Big Economic Shift Underway

Day 1,150, 13:48 • Published in USA USA • by PigInZen
From the Secretary of the Treasury



A Quick Primer on the Current Economic Trends at Work

I've read concerned shouts and messages from citizens wondering what is going on in the USA with the economy. Wages and prices have dropped a fair amount and the USD Currency Peg has slipped from 0.02 to 0.019.

First, allow me to reassure everyone that this doesn't mean that widespread economic panic is upon us. These kinds of ecnomic shifts happen from time to time when a large change to the status quo occurs. Consider yourselves fortunate to be living in exciting times, eRep wise. While it is preferable to have a steady economic environment sometimes we are vulnerable to events beyond our control.


Contribution #1 - Rising Population

For a few days now we've been adding citizens at a rate near or above 500 a day. Many of these citizens are people relocating here. New citizens require jobs. As jobs get taken there are fewer on the jobs market. Now, the jobs market is like the reverse of a regular market; that is, the more demand for jobs there is the lower a price (wage) someone is willing to pay. Think of it in supply and demand terms as an excess supply of employees. That makes employees less valuable and cheaper. Hence wages have dropped and I expect that they will continue their downward trend. The solution to this trend is to open more companies. That is contingent upon product demand moreso than employee availability, however.

A rising population also means we're producing more stuff. This sudden glut of new products force prices downward, consistent with what's been occurring across all markets. The solution to excess supply is to increase demand or reduce supply. This means either people have to purchase more goods or businesses will have to stop producing so much.


Contribution #2 - Economic Module Changes

I'm not one to rail against the almighty admin but the latest change has me scratching my head. The Admins have made it possible for company owners to work in all of their companies every day. There is no wage paid to the owner, the only cost is 5 health. Earlier today the price for 3 Q1 food was around .70 USD so a company owner can work for the equivalent of 2.10 USD.

"So what?" you may be asking. Well, this means that the value of labor now has a long-term deflationary trend. As a skill 10 employee (Guru😉, I can produce around 400 grain for 2.10 USD using the basic booster. 400 grain will fetch over 20 USD on the market currently. I think the answer is quite obvious for most to see: now that labor is no longer tied to a wage but rather to 5 health as its most basic level. Owners now have an incentive to get all employees wages to that level and a DISINCENTIVE to pay anything higher. Anything above it is inefficient. What does this mean? Long term wages are heading downward as employers stop hiring, instead seeking to produce from themselves as cheaply as possible.

This change has made gold very valuable as it is the key to company ownership. We're seeing this play out on the monetary market as I write this as more and more offers for USD at 0.019 pop up. This means that people are more willing that before to offer USD at a CHEAPER exchange rate for gold. Whereas before the lowest rate people accepted (generally) was 50 USD for 1 gold, now we're seeing people offer 52.63 USD for 1 gold (0.019 per USD). How much lower can the monetary market go? Well that remains to be seen but I personally anticipate that it will go a bit lower than 0.019 unless the US government steps in to purchase USD from the other side of the market.


Bottom Line

Currency exchange:

1. Those holding gold are in the best position of all. People want gold more than ever before so your value will hold if not increase relative to currency.

2. Those holding large sums of USD for product purchase (Weapons, Food, etc.) are in a good position too as the price of goods is falling relative to the USD.

3. Those saving large sums of USD to exchange into Gold are in the worst position.

4. The US Government receives less gold for selling USD. That impacts directly what we're able to do diplomatically and militarily.


Wages:

1. Employers are being pinched from falling prices and product is slow to move.

2. Employees will be lucky to escape without seeing their wages fall further.

3. Unless Congress drops the minimum wage soon we'll see jobs shortages.


Tax Revenue:

1. Falling wages means falling income tax revenue.

2. Government expenditures will have to follow suit.


The Good News:

Every country is facing this problem. We're not alone. Consider this the post-V2 eRep world's first economic shock.





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