Why Tax Exchange is always rising?

[Naiman Broome]

Its since I am on SL that this tax is always rising and never lowering , at least not that I remember of , and can someone explain me why?

 

Just a few months ago I remember it was at 247 now it rised to 258

 

L$258 / US$1.00

[Alwin Alcott]

thats no tax, it's the market

exchange rate never was a fixed amount

[Qie Niangao]

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Naiman Broome wrote:

Its since I am on SL ...

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Nope. You joined in July 2007. The rate was higher then. For more Lindex history, see Tyche's fabulous gridsurvey page with complete Lindex data back to 2009.

(As already mentioned, the L$ exchange has nothing to do with a "tax" but that's probably just a second-language thing. Just in case, though: the vast majority of L$s traded are between residents, with only small fees and commissions going to Linden Lab -- except when the L$ gets "too" valuable, and then the Lab will sell some L$s to replenish the supply.)

[Rya Nitely]

Your question was why. People here are answering you by saying 'because it happens'. That's not an answer. Anyone can look at data and know that it happens.

With respect to your question. Why? We don't know why. We can spend days talking about it, and produce pages of guesses.

Rest assured, there are many others like you who are also concerned and wondering why.

In the real world we have the media, and we get solid reasons. Why did the pound go down? We know why. If we didn't have a logical reason there would be strong concern.

Saying that it happens is not a reason. It's just annoying.

[Alwin Alcott]

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Rya Nitely wrote:

People here are answering you by saying 'because it happens'. That's not an answer.

 

Saying that it happens is not a reason. It's just annoying.

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the reason IS the market... if you like it as answer or not.

[Rya Nitely]

The reason is the market?

I was preparing an answer, but that's just not worth my time

[Qie Niangao]

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Rya Nitely wrote:

 

Saying that it happens is not a reason. It's just annoying.

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Okay, but the OP did not only ask the "why" question, but also said "at least not that I remember of" which seemed to beg for more actual data.

I perfectly understand that you would like to know why there isn't enough demand for L$s to absorb the supply at the old exchange rate that was more favourable for sellers (and, of course, worse for buyers). As you say, there have been many comments speculating on that, across several threads on different forums in recent months. I'm not sure if that speculation is more or less annoying, but if enough "explanations" are generated, one of them is likely to be correct.

[Phil Deakins]

The OP also asked why "it is always rising", but it isn't always rising, as has been shown, so the whole question is void.

[Syo Emerald]

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Phil Deakins wrote:

The OP also asked why "

it is always rising

", but it isn't always rising, as has been shown, so the whole question is void.

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The whole discussion is pointless, as the question is asked by someone, who does not even know what taxes are or what an exchange rate or market is.

[Rhonda Huntress]

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Rya Nitely wrote:

The reason is the market?

I was preparing an answer, but that's just not worth my time

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Does supply and demand make more sense then?  It's pretty much the same thing, just like 1st Life stock markets. It fluctuates to match market values.

[Prokofy Neva]

As explained, the number isn't a "tax" per se, but the reflection of the worth  of the Linden dollar inworld against the real-life US dollar.

But it's actually helpful to think of it as a tax going up, because that's what it is -- a loss of your revenue and currency value dictated by government policies you can't control or even find out about.

The answers you are getting here are completely ridiculous, as it is insane to claim there is a free "market" in currency here, as there are in real-life countries such as the UK -- where the pound just dropped like a stone after the Brexit vote.

In fact, this currency "market" is as controlled or more controlled as the Russian ruble or  more like the manat in Turkmenistan, a former Soviet republic little changed from the Soviet-era (except to become more poor as it becomes gas rich).

The fact is, the Lindens "print rubles" i.e. they sell Linden dollars into the market by an account called Supply Linden. They do this in fact to keep the currency rate "stable". Any currency that has "government" manipulation to that excent to keep it "the same" rate is obviously not a market responding to real signals.

Except, despite the efforts to stabilize this script, it is rapidly devaluing -- in fact it is worse today than it has been in weeks, during the last round of crisis that people thought was "over" when it fell in value by 10 points, i.e. went up 10 points. It's now only possibly to sell instantly at the rate of 259 -- 11 more points than 2 months ago.

Why is this happening? No one knows as Linden Lab doesn't tell us, but some speculation has centered around people with Lindens inworld cashing them out to buy an offer made some months ago called a "buy-down" of sims to be "grandfathered" and lower tier. The offer costs $600. 

But as I've have strenuously and repeatedly pointed out, only 1,000 or so islands were downgraded to this GF status, so that's only $600,000 US which exited SL in fact BEFORE the LindEx began to fall -- and that's only IF everyone who bought that deal used Lindens and not real dollars, which is really unlikely. There just aren't enough people taking the risk of buying down GF islands to result in this drop.  And now there can't possibly be that many. It's just not a valid explanation.

Another explanation is that some big island empire has failed and is cashing out millions -- billions -- of Lindens.

Yet another explanation is some big content business closing, and we know a very large one that had a large stream of revenue that quit recently for reasons not explained.

The actions by giant players in this tiny "market" cause big ripples and many little guys then give up or pause.

Sometimes these reasons are just related to peoples' real lives. But more likely than not they are related to the fact that LL is creating Project Sansar, a different and allegedly better virtual world, separate from this one with items not transferable between them, and that creates a sense in people that this existing SL may drain out of people and content and value. And that's a reasonable assumption, as there are many precedents, such as There and The Sims Online that drained out and closed as their populations migrated to Second Life. It's human nature. No one is listening to music on Sony Walkman's today.

 

[wherorangi]

just a general fyi

Ebbe Linden got asked about it at the SLB13 talks. His reply is here: https://modemworld.me/sl13b-ebbe-on-second-life/#lindex

+

basically he said that LL are watching it closely, and is not of their doing

theres a lot of contributing factors he said

he acknowledge that theres someone(s) shifting a lot of L$ to US$ in ways that they have not seen for a while, (implying I think that these someones are not overly fussed about how much USD they are getting for their L$)

he said that Lindex is a exchange between residents, and that LL will never get into Lindex price controls. It will go where it goes (i assume thats with the already existing day trading trigger halt mechanisms in place)

[Pamela Galli]

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wherorangi wrote:

just a general fyi

Ebbe Linden got asked about it at the SLB13 talks. His reply is here:

https://modemworld.me/sl13b-ebbe-on-second-life/#lindex

+

basically he said that LL are watching it closely, and is not of their doing

theres a lot of contributing factors he said

he acknowledge that theres someone(s) shifting a lot of L$ to US$ in ways that they have not seen for a while, (implying I think that these someones are not overly fussed about how much USD they are getting for their L$)

he said that Lindex is a exchange between residents, and that LL will never get into Lindex price controls. It will go where it goes (i assume thats with the already existing day trading trigger halt mechanisms in place)

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Thanks. The mystery deepens...:smileysurprised:

[Rya Nitely]

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Rhonda Huntress wrote:

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Rya Nitely wrote:

The reason is the market?

I was preparing an answer, but that's just not worth my time

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Does supply and demand make more sense then?  It's pretty much the same thing, just like 1st Life stock markets. It fluctuates to match market values.

---

Yes, there's more supply than demand, resulting in devaluation. My gut feel is it will stop at 260. I believe that's the target. It overshot last time, then it had a correction and now it's aiming for it again.

Real life stock markets move for a reason - news, speculation, rumours etc., or the reason may be technical -  when the price reaches support or resistance levels; buying or selling the trend; a price break out, or other more complex indicators used by traders.

The LindeX chart was flat for 4 years, and the only technical indicator was the recent spike (price break out) when it went to 251.

The LindeX doesn't work like RL markets because It's not actively traded. Demand is relatively constant, the daily volume is relatively constant, and the vast majority of buyers don't specify a price, but most sellers do. If this happened in a real market the price of Lindens would go up because sellers would have control, until it became too expensive and then demand would decrease, leading to a reversal. Then we would see the normal waves, like in real markets.

For 4 years the exchange rate was flat because  LL kept it stable. It didn't work like a normal market. That control is no longer in place, and because there is an increase in supply, which is not met by demand, the value of the Linden is dropping. 

If this increase in L$ came from inworld (mesh body sales or asset sales) then it would be met by an increase in demand for L$, and therefore an increase in daily volume, but no change in the exchange rate. ( I don't believe people are selling hoarded L$.)

The only thing that makes any sense to me is that the increase in supply is coming from LL, perhaps to get the LindeX exchange rate to a target level, hopefully no higher than 260. Or perhaps they are just selling L$ to generate revenue.

My theory stands despite what Ebbe might say. I mean would he really say that LL are messing with it? Of course not.

I'm a stock trader in RL. This is not a normal market.

[Bobbie Faulds]

Not any more mysterious than any currency exchange. The cost of one currency compared to another. That fluctuates daily. If you went to a bank tp purchase any foreign currency, they look up the current rate so what you get today could be more or less than what you get tomorrow and different next week. Some people actually do use buy and sell orders on the Linden exchange just like they do with RL money exchanges. 

If you were to buy British pounds now, while they are low, then wait a bit, once Britain stabilizes and the value starts to rise, you could then exchange them for US currency and make money on it. 

[Rya Nitely]

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Bobbie Faulds wrote:

Not any more mysterious than any currency exchange. The cost of one currency compared to another. That fluctuates daily. If you went to a bank tp purchase any foreign currency, they look up the current rate so what you get today could be more or less than what you get tomorrow and different next week. Some people actually do use buy and sell orders on the Linden exchange just like they do with RL money exchanges. 

If you were to buy British pounds now, while they are low, then wait a bit, once Britain stabilizes and the value starts to rise, you could then exchange them for US currency and make money on it. 

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Except that RL currency exchanges are not mysterious. There are sound reasons for major fluctuations. Central banks don't have a 'we don't know' approach to it. They do know, and the media will let us know. There may be normal and insignificant ups and downs around a certain point from day to day, but what we're experiencing with the LindeX is unexpected and unusual. Even Ebbe agreed with that.

The LindeX does not work like a normal currency exchange. If it did, it would not have remained flat for 4 years. We would see waves. One of the main reasons is because it's not actively traded like normal currencies are, where both buyers and sellers are setting prices. Most of our buyers are passive, and buy at whatever price, like if you go into a foreign exchange to buy pounds - the price you pay is determined by active traders. The LindeX price is not determined by active trading, like normal markets are.

 

[wherorangi]

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Rya Nitely wrote:

For 4 years the exchange rate was flat because  LL kept it stable.

It didn't work like a normal market

. That control is no longer in place, and because there is an increase in supply, which is not met by demand, the value of the Linden is dropping. 

If this increase in L$ came from inworld (mesh body sales or asset sales) then it would be met by an increase in demand for L$, and therefore an increase in daily volume, but no change in the exchange rate. ( I don't believe people are selling hoarded L$.)

The only thing that makes any sense to me is that the increase in supply is coming from LL, perhaps to get the LindeX exchange rate to a target level, hopefully no higher than 260. Or perhaps they are just selling L$ to generate revenue.

My theory stands despite what Ebbe might say. I mean would he really say that LL are messing with it? Of course not.

I'm a stock trader in RL. This is not a normal market.

---

for a currency exchange rate to stay flat in a market then a central bank (or surrogate(s)) has to buy back their currency as well as sell it. Is zero evidence to suggest that LL buys L$ back from us

the only surrogates who would have the interest and sustainable volumes to stabilise this market over such a long time, would have been the 3rd-party L$ exchanges, volatility is anathema to a currency re-supplier. Their business model is supply at stable/predictable rates, they are not market day traders

now that they are not in the market anymore then is no large buying surrogate(s). Most of their previous customers are now buying on the Lindex directly

+

also

what there is evidence of is that there are now more people willing to sell their L$ at a discount to previous

you are evidence of this yourself. Last time we had this discussion you said that you sold at 263. If you had waited another 48 hours at the time, then you would have gotten 255 about

which is actual consistent with what Ebbe Linden said: There are now someones shifting L$ to US$ in ways that LL hasnt seen in a while

 

  

[Rya Nitely]

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wherorangi wrote:

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what there is evidence of is that there are now more people

willing

to sell their L$ at a discount to previous

 

  

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Willing? Not sure about that. I think most sellers would agree with me here. How long do you wait....and watch... before you give in? You really need to be a regular seller to understand.

[Qie Niangao]

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Rya Nitely wrote:

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wherorangi wrote:

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what there is evidence of is that there are now more people

willing

to sell their L$ at a discount to previous  

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Willing? Not sure about that. I think most sellers would agree with me here. How long do you wait....and watch... before you give in? You really need to be a regular seller to understand.

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That's the thing, though: Nobody is ripping L$s out of people's accounts and forcing them to take US$s in return. They're doing it of their own accord, no matter how desperate they may be to raise US$s. I mean, any L$ seller could instead decide to leave the market altogether and never look back -- stop renting land, stop selling stuff, stop whatever they're doing that generates L$s to trade. Until they walk away leaving their L$ balance behind, they're "willing" participants in the market.

That willingness to trade at higher rates is all it takes to push any market higher.

Whatever Ebbe says, there's a floor under the rates at some level above zero, below which Supply will sell fresh L$s. That artificially caps risk in one direction. I originally suspected that traders were manipulating the market to exploit that one-way risk and the very thin protection of scant standing buy-side orders. The method would be to push rates into a range where there's a greater bid/ask spread than the total transaction costs, and then trade both sides of that range as the market fluctuates.

Those traders should be "willing" to sell for any rate better than 3.5%(-ish) more valuable than they need to buy, and there's just not a lot of buy-side competition.

[Rya Nitely]

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Qie Niangao wrote:

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That's the thing, though: Nobody is ripping L$s out of people's accounts and forcing them to take US$s in return. They're doing it of their own accord, no matter how desperate they may be to raise US$s. I mean, any L$ seller could instead decide to leave the market altogether and never look back -- stop renting land, stop selling stuff, stop whatever they're doing that generates L$s to trade. Until they walk away leaving their L$ balance behind, they're "willing" participants in the market.

That willingness to trade at higher rates is all it takes to push any market higher.

 

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The old argument of 'like it or lump it'. When there's nothing else to say, then that will do it. :smileywink:

But once again, the discussion proved useful. I didn't know Ebbe said anything, did you? I appreciate that he didn't say the recent moves were normal, and then referred people to historical data. He said it was 'very unusual as we haven’t seen that in years..... It’s something we’re looking at, and we’re analysing it.'  At least this shows some concern. Then he tried to come up with reasons - also appreciated.

But I find it hard to believe that a number of different factors suddenly came into play all at the same time, making the market move, not once but twice in quick succession.

'So, all these things could have various impacts individually, and combined they could be a contribution', or it was 'a fairly isolated incident of someone or someones being very active on the sell side'. Just guesses like all the rest of us :matte-motes-confused:

Edit to add: Surely if LL detected very unusual selling by someone or someones it would prompt investigation. They would know exactly what it was and who it was. This isn't speculation, it would be a fact.

So then we have two reasons for two separate events that happened in quick succession - the first was someone or someone(s) selling, and a few weeks later it could be 'all these things having various impacts'.

But whatever it is, it's not going to make me pack up and go. I do like analysing and picking at things like this, although some may find it annoying. But then your 'like it or lump it' advice applies. :matte-motes-tongue:

[Phil Deakins]

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Rya Nitely wrote:

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Qie Niangao wrote:

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That's the thing, though: Nobody is ripping L$s out of people's accounts and forcing them to take US$s in return. They're doing it of their own accord, no matter how desperate they may be to raise US$s. I mean, any L$ seller could instead decide to leave the market altogether and never look back -- stop renting land, stop selling stuff, stop whatever they're doing that generates L$s to trade. Until they walk away leaving their L$ balance behind, they're "willing" participants in the market.

That willingness to trade at higher rates is all it takes to push any market higher.

 

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The old argument of like it or lump it. When there's nothing else to say, then that will do it. :smileywink:

But once again, the discussion proved useful. I didn't know Ebbe said anything, did you?

I appreciate that he didn't say the recent moves were normal, and then referred people to historical data

. He said it was 'very unusual as we haven’t seen that in years..... It’s something we’re looking at, and we’re analysing it.'  At least this shows some concern. Then he tried to come up with reasons - also appreciated.

But I find it hard to believe that a number of

different

factors suddenly came into play all at the same time, making the market move, not once but twice in quick succession.

'So, all these things could have various impacts individually, and combined they could be a contribution', or it could be ' a fairly isolated incident of someone or someones being very active on the sell side'. Just guesses like all the rest of us :matte-motes-confused:

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Inasmuch as it does happen from time to time, it is normal - as the historical data shows

[Qie Niangao]

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Rya Nitely wrote:

The old argument of like it or lump it. When there's nothing else to say, then that will do it. :smileywink:

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Yeah, but it's the market saying "like it or lump it", not me. I'm just pointing out that the market will respond as we've seen as long as people are willing to sell their L$s at the higher rates without others willling to buy at lower rates -- where "willing" just means participating, however unhappily.

If nobody were willing to sell at those higher rates, I bet eventually some buyers would get L$-desperate enough to pay the old lower rates. Lucky for them, they recently haven't needed to.

I agree that it's good to get Ebbe's quote out here where more folks might see it. (I'm somehow remembering having heard it, but I wasn't in the SL13B audience, doubt I played it from Inara's blog, so maybe it's just deja vu.)

[Rya Nitely]

But this market isn't significantly influenced by buyers, because the vast majority of buy orders are at market (in the viewer). Most SL buyers are not even aware of the exchange rate or that their orders go through an exchange. They think they're buying L$ from LL. If the price of L$ went up too significantly then they'd start feeling ripped off and they might start buying less. But with this recent change, they'd be just as comfortable paying the higher price of 248.

As for 'like it or lump it' - it's advice that can be applied to any situation, not just this market. Someone complains about their job or pay or whatever - like it or lump it. It's something they already know, they don't need the advice.

[Pamela Galli]

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Rya Nitely wrote:

But this market isn't significantly influenced by buyers, because the vast majority of buy orders are at market (in the viewer). Most SL buyers are not even aware of the exchange rate or that their orders go through an exchange. They think they're buying L$ from LL. If the price of L$ went up too significantly then they'd start feeling ripped off and they might start buying less. But with this recent change, they'd be just as comfortable paying the higher price of 248.

As for 'like it or lump it' - it's

advice

that can be applied to any situation, not just this market. Someone complains about their job or pay or whatever - like it or lump it. It's something they already know, they don't need the advice.

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Oh you thought we were trying to come up with something we could DO about this? Because whether we know who is doing this and why, or not, the fact remains that we can like it or lump it, we are not going to affect it in any way.

[Rya Nitely]

if I lump it, it will be an individual action and It won't change anything. If you also lump it, as in hold off selling, it won't make any difference. It needs to be a significant number of sellers holding off to make an impact. This isn't going to happen. When I'm ready to sell again, I will sell near the top, just like everyone else is doing. Because nobody is going to be making a pact here.