The Economist ~ Deflation and the slow slide into economic ruin.

Day 995, 14:34 • Published in United Kingdom United Kingdom • by Spite313
“Deflation: A general decline in prices, often caused by a reduction in the supply of money or credit.”

OK, so this is what happened. One day, eRepublik changed. They changed the formulas, the modules and the way products were used. Unlike in a real market environment, this changed in one day. Suddenly, everyone in the entire economy was made unemployed. Manufacturing workers who had been making food now found they could only make weapons. Weapons workers found they could now only build houses. No supply and demand was present, it was the random hand of fate which decided who did what and when and how.

“he is ... led by an invisible hand to promote an end which was no part of his intention.”- Adam Smith

In this situation there was no invisible hand, slowly guiding the market towards the most profitable, most efficient means of satisfying demand. There was instead a giant, very visible hand, which did not guide. It wiped the board, reset, changed everything. The result was total chaos. No gradual changes in wages- vast supplies of almost free labour resulted in huge profits. Whole sectors were decimated. No war meant the entire weapons sector collapsed, leaving tens of thousands unemployed or working on slave wages.

"Mere parsimony is not economy. Expense, and great expense, may be an essential part in true economy."- Edmund Burke

To make the situation worse, once the beleaguered manufacturing industry realised its products were worthless, prices of RM, the only stable and strong industry, collapsed. Prices dropped, and many companies collapsed causing further unemployment. In eRepublik terms, unemployment doesn’t mean literally not employed, it means that you are forced to take a job which pays well below the value of your productivity. The number of people on a slave wage gradually grows, which means that few people can afford to buy anything other than food, which means every sector except food is forced to lower prices to make sales. And of course, the cycle of deflation continues.

But to make things worse, the pound itself is losing value against gold. Despite its value in terms of productivity increasing, excess monetary supply has forced down its sale value internationally. With the market shrinking by more than half (due to mass die-off of 2 clickers) we have seen the value of GBP plummet. This is simply because the market is saturated with it, and there is no demand for the kind of money supply we have. Coupled with this, the necessity of gold for battle and boosters has effectively drained all the non-fixed gold out of the economy.

What is the result of all this? Economic paralysis. Prices are slowly dropping, but wages are constant. Poor migration, poor management of the economy, poor understanding of macroeconomic theory, all these things have led to the slow and inevitable collapse of the entire economy module of the game. The blame for this can be laid squarely at the feet of the admins. Due to the media module being severely restricted, I’m not going to ramble on any more, lest I kill you via wall-of-text. But if this isn’t sorted soon, the short term problem of hacks is going to be nothing in comparison.

Iain Keers

Phoenix Treasurer

"Economy is the method by which we prepare today to afford the improvements of tomorrow”