The Economist ~ The Economy is sick...again.
Day 949, 10:03
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Published in United Kingdom 
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by
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by Spite313
Please help the Economist: Vote and Subscribe
Dear Friends,
I wonder how many of you remember this? A few months ago, a major fault in the Economy module came to a head when manufacturing wages and prices started to find themselves in an inescapable downspiral which began to suck the whole economy into recession. Fortunately for the UK, a combination of government actions and admin changes to the hospital system saved the economy- for at least a few months. However, the problem was not removed, only delayed. Productivity globally continued to rise, as did average skill. Even considering the huge increase in house purchases and food purchases, citizens are starting to produce considerably more than they consume once again. In addition, the citizen intake has been drastically reduced. Indeed, we are losing citizens globally. This means that the pressure valve for the system- new citizens who buy a lot, then die- has been removed. And it’s obvious that the job market is suffering as a consequence.
Months ago, I advocated a three part plan to stimulate the economy from government side. Firstly, we devalued our currency by four points, which forced a lot more GBP into the market, providing lubrication to businesses and citizens, and meaning that skill 1-3 people were employable. Without this measure, there would be no profit employing anyone under skill 3, as their labour was only worth £1.
Secondly, I advocated a range of government spending initiatives with the currency we made from devaluation. This essentially meant we stockpiled in all our military companies, instead supplying them from the market. This drove up the price of weapons (and food), to a level which we pre-determined by putting 1000 guns on the market as a holder. I believe that amount was around 0.1 gold, or £3.85, which was competitive internationally. By doing this, we made temporary profits for our companies whilst reducing the peg simultaneously. This meant that our companies could remain open and provide jobs for workers, whilst the recession was active. It also meant they could increase wages, on the premise that this would also raise private sector spending. In short- we took over the entire UK economy for several weeks to make sure that it didn’t collapse wildly out of control.
we were panicking a little bit I admit
Finally, we launched a public awareness campaign about the necessity of spending currency and not gold. Without currency, the economy fails. It is what gives everything value, and as gold becomes stronger and stronger (in real times value vs productivity) it hurts our currency. The only response to this is to spend currency. Buy guns, buy higher quality food, buy housing from the marketplace. Company owners- buy gold with your profits, but buy it from the government. PM the Bank of England directly and request it. Then use the gold to upgrade your companies. Do this for two reasons: firstly because higher Q companies use more productivity per unit, and are easier to sell internationally; secondly because upgrades will be far more expensive in V2, and so it’s best to do it now.
Some of you are probably wondering what the actual cause of this is. In the article I linked in the first sentence I explain briefly why our economy suffers due to an imbalance between consumption and production created by the admins. My analysis is Keynesian, but most of you probably recognise that it’s a valid one, regardless of your own economics. I’d like to go on from that to talk about why the gold-GBP exchange rate is not only deceiving, but virtually worthless. Sometimes people ask me, does having a strong currency make your economy stronger? Having analysed the top 20 economies in eRepublik for nearly a year now, first as UK Minister of Trade, then as Phoenix Treasurer, I can say that it has very little effect. A very strong currency is actually harmful. So long as your currency remains very stable the actual peg isn’t that important.
[img]http://4.bp.blogspot.com/_9Gsu_hMGnVk/SYvb4YdlUaI/AAAAAAAAFQ0/ToNEqCuKDNA/s400/Don%27t+Rock+The+Coney+Boat+Baby.JPG[/img]
The Boat: Don’t rock it
What is important however is the value of productivity. Nearly all items correspond in value to their productivity. This is because the cost of an item constitutes the cost in productivity for producing that item, added to the cost of the raw material needed to produce it. So:
p+r = c
Where p = productivity, r = raw materials cost, c = cost of production
This essentially means that the cost of a product is measured in productivity, not in currency. And productivity can be measured against currency because productivity is created by workers, and workers are paid. So if a worker has 10 productivity, and they are paid £5, the cost of one productivity is £0.5. This seems elemental, but a lot of economics in erep is based around exchange rates which have no relevance. The only real measure of economic strength is the productivity of its workers, and the purchasing power they have. In the last thirty days, the value of productivity has almost halved due to excessive production in all industries. The cost of Q3 food has dropped in the UK from 0.07gold to 0.035 gold in under 20 days. This has been matched by a similar drop in wages.
FFFFFFFFFFFFFFFFFUUUUUUUUUUUUUUUUUUUU UUUUUUU
The problem is that this drop isn’t something which will level out. It will continue to drop so long as productivity remains higher than consumption, which is to say as long as the admins continue to use terrible formulas. V2 is only around the corner, so it seems they have completely given up on V1. As my friend jamesw said in IRC, “Keers, manu wages are about to implode”. And it is true- we are just a few days away from wages making low skills unemployable again.
The government is now in discussion on how to respond. Initially, I think that the best solution to this crisis would come from citizens. Those companies and individuals who are sitting on more than a hundred GBP should think about spending it. Buy guns, buy decent food, buy gifts, buy a house, buy gold, buy anything. It will help support our national economy. The government itself is considering which of the many crisis alleviation methods are the cheapest. Last time it was talked about that the government may need to expand skill 0 companies to cover skill 1 & 2 as well. A this stage the huge number of empty companies the government has may make this the cheapest solution to what is inevitably going to be an expensive problem. In conclusion, if you have money, spend it. The government will support your actions with its own, and we’ll pull through again. Remember, whatever your skill, this effects all of us equally.
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Dear Friends,
I wonder how many of you remember this? A few months ago, a major fault in the Economy module came to a head when manufacturing wages and prices started to find themselves in an inescapable downspiral which began to suck the whole economy into recession. Fortunately for the UK, a combination of government actions and admin changes to the hospital system saved the economy- for at least a few months. However, the problem was not removed, only delayed. Productivity globally continued to rise, as did average skill. Even considering the huge increase in house purchases and food purchases, citizens are starting to produce considerably more than they consume once again. In addition, the citizen intake has been drastically reduced. Indeed, we are losing citizens globally. This means that the pressure valve for the system- new citizens who buy a lot, then die- has been removed. And it’s obvious that the job market is suffering as a consequence.
Months ago, I advocated a three part plan to stimulate the economy from government side. Firstly, we devalued our currency by four points, which forced a lot more GBP into the market, providing lubrication to businesses and citizens, and meaning that skill 1-3 people were employable. Without this measure, there would be no profit employing anyone under skill 3, as their labour was only worth £1.
Secondly, I advocated a range of government spending initiatives with the currency we made from devaluation. This essentially meant we stockpiled in all our military companies, instead supplying them from the market. This drove up the price of weapons (and food), to a level which we pre-determined by putting 1000 guns on the market as a holder. I believe that amount was around 0.1 gold, or £3.85, which was competitive internationally. By doing this, we made temporary profits for our companies whilst reducing the peg simultaneously. This meant that our companies could remain open and provide jobs for workers, whilst the recession was active. It also meant they could increase wages, on the premise that this would also raise private sector spending. In short- we took over the entire UK economy for several weeks to make sure that it didn’t collapse wildly out of control.
we were panicking a little bit I admit
Finally, we launched a public awareness campaign about the necessity of spending currency and not gold. Without currency, the economy fails. It is what gives everything value, and as gold becomes stronger and stronger (in real times value vs productivity) it hurts our currency. The only response to this is to spend currency. Buy guns, buy higher quality food, buy housing from the marketplace. Company owners- buy gold with your profits, but buy it from the government. PM the Bank of England directly and request it. Then use the gold to upgrade your companies. Do this for two reasons: firstly because higher Q companies use more productivity per unit, and are easier to sell internationally; secondly because upgrades will be far more expensive in V2, and so it’s best to do it now.
Some of you are probably wondering what the actual cause of this is. In the article I linked in the first sentence I explain briefly why our economy suffers due to an imbalance between consumption and production created by the admins. My analysis is Keynesian, but most of you probably recognise that it’s a valid one, regardless of your own economics. I’d like to go on from that to talk about why the gold-GBP exchange rate is not only deceiving, but virtually worthless. Sometimes people ask me, does having a strong currency make your economy stronger? Having analysed the top 20 economies in eRepublik for nearly a year now, first as UK Minister of Trade, then as Phoenix Treasurer, I can say that it has very little effect. A very strong currency is actually harmful. So long as your currency remains very stable the actual peg isn’t that important.
[img]http://4.bp.blogspot.com/_9Gsu_hMGnVk/SYvb4YdlUaI/AAAAAAAAFQ0/ToNEqCuKDNA/s400/Don%27t+Rock+The+Coney+Boat+Baby.JPG[/img]
The Boat: Don’t rock it
What is important however is the value of productivity. Nearly all items correspond in value to their productivity. This is because the cost of an item constitutes the cost in productivity for producing that item, added to the cost of the raw material needed to produce it. So:
p+r = c
Where p = productivity, r = raw materials cost, c = cost of production
This essentially means that the cost of a product is measured in productivity, not in currency. And productivity can be measured against currency because productivity is created by workers, and workers are paid. So if a worker has 10 productivity, and they are paid £5, the cost of one productivity is £0.5. This seems elemental, but a lot of economics in erep is based around exchange rates which have no relevance. The only real measure of economic strength is the productivity of its workers, and the purchasing power they have. In the last thirty days, the value of productivity has almost halved due to excessive production in all industries. The cost of Q3 food has dropped in the UK from 0.07gold to 0.035 gold in under 20 days. This has been matched by a similar drop in wages.
FFFFFFFFFFFFFFFFFUUUUUUUUUUUUUUUUUUUU UUUUUUU
The problem is that this drop isn’t something which will level out. It will continue to drop so long as productivity remains higher than consumption, which is to say as long as the admins continue to use terrible formulas. V2 is only around the corner, so it seems they have completely given up on V1. As my friend jamesw said in IRC, “Keers, manu wages are about to implode”. And it is true- we are just a few days away from wages making low skills unemployable again.
The government is now in discussion on how to respond. Initially, I think that the best solution to this crisis would come from citizens. Those companies and individuals who are sitting on more than a hundred GBP should think about spending it. Buy guns, buy decent food, buy gifts, buy a house, buy gold, buy anything. It will help support our national economy. The government itself is considering which of the many crisis alleviation methods are the cheapest. Last time it was talked about that the government may need to expand skill 0 companies to cover skill 1 & 2 as well. A this stage the huge number of empty companies the government has may make this the cheapest solution to what is inevitably going to be an expensive problem. In conclusion, if you have money, spend it. The government will support your actions with its own, and we’ll pull through again. Remember, whatever your skill, this effects all of us equally.
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Comments
Voted
A very informative article
Voted as always, another informative article.
Iain Keers good article however
in v2 you should change your newspaper name to "the militarist" because there wont be anymore any economy at erepublik v2...
and also could you write an analize article about economic future of eWorld at v2?
More like "The Goldsmith" Muhtar 😃
I will do one soon, but a lot of the formulas haven't been released yet to us mortals, so it is mainly guesswork.
Good read. Easy to understand.
Nice article as always 😛
You remember how everything went mad between when Lana was introduced and before the new hospital rules?
V2 has 5 Lanas, and the old rules apply again. Good luck preparing for that :/ At least the war should help 😛
As always a top quality article, quite how you can only have 1500 Subs is beyond me.
@daniecox, I know mate. It's a mess. I have been thinking about it though, and it's lot all doom and gloom. We'll just have to see what the admins do when the dust settles.
@Starbuck50000 thank you 🙂
well "the euronomist" more better 😃 because there wont be any gold at the game if that 4*lana will go on that way...
the Lana Cloning project is rising 🙁
Muhtar if you pay 2g your comment will be twice as delicious
article voting button = 0.2gold.
comment button= 0.5 gold.
well good idea if I were an admin 😃DDDD
nationalise everything
I second bowen199
Beyond that, good article.
Im am now geting MORE money on my army job then I would in a normal, and I am skill lvl 4 :/
nice vote
@Sir Mic
Nationalised industry wins again 😛
but seriously it is a mess I know
Voted and subscribed 🙂 Brilliantly thought out article that answered some of the questions a newbie like myself had about the game. Seems I joined at just the right time to see it all hit the fan 😛
Easily the best journalist in the UK.
i miss this kinda stuff...
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well the economy in the UK will always go up and down - how bout you try to create a advertisement campaign that the UK is the place to go if you are just starting out (maybe steal them from other countries with baby booms such as the poleski giant) If you use this idea make sure it seems like the UK is really really friendly place to be.
Point one, nationalise everything.
Point two, devalue GBP.
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Voted!
Nice Work Keers!