)
It allows the government the ability to pay for anything it likes which leads to the inevitable increases in power of the political elite, the banks and the largest multinational corporations which service government interests.
It requires an exponentially increasing economy and debt burden just to maintain the status quo and make interest payments. This has a devastating effect on the environment and human being's work/life balance.
Those are just off the top of my head. There are more disadvantages.
The currency shapes our society.
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The gold standard has nothing to do with this. The government pays for things it can't afford by borrowing money, not by printing it. When the money supply is increased, the government doesn't get the money.
Re:Fiat currencies have several problems. (Score:4, Insightful)
Re:Fiat currencies have several problems. (Score:4, Informative)
Of course there wasn't! GOLDGOLDGOLDGODLGOLDGOLD!!!!!!!!111
I'm fairly certain that those who base their entire dislike of the movement away from "gold standards" in currency matters overlap to a great extent with those who don't really understand economics on some imaginary Venn diagram.
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Re:Fiat currencies have several problems. (Score:5, Informative)
For an introduction on how money is created, try this: http://ingrimayne.com/econ/Banking/Commodity2.htm
Re:Fiat currencies have several problems. (Score:5, Funny)
> you obviously don't know what the hell you're talking about.
Wait...wh-? Seriously?
Oh, shit. Excuse me--I have to call Kinko's and cancel an order right now.
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"We're all Keynesians now." --Richard Nixon
There's truth to that too. The primary difference between the Keynesians is more who gets the government money than anything else.
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If those with money left this country in the dead of night, those without could simply raid the storehouses of food left behind. OR, better yet, actually take over the farms stolen by the white man to begin with.
People certainly do need to eat, but there would be no investment. Most likely what you would see would be alternate fiat currency like we saw durin
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Re:Fiat currencies have several problems. (Score:4, Insightful)
Forcing investment, which is a much better use for capital to expand the economy.
It requires and exponentially increasing economy to meet the demands of exponentially increasing populations. An economy based on a fixed resource results in deflation which will actually prevent the economy from keeping pace with population. For example it was difficult for farmers in the late 19th century to get capital because of the fixed gold based money supply. With supply and demand, the rich will get richer just sitting on money, rather than what we have today where it requires investment and economic expansion to become wealthier.
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Flaw? Gold is not THAT rare. Major countries sit on huge stockpiles of gold and literal gold mines. If they so chose, they could release massive quantities of gold into the market which would instantly deflate the value of everybody's holdings and crash the economy of any country stuck on the gold standard.
Russia, for example, could dump some of their holdings. This woul
Re:Looking for a decent exchange rate (Score:5, Insightful)
2L? (Score:5, Funny)
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That's not what "price point" means. Sony is failing because their price is set above attractive price points.
Anyway, nowadays everyone says "Sony's failing because they make the PS3 SKU's price point too high." Where are you writing from -- two weeks ago?
Re:2L? (Score:5, Funny)
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I read "two litre stock market". I read on for a bit before thinking, "that's not right...."
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But I doubt that's what he was going for.
-GiH
Vast exaggeration (Score:5, Interesting)
Ginko's problem was their insane interest rates, which IIRC varied somewhere between 100% and 30% per year. I think it was 70% for a quite long time. People accused it of being a Ponzi scheme, which given that enormous interest sounds likely. That's why I never put a cent in it
Re:Vast exaggeration (Score:4, Insightful)
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Re:Vast exaggeration (Score:5, Insightful)
Banks make money through investing in other people's projects, and by loaning money for interest. Like everything else, it's a diminishing return, so you can't loan money at an equal rate to the interest rate you're giving your depositors, so either they're loaning your money to people at an interest rate that is higher than 100%, with no possible way to collect on a bad debt.
Chances are they were using that money to finance one of the now-illegal casino's, which would make sense, as that's about the only way to make money in SL that would actually require an input of cash. Now that they've tanked there is basically no longer any point in a bank that actually pays interest. There is nowhere for the money to come from.
Re:Vast exaggeration (Score:5, Funny)
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Re:Vast exaggeration (Score:5, Insightful)
The most interesting part of the article to me, though was this tidbit:
Now, s/Linden dollar/U.S. dollar/ and s/Second Life/U.S./ and the sentence would still be correct. Go ahead, try it. Read it again. Because the U.S. dollar has no commodity backing...
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That's the whole reason US money is worth something, because the government guarantees they will accept it in payment of taxes.
Um. Nope. The US dollar is worth something because it has a limited supply.
Money works in the same way as any other commodity. It's like coffee or oil. High demand and low supply increases the value of the currency compared to other commodities, everything appears to become cheaper (deflation). High supply of the currency or reduced demand for it reduces the value of the money with respect to other commodities and everything appears to get more expensive (inflation). You have inflation at the moment becaus
Re:Vast exaggeration (Score:5, Informative)
My snot has limited supply too, but it's not worth anything.
The GP was right for the question he was answering: why do the unbacked, limited-supply US dollars have value? Among other things, because you can pay taxes with them. I would add further, that so many debts are denominated in US dollars. This cascades into a sort of network effect: X people accept dollars, because they can pay debts with them, so MOST people accept dollars because they will be buying from someone, somehow connected to those X people.
And no, debt in and of it self is not morally objectionable. There's nothing wrong with businesses taking out loans for productive purposes for example. The reason a lot of economists like currency based this way is that you don't have to hold productive commodites (like gold, which can be used for hi-tech equipment) out of production, just so it can be used as money.
Your point about government inflating the currency is well-taken, but you're exaggerating its impact. As long as people know the approximate range by which it will expand the money supply, they will demand an interest rate on their lending that eliminates this effect. It's only the *ununsually excessive* expansions that can have distortionary effects, and people's expectations are pretty well adapted based on history.
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All of which boils down to the starting point, the the US
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There is no requirement to accept USD, or anything else, as payment. If you were to contract with me for a service, there is no restriction on my accepting bunny rabbits or seashells in the exchange. Legal tender laws don't mean that someone has to use a particular currency to
Re:Vast exaggeration (Score:5, Insightful)
e.g. http://www.mises.org/fullstory.aspx?control=1595 [mises.org]
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If you can't use it to settle debts, it's not money.
"'As long as people know the approximate range by which it will expand the money supply, they will demand an interest rate on their lending that eliminates this effect.'
Fine if you're in a position to buy government bonds. For the rest of humanity though? The waitress waiting tables for minimum wage."
Yeah, life under the gold standard was a workers paradise
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The supply of Confederate dollars is much more limited, but they are essentially worthless.
The only thing that gives anything value is what someone else is willing to do in exchange for it. People accept dollars in exchange for other things in many places, so it has value as a currency. Why do they do that? Only because everybody else does.
Let's go to the desert island model that's always so helpful. Two people on a desert island, one has water, the o
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And they've been holding interest rates steady, despite the obvious need to lower them to juice up the economy.
Pay attention, people! I believe that the U.S. economy is currently collapsing under its own weight. This collapse should be completed wi
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Only if the something in question has some objective value. I can print off a few hundred CGMUs (Control Group Monetary Units), making a very limited supply, but I don't imagine that would make them worth money to anyone else*.
Unlike the other commodities you mention, US dollars have no inherent utility. The "full faith and credit" of the US government determines their utility. Their scarcity determines their market value. You need b
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Assuming you have looked this up yourself, why do you persist in pretending the governments borrowing of money is anything like "printing" it?
Mind you, irresponsible borrowing of money is a really stupid idea. But it is an entirely different stupid idea than the government creating new money and spending it, assuming the currency system were set up in such a way that that were possible, which it is not.
Something being in limited supply does not make it valuable unl
Re:Vast exaggeration (Score:5, Informative)
It is not legal to require payment in pounds sterling, gold bars, or years of indentured servitude.
Basically, the US dollar is worth anything because the government says it is...which is, ultimately, a function of the citizens of the US saying that it is. Which, ultimately, makes it no different than gold (except, of course, that the finite supply of gold is imposed by the universe, while the finite supply of dollars is imposed by the Fed).
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"You are contractually obligated to dig one ton of gold from this mine."
"Hahah! Invali
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Good start.
If you specify a different medium of exchange beforehand, yes. As I admitted in another post, I was being overly simplistic. You may not retroactively elect to not accept dollars as payment.
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Well, that's *A* reason but not "the whole reason". The US dollar is unique amongst currencies as it is close to being a global currency. It is accepted in nearly every country and some countries even use it as their own official currency rather than print their own. People accept it as having value because the know it will retain value in the future making it the world's foremost r
Re:Vast exaggeration (Score:4, Interesting)
There are 18,875 accounts. Right now there are 34,822 people logged in (see http://secondlife.com/ [secondlife.com] ). In the last 60 days, 1,646,830 people logged in. So the total Ginko userbase is not all that great compared to the amount of people who use SL.
Next, it's quite reasonable to assume that a good portion of those 18,875 are by people who put there L$1 (USD $.00370) as a test, then forgot about it.
Now, they say their deposits are L$94,441,798 = USD $349,784. But, Ginko's claims about the amount of deposits were cast into doubt by several people, and that number seems to include interest, that is money they would be expected to give, but which none of the users actually put there.
Average amount of money per account is $349,784 / 18,875 = $18.53
Looking at the SL statistics:
US$ Spent Last 24h: $1,433,039
LindeX Activity Last 24h: $223,005
You can see that even the claimed amount of money isn't all that huge, and after years of operation at the enormous interest they claimed, most of that cash must be accumulated interest anyway.
While I bet some people will lose something quite significant, I don't think it's nearly as big as the article says.
You don't think debt is a commodity? (Score:2)
Re:You don't think debt is a commodity? (Score:5, Insightful)
That's a bit disingenuous - I challenge to post a link to a picture of "value." The very notion of value is virtual, since the universe certainly doesn't care whether there's gold in them thar hills.
And don't fall into the trap of thinking that gold is somehow magical in its ability to have value. Gold is only valuable because people say it is, just like the US dollar. The only difference is that the scarcity of gold is based on physics and the relative difficulty of building a supercollider, while the scarcity of US dollars is based on the desire of the US to have a functioning economy.
If you don't believe me, think about how you'd value the following if modern civilization were to collapse - potable water, food, matches, ammunition, tobacco, liquor, coffee, paper, gold. Now imagine everyone else thinking the same thing (because civilization has collapsed).
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Yes, but liquor can always get you drunk. That's why it's at the top of my list.
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Ahh... Mindless US basing FTKW (For The Karma Whore).
Truth is you also go s/Linden dollar/99% of all RL currencies/ and s/Second Life/99% of all RL countries/, and still be correct.
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I agree. It's stupid.
But putting a tiny amount of money into a high risk "investment" scheme is riskier than putting your whole savings into junk bonds? Come on. This type of high risk investment can be perfectly reasonable as long as your overall position is well diversified.
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Now, I think that Ginko is very likely to be a Ponzi scheme. Not necessarily intentionally though, I think they did try to invest that money to be able to provide that interest, but of course that sort of profit is awfully hard to make and we're seeing the result.
The thing about Ponzi schemes is that they work, for a while. The early investors DO get their interest. It's the later ones who get screwed. So if you're not terribly ethical, you could put money into
Re:Vast exaggeration (Score:5, Interesting)
First, some background: (as of '03 when I played) in SL, they make it so that they "recharge" your money to a certain level each week, sort of like welfare. The day of the week varies between people. So, if you store your money with a trusted party, it will look like you're poor and you'll get money despite not being poor. I believe at the time it was something like LD 7000 that they would recharge you to. My bank served the function of the trusted party: I'd hold their money (through a script) over their recharge day.
Oh, and yes, I was very open about this, and told admins I was doing it. They didn't care.
Now, this doesn't explain how exactly you'd employ someone's money to make more money (like the banks claimed). However, it shows how, using some tricks, you can start with e.g. LD 7000, and "earn" 7000 more each week
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If you look at their Stats Page [secondlife.com], you will see a number of sinks they have to remove money from the system. These include classified ads, group creation fees, land, directory fees, upload charges, etc. because of this, they can pay some of those linden dollars back, without causing inflation in the process.
Ponzi Scheme (Score:2)
So yeah, my money is on Ponzi scheme: these "scams" aren't always done with the intent to defraud; often they're based on the well-mean
Look out! It's a Self-Fulfilling Prophecy! (Score:2, Insightful)
It's like a housing price crash you only need to send the correct message to make the stampede to avoid and the very thing you have been warning about comes into being because of the original message. Hell, I explained it badly, Wiki does it better...
http://en.wikipedia.org/wiki/Self-fulfilling_prop h ecy [wikipedia.org]
People are idiots (Score:5, Insightful)
You might as well call playing the slots in Vegas a retirement plan, it's probably less risky.
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Re:People are idiots (Score:4, Informative)
Just to pick nits but LindenLabs doesn't really publish an exchange rate, at least not in the sense that you would seem to imply. What LL really does is act as a middle man between two players exchanging LindenDollars for US Dollars. The person selling the LindenDollars sets the sell rate at whatever they wish and their money goes into a big pool with a tag for that exchange amount. When another player wishes to purchase LindenDollars they set the buy rate at whatever the maximum is that they are willing to pay and if there is anything in the pool at that sell value or less it is purchased at the sell value originally tagged. LL makes a little bit of money from the deal as a brokerage fee.
The exchange rates published by LL are the low, high, and average exchanges of the day so the values aren't set at all by LL. Now technically, yes, you are correct when you say LL publishes an exchange rate but the implication in that statement seems to me to be that they set that exchange rate. In this they no more set the exchange rate than, say, the Wall Street Journal when it publishes the exchange rate of the US dollar against the Yen. The value isn't really arbitrarily set but is set by the faith people hold in the currency.
None of which is to really say that people investing large amounts of money into LindenDollars aren't being foolish. It seems to be a very high risk investment. Just that there is a bit more backing up the value of the LindenDollar than a company saying 'this is it'.
Another scam? (Score:4, Informative)
Really people, there is no reason to invest in these "banks" in SecondLife (or any other game). Your money is safe in your own account. It's not like it's any safer in one of these "banks", in fact the opposite is true since you're forced to trust a random guy on the internet who has absolutely no laws or regulations backing him up.
The ban on gambling shouldn't have made too much difference. Everybody knows that every form of gambling in SL was fixed anyway. I don't know anybody who actually used them.
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Al very true, but in the end it might just be the game which is a pyramid scheme, not just the bank inside the game. If Lindon were to p
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Also, how is the bank's creator supposed to grab the money and run if he's managing loans? That defeats the whole purpose of these banks.
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One of two things (Score:2)
What Do You Expect (Score:2, Interesting)
The reality is that anyone who lost money on this is getting what they paid for.
Re:What Do You Expect (Score:4, Insightful)
And while some people do have lots of fun there, others do business. Business is quite possibly to do successfully in SL, but just like in reality they go bankrupt as well when things don't go as planned.
tho? (Score:5, Funny)
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Actually, it's the word "netspeak," you puppy killer!
(Yes, I'm aware I used the word twice just now, but I'm pretty sure it doesn't count when you quote it.)
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Cheers!
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Slow news day in the real world... (Score:4, Funny)
Could be worse... (Score:5, Funny)
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Fiction meets fact (Score:2)
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Obl. Quote (Score:5, Funny)
It's a wonderful life. (Score:3, Funny)
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Sm Wnrit
Is anyone really surprised by this? (Score:3, Interesting)
Linden-dollars (or whatever they're called) are backed by the full faith and credit of Linden Labs. Which is a lot less comforting to the average person than being backed by the U.S. government. Once Linden starts to lose credibility (and how was money "stolen" from the stock market) all those Lindenbacks are going to be worth the bits they're printed on.
I'm shocked, absolutely shocked to find gambling going on here.
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Apparently it was an inside job. Someone involved with fixing the ATM system hacked it. Full story here [reuters.com].
Saw this coming... (Score:4, Interesting)
In the past couple of weeks I heard of at least three people who had trouble getting money out of Ginko.
Word gets around quickly in these cases; as soon as people found out Ginko isn't paying out withdrawls they lose confidence and want their money back, just as would happen with a real bank.
Thankfully I have no money in Ginko. No way in hell I was ever going to trust them.
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Apez [apez.biz] might be a better answer for the cashflow management, but my business partner has had trouble with them, too, in the past.
At least... (Score:3, Funny)
Flies are right! (Score:2, Insightful)
missed oportunity (Score:2)
Deductions? (Score:2)
Oh, wait--they CAN have it both ways. Never mind.
Some perspective (Score:4, Interesting)
Before casinos were banned the daily SL economy was about US $2 Million per day. That's the total amount of all transactions between residents that Linded Labs (who run Second Life) knows about. It's currently running about US $1.4 Million. That's a big hit, but the difference was people putting money into slot machines. The banning has hurt some people running unregulated gambling scripts, and benefitted the idiots that were feeding them. A wash, AFAIC.
The Ginko thing also only affects a scammer and his victims, and is only US $0.75 Million. Less than a day's economic activity. Those people payed into a ponzi scheme, and like the gamblers, they had no reason to expect a return. Some might say that whatever the "banker" invested in will suffer, but until proven otherwise, his "investments" are probably real-world. That money is already gone from the economy, and it's not an economy-crashing amount even if some of it actually is invested in SL.
The real danger is to the land barons, who continue to buy up all the virtual land The Labs has to offer; much of it up for sale as casinos also sell off their land. Them, and Linden Lab itself, who stand to lose tier payments on land people can't afford to hold. But if a hypothetical sell-off is short-lived and is absorbed by new members and other residents suddenly able to buy cheap land, LL stands to gain as they get to re-sell land that is abandoned; land they already sold once and will get to sell again. The most likely scenario is that land re-sale prices (prices residents pay each other, not The Labs) will go down some, and The Labs will be unaffected. It is probable, in fact, that they want land prices to go down so people will buy more of it. They make much more money on monthly land payments than they do selling land (i.e. server space) to land barons.
Enough with the bullshit subscriber numbers (Score:3, Informative)
Oh give it the fuck up already. It was just 2 weeks ago we covered this. Second Life does not have 8.5M active subscribers. It does not have 5-6M active subscribers. IT DOESN'T HAVE HALF THAT.
Second Life has 20-30,000 active subscribers, THAT IS ALL.
I'm so goddamn sick of this media blitz on Slashdot by Second Life's lame fanbois. You're damn right this is inflammatory, because I and a good number of the rest of the readers here are sick and tired of seeing these folks abuse Slashdot with their little fake media drama, as often as several times a week, to benefit the bottom line of Linden Labs.
At least give us someway to filter these stories out. People who want to stay abreast of the latest little events in this insignificant virtual "meeting place" can read the fan sites instead; I'm sure they do.
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Since people generally can't remain awake and logged into SL 24/7, there's got to be more active accounts than that.
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Holding the mirror up to nature (Score:2, Insightful)
Yes, I'm totally down with the sentiments at http://www.getafirstlife.com/ [getafirstlife.com]. There is no need for a second life if you've already got a first one.
But then I stop and think for a second, and I realize that Second Life in general, and events like this in particular, and the attention they get, are good things for a specific reason. Most people don't have the vaguest notion how their first life actually works. Getting in on the ground floor of a micro-society that would like to mirror all the stuff its externa
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Shit, the game sucks. Well, there's no game to speak of.
"Here's an engine. Build content and prosper (sp?) (and give us some money)"
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It's also an interesting sociological and economic experiment. The enviroment of SL is ever evolving.
It's pret
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