Join the new world

I was going to write an article inaugural article themed around "The 30 Days" echoing FDR's 100 days detailing vague platitudes about how we were going to change Belgium. Then I remembered that I was 3 1/2 hours away from having a cabinet that I could delegate that stuff too, Rithulme now is when you earn your FBS. Instead I present to you:

Ragonomics: everything you wanted to know about the economy, but didn't think to ask.

The New World Is Not The Real World

The most important thing to remember when discussing the eConomy is that this is not the real world in which we live in. Many concepts and vocabulary are similar, but the mechanics are not the same. Just because something is true in the real world does not mean it will work here. Off the top of my head, difference include: lack of widespread sovereign debt, the lack of innovation, limited methods of taxation, the relative dearth of joint stock companies, the lack of transport costs, and the current fact that all products of a given kind and quality are perfect substitutions.

Trade: much like King Charles XIV John of Sweden, electricity, and an American sorority girl, it goes both ways.

This is some pretty basic stuff but when we talk about exports we're talking about stuff made in our country (for the purpose of this article we will assume this is which ever country you happen to be in while reading this) and consumed in another country. Imports are things consumed here but made somewhere else but these fall into two categories: white market imports are bought in local currency in the local market place and thus import duties and local VAT are payed, grey market imports are bought in the local market, often with an org account and then donated to the citizen account of the buyer, these do not pay import duties and they pay the foreign VAT. There is also the off site black market but for the purposes of this article it can be lumped in with the grey market.

Most people you ask will tell you that exports are good and imports are bad. This is true, when something is made domestically the government gets income tax and the workers gain skill, while in the importing country they might get import duty and VAT assuming who ever imported did so on the white market. But it is also true that there is exactly the same amount of importing as exporting, exports don't just disappear into a magical land of economic fallacy, they're somebody else's imports, and since imports and exports are done in local currency, this means if you import more/less then you export that is going to decrease/increase the demand for your local currency which as we will see latter is who/knows for your economy.

The only things certain in eLife: permabans and taxes

Taxes are money you have to pay the the government, which the government uses to do stuff. But it is actually more complex then that, it is not only a source of revenue for the government it is also an incentive not to do something. If you want people to buy less eWigets, jacking up the taxes on those will cause them to buy less of them, if only because they can't afford as many, if you want them to buy more, lower the tax on them, or raise the tax on everything but eWigets, but it gets yet more complex. In eConomy there are 3 types of taxes:

-Income Tax: this is a percentage, set based on industry of a workers wage and money being taken out of a company, but since it is supper easy for company managers to get around it, this ends up being a tax on income and dumb managers. This is also the most dependable type of tax for a country as every citizen needs to work and thus earn a taxable income. An increase in the income tax is an incentive to a worker, for the same wage, go get a job in another industry, and for the company, to raise payed wages (but not take home wages) and thus prices so ultimatly it results in an increase in price things sold buy domestic companies in both the domestic and export market, but as it causes workers to tend to migrate to other industries within their skill set it causes those wages to fall as there is an increase in workers for the same amount of companies and thus those prices to ultimately fall.

-VAT: This is a tax on things sold in the country, (also it is technically not a VAT as much as a sales tax as it is only levied on the final product and not on any incremental steps). As it affects both white market imports, black market exports and domestically sold products raising this is an incentive to buy an export license.

-Import Duties: This is a tax on products produced in another country and imported legally to this one, aka a tax on white market imports. This is by far the most controversial and least understood type of tax. The first response people have is to suggest that they be set at 99% in order to prevent imports and it works brilliantly to do just that, prevent white market imports, but it does nothing to prevent black market ones, which don't pay VAT or import duties, causing those cheap imports to come in anyway. Import duties should be instead thought of as a tool to prevent overly cheap products flooding the market any duty at a level more then domestic price=foreign price+tax rate is essentially the same a as 99%, but at that level and under it is a source of revenue while keeping the playing field level.

Now you'd think that your government would just take that money and use it to buy stuff, but then you'd be wrong, which brings us to.

Money makes the new world's server reset

Just to make things complicated, there are actually two types of money in the real world, there is gold, used to do important governmental things like sign MPPs, issue local currency, and declare war, and important other things like found/buy/upgrade companies, buy ads, and pay for Lana, and your local currency, used to pay citizen fees, buy stuff on the white market, and pay your taxes. Gold enters the economy when somebody spends real world money to buy it, gains levels, and earns trophies, gold leaves the economy when somebody does anything with it besides use it to buy local currency. Your local currency is created the government spends gold to do so, it only leaves the economy when the currency paid out of the treasury into new players accounts is lost by those players leaving the game with the currency unspent in their accounts. On a side note you will notice lots of players complaining about Lana draining gold from the economy, but this is only partially true, when she was first created it was quite easy to fill out surveys for free gold, the economy only started to go south when surveys that only required an email and clicking past a bunch of ads became less common, thus Lana was taking a lot of gold out of the economy, while at the same time survey gold was no longer entering into the economy.

So since the government earns taxes in local currency, but most anything they would want to do would be in gold they would have to buy gold on the market place, but if they were selling lots of local currency to buy gold that would make the price of gold increase, so what would that do, I'm glad you asked.

Inflation, Deflation: Insert Play On Witty Quote

You'd get inflation also refereed to as weakening currency, basically the purchasing power (amount of stuff you can buy with it) of your currency goes down, this is bad right? Well who knows, because if it takes more of your currency to buy gold, that also means that someone with gold can buy more of your currency, thus it from an outside perspective your goods are cheaper for someone in some other country to buy aka boosting exports (in the real world people often blame China for doing this), but it also means stuff in other countries becomes more expensive, so this is not recommended unless you have high resource regions for all raw materials, because otherwise, your going to have to import something.

The other side of this is deflation, in a healthy country with new players joining and some of them leaving with cash in their accounts this is the natural tendency. Since there is less currency around it becomes more valuable meaning it takes less of it to buy gold, thus from your perspective it looks like prices in other countries have dropped this is good it means your citizens can buy more stuff, but the flip side of this is that from a foreign perspective it looks like your prices have gone up, this is not so good as they'll just buy it somewhere else.

The way this is dealt with is by setting a peg, this is a standing order to buy gold with local currency set up by the government to turn currency from taxes into gold. It also prevents deflation by preventing other people from selling currency at a higher price because nobody else is going to have the same level of volume as the government. It doesn't prevent inflation, but of the two, inflation is the least worst. The catch is that it creates a fundamental limit on governmental budgets as you have to limit the amount of gold produced by the peg to a level that doesn't create runaway inflation which is as bad as deflation.

I hope this has been educational, if you have any questions, bother me on IRC
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Ragoth
Head Belgian Ragonomist
3 1/2 hours away from being your President