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The Economist ~ Notes on the global financial crash

Day 1,725, 09:31 Published in Slovenia Poland by Iain Keers


Dear friends,

I just want to write a brief article today talking about the current financial crisis facing the new world. Most of you have probably seen the wildly fluctuating values in the money markets, the weapons industry and the job market. Obviously these things are connected, and the connection is hung around the introduction of the Q7 industries by the game administration. I’m mainly writing this article for newer players- since the crisis began there’s been a plethora of articles offering solutions, and I’d just like to try and give newer players a basic grounding in why it’s all happening.


So to begin- what was the background to the crisis? When the game was created, there were five qualities to each industry. The first 4 qualities (Q1-Q4) were quite heavily populated back then, with a small minority of players (and a larger number of countries) owning Q5 companies. As time went on, the game changed, and Q5 became increasingly common usage for military units and players. Even fairly weak players fought with Q5.

All this is connected to the simple driving formula of aggregate demand which drives all economics. As the number of Q5 companies increased, the profit margins in that industry fell. Eventually it fell to the point where other qualities of industry became unprofitable to hire workers in. This was hurried along by admin changes to how employment works and the gradual devaluation of currency caused by strength training.

The long and short of it is that Q5 dominated the new world. At this point the admins introduced Q6 companies. Q6 wasn’t a luxury good- it was a simple upscaling of Q5. It used 20% more raw material, gave 20% more hits and 20% more damage. This was a mistake by the admins, since it immediately killed Q5. By this point government owned companies were basically gone, and the majority of Q5 company owners were wealthy private individuals- either gold buyers or the super rich entrepreneur class which emerged through 2010. Most of these people upgraded their companies to Q6, causing Q5 to die. Again, supply and demand forced up wages and down prices until they met, killing the whole sector.


porn for economists

Moving on seven months and the introduction of Q7 weapons. The admins have made several efforts to resurrect the dead lower quality industries. However this change was a major error. Q7 was originally created with the intention of it being an elite product for division 4 players. It was an attempt to screw some more real money out of these older players by forcing them to upgrade. Realistically, the production cost per unit of Q7 means that they’re not intended to replace Q6, just coexist alongside them.

Unfortunately the marketplace is not controlled by logic, it’s controlled by market forces. Demand for Q6 dropped rapidly, and as hundreds of gold buyers rushed to upgrade, the actual number of Q6 weapons on the market dropped as well. Q7 became the new King.


Admins say oops

The most obvious effect of this was the sudden surge in prices for weapons raw material. At one point they topped the 0.4 mark, having dwindled to below 0.07. This is the clearest example of the dominance of the Q7 industry. A Q7 costs 200 raw materials to produce, whereas a Q6 requires only 60. Overnight demand escalated, which forced up the prices fivefold.

The secondary effect of this was a flooding of the market with Q7 weapons. High prices and the collapse of Q6 made Q7 the attractive option for business owners. Despite a truly enormous investment cost most players were used to it by now and upgraded, and we saw a massive influx of Q7 guns.

What happened next is obvious. Supply suddenly outstripped demand, and there was a world-wide collapse of the entire weapons industry. The effects of this were incredibly far reaching.

First of all you had the obvious- prices collapsing from highs of over 100 currency to below 50. This was a race to the middle, as they say, between the market and the manufacturer. The minimum cost per unit of any product is determined by the value of the materials used to make it and the wage of the person who built it. For Q7 weapons this combined cost is usually around 45 currency, which when taxes are taken into account puts the cost per unit at around 50. This means that most people are breaking even on production, making it actually a waste of time doing.


Anyone want Q6? Anyone??

In this situation the two variables- weapons raw price and wage price- both come under assault from the market. First of all the wages begin to drop as business owners try and cut costs. Despite a minority who don’t seem to be able to do the maths to calculate profit margins, the market has dropped and is still dropping. A few weeks ago a worker could earn 300 currency a day working in Poland, now it’s more like 65 in most countries.

On the other hand weapons raw material has become suddenly very profitable. Working there yourself costs just 10 health and produces around £80 a day provided you have the right bonuses and saltpetre factories. This might not sound like much but it’s actually one of the best ROI (return on investment) in the game right now. People with money to invest rushed to buy them, and players with a lot already started using them again. In addition a lot of players (myself included) stopped using workers in their factories due to the tiny margins, meaning that the amount of WRM on the market grew a lot. This meant that prices have slowly depressed down to 0.22 or so. Now this would normally mean an increased profit margin in weapons, but weapons prices are so depressed they’ve just followed every drop in price.


Cheaper (and more useless) than ever!

Some of you probably see where this is going now. Obviously a sudden surge in demand for WRM caused a sudden demand for currency to buy WRM factories. Hence we’ve seen the gradual fall of the value of gold from 1800 cc to something closer to 1200. This has also been influenced by the admin “stealth bot” which buys a percentage of every currency listing on the last day it’s listed. On the other hand demand for gold to buy companies is low, since the profit margin in high quality companies is low, and the enormous cost of acquiring a Q7 company means that actually saving up gold a few gold at a time (as a new player might manage) will never generate the mind-blowing amount of gold required to buy a Q7.


The future is uncertain at this point. I predict that eventually the supply of WRM will more or less match demand, meaning these high prices are a temporary situation. This will have a knock on effect on the price of gold- so this too is temporary. The value of Q6 companies and weapons looks to be forever trashed, with Q7 replacing it. Whether Q7 ever becomes a full replacement for Q6 is uncertain. It costs hundreds more each day to supply an army with Q7 per player, so most armies are either sticking to Q6 or giving mixed supplies. I don’t see a surge in Q7 value anytime soon, making them a very poor investment from that perspective- though as always if you already have everything else it’s a better investment than fighting or training, which are nothing more than a gambler’s trap designed to draw people into buying gold to give them the ‘buzz’ of tanking.

Hope this has cleared things up for the newer players amongst you

Iain




Ps. Hello Slovenia! I will do a proper article soon saying hi and so forth. It's lovely to be here :)
 

Comments

soneras
soneras Day 1,725, 09:35

1.

POLAND PLS
POLAND PLS Day 1,725, 09:39

2.

Uber kiko
Uber kiko Day 1,725, 09:42

Lol i want q6 weaps xDDD If they're free, gimme gimme..

Vincenzo Roque
Vincenzo Roque Day 1,725, 09:49

nice article

Death and Taxes
Death and Taxes Day 1,725, 09:51

Thank you Iain

dinossauro
dinossauro Day 1,725, 09:51

"porn for economists"


fap fap fap fap fap

so true

Grainne Ni Mhaille
Grainne Ni Mhaille Day 1,725, 09:59

Thanks, good info.
What immediate economic effect do you think this'll have, on a local level, and further afield? http://www.erepublik.com/en/main/law/Bulgaria/113599
Does the funding counter reset to zero once the law is proposed, or something else?

biiis
biiis Day 1,725, 09:59

i love your type of porn

o7

Iain Keers
Iain Keers Day 1,725, 10:13

@Grainne, I suppose the idea was to try and remove some currency from the game. There are thousands of players with over 100k of currency, and that's going to add up. Look how easily the Americans reached their target. Maybe if the Airstrikes were open more than a week.

Tbh I'm a bit cynical about it. I think it's just an attempt to unbalance the status quo by giving the superpowered balkans a chance to conquer the weaker countries elsewhere.

Mike Littoris
Mike Littoris Day 1,725, 10:43

Groovy

Hostilian
Hostilian Day 1,725, 10:45

Don't worry Iain, admins know what they are doing. They took the gold from gold buyers (or rich old players which are a minority I think) and increased WRM prices to make all players able to live again. Once WRM drops again, they'll introduce Q8 taking even more gold from the gold buyers and pumping WRM back up. Until everything blows to hell, but by that time they'll already have a private island each, so they won't care.

Hostilian
Hostilian Day 1,725, 10:48

Btw, this economic crisis is an inherent property of the capitalist system, it was just reached earlier in game because of the much faster pace here. Increasing production and profit ad infinitum requires an infinite demand, thus capitalism can never work (without being reset by crisis from time to time). Even Ben Franklin predicted that (with T=100years by his calculations).

Iain Keers
Iain Keers Day 1,725, 10:52

The real world is a slightly different situation, since there are more factors involved there. Population growth and market development isn't infinite, but it's as near enough that meaningful predictions can be made on that basis. I'm not saying capitalism is going to live forever in it's current form, or that this is a desireable thing. But a gradual change is more likely in the real world than an overnight re-write ^^

Plus failure doesn't mean ending, just as you say a restart

fagyan
fagyan Day 1,725, 10:56

sLOVEnia ?
Y U NO COME TO IRAN ?

Hostilian
Hostilian Day 1,725, 11:11

Well, we have a lot of diversity that allows things to grow in RL. Until my coffee cup counts the number of coffees I consumed during the day while displaying latest headlines and streaming HD films somewhere, soft- and hardware industries will be allowed to grow almost indefinitely. But, even today in RL we cannot expect business to grow without either inventing something new or stomping somebody else that held that market before.

Hostilian
Hostilian Day 1,725, 11:14

Btw, I do like capitalism, as it enables me to stomp on others while inventing new stuff... But that doesn't change the fact that a system should take care of all the resources in such a fashion that allows the resources to grow back. If I expect, for example, agriculture to grow indefinitely, I'll be forced to invent Monsanto-like GM idiocy (along with mad cows) while draining all the resources available on Earth. Such behaviour is just going to hit on the head our descendants (if not even us).

LoCkSaW
LoCkSaW Day 1,725, 11:24

vote : )

mcmoox
mcmoox Day 1,725, 11:26

MCMOOX je bio ovde!!!!

Oblige
Oblige Day 1,725, 12:22

What- no charts?

Djuro Drljaca
Djuro Drljaca Day 1,725, 13:11

what kind of porn doesn't have boobs? :o (facepalm)

Erik-Ero
Erik-Ero Day 1,725, 13:13

V+S

RaviMirza
RaviMirza Day 1,725, 13:47

o7

Plugson
Plugson Day 1,725, 14:03

Awesome explanation ~ thanks

Jorge Salazar
Jorge Salazar Day 1,725, 14:25

Great article!

screamingslave
screamingslave Day 1,725, 14:25

i agree with plugson what a great explanation. Also some very interesting and thought provoking comments!

A-2020
A-2020 Day 1,725, 14:40

I think it unlikely that admin will be content to have a collapsed weapons industry in the long run. Aside from the gambler's trap of fighting, there is nothing else on this game for players to buy large amounts of gold for. At the moment, anyone possessing the mental dexterity to use a calculator (surely the majority of players?), will look at the figures, promptly deem it nonviable and keep the their credit card securely in their wallets - certainly not what admin want as we know.

nimnul
nimnul Day 1,725, 14:41

o7

great

PahorNimaPojma
PahorNimaPojma Day 1,725, 15:16

nice article. welcome to sLOVEnia o7

Ice Killa
Ice Killa Day 1,725, 15:24

Very interesting, Iain.

MicimLaLicim
MicimLaLicim Day 1,725, 15:53

No hope for capitalist
Big V.

extruder
extruder Day 1,725, 16:20

nice article. thnx for it

Alphabethis
Alphabethis Day 1,725, 16:44

all article may be resumed in these two points:
1. offer balances with demands in the long term
2. high offer of any "resource": weapons, WRM, workforce imply a lower price of the resource

And poor logic and flaws:
1. http://en.wikipedia.org/wiki/Aggregate_demand
you're using formulae and laws from a system (REAL LIFE) to another absolutely
different system (eRepublik) where consumption and any other curve means something
absolutely different.
2....

Alphabethis
Alphabethis Day 1,725, 16:47

... market is not dominated by logic, ever heard of theory of chaos? dominated by marketforces, it's like saying water movement is not dominated by logic or physics, but dominated by waterforces.

ANYWAY, you can say any falacy or flaw, you ARE a level 55 and have lots of friends, subscribers,...
But reasoning is not based on friends, but on logic, reasoningforces if you like.

Mali Leteci Medvedek
Mali Leteci Medvedek Day 1,725, 17:22

v+s

Brigadier Roman
Brigadier Roman Day 1,725, 23:15

v+s exceletnt

CryingLightning
CryingLightning Day 1,726, 01:30

great job as usual

pikomalecki
pikomalecki Day 1,726, 02:15

Nice article Iain, also price of curency will grow next few days because of aistrike. After that and with bigger raw production the circle will come back on point where curency will grow and prices will fallen, at least for food

T.Pirjowc
T.Pirjowc Day 1,726, 02:49

v+s

Guerilla2k
Guerilla2k Day 1,726, 03:22

Once again, a very fine read. Also, welcome to Slovenia, hope you enjoy your stay. :]

zoomanager
zoomanager Day 1,726, 04:10

nice one, excelent article.

Iain Keers
Iain Keers Day 1,726, 05:11

In case anyone was wondering, Alphabetis is some ... guy... from the UK who follows me around shitposting. If you look at his paper it'll give you an idea of his IQ level, which is probably similar to his ingame one.

DonHonChi
DonHonChi Day 1,726, 05:22

From time to time market is chaotic but that's just because admins are making economical changes way too fast.

Rest of it you don't need any math to understand what will happen with prices over time.
Its pure logic and seems like they miss someone with that at their development.

Tho no one can predict changes if they play around with their bot all the time.

DonHonChi
DonHonChi Day 1,726, 05:30

They could reach their goal easier if they would start to cap.
Like how much raw, food, weapons can player produce or how many companies can a player own.

By doing that they could limit income of players to a certain number. So every change they make wouldn't make start for beginners harder. They are afraid players will stop buying gold so each change they make is limiting the possibility to earn money, especially for those that don't have empires like a lot of older players.

WayneKerr
WayneKerr Day 1,726, 05:46

Your lucky Iain, you don't have to read his shit posts in the MU thread everyday...

Vezuv
Vezuv Day 1,726, 07:51

just repead; you'r welcome bro...

Iain Keers
Iain Keers Day 1,726, 08:03

Alphabetis, I think you're confused. It wasn't my goal to give specific market information, it was my goal to explain the trends and the reasons behind them to newer players or those who aren't that interested in the economy module.

I wish you'd just not post on my articles (or anywhere else). I think you're under the mistaken impression anyone wants to hear your opinion.

Alphabethis
Alphabethis Day 1,726, 08:54

I think that the article : http://www.erepublik.com/en/article/wmr-good-news-gold-down-15-bad-news-you-still-can-039-t-afford-it-2100034/1/20

can complement quite well the information given here. It's not about the ideas I have or not.

Fantikus
Fantikus Day 1,726, 11:05

Zanimljivo tovarišija...podomače bi rekli "Đe ba zapelo?"

matjazbre
matjazbre Day 1,726, 11:44

vote & sub, great article. welcome to eSlovenia ; )

 
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