SW:TOR will experience the first ever overnight ecomonic crash of an MMO.

[Kimiko]

SW:TOR is on the precipice of being the first MMO in history to induce an artificial recession. It's complex in it's intricacies and while it's not so dissimilar from real life economics, a few things are different, some of which make things more simple while some make things far more complex.

 

Basic Economics in Real Life

 

We are all familiar with supply and demand. In fact, whether or not we understand it, we are a part of that facet of economics. Even if our resources are provided by our respective governments and our buying power is subsidized, we become consumers with the given resources. In real life our personal wealth is obtained from working a job, investments, tax loopholes and enterprise, among other ways. All currency is issued by our respective government's central bank or in some cases a regional treasury. The rate at which currency is issued and destroyed, the actual physical currency as well as the data representing that currency, directly effects the value of said currency as balanced against other economic factors such as, credit rating, confidence and supply and demand for goods and services. It's important to keep two things in mind throughout this post -

 

There is no economic "free lunch."

 

Resources generated = economic production.

 

 

Basic Economics in SW:TOR

 

We all start out with zero credits in this game. For this point to be taken in it's entire truth, you'll need to think of yourself, the player, as a single account, not a collection of characters on that account, ergo, your new character in game may have 10K credits in his mailbox shortly after creation, but it is likely your own money from an existing character from which that money came. Sure, someone may send us money on our first character, however we will exclude that for the time being and refer to that as "player-to-player subsidization" later on.

 

With the previous point taken as a given, we can then contemplate where money actually comes from in our game world. Money in SW:TOR comes primarily from questing (looting money and items of value) and quest rewards (the items of value and the currency given upon quest completion). There are some nominal currency injections from cartel pack "credit boom" items which can't be overlooked. One can also gather crafting resources in world and convert them into currency by selling them to the game system or by crafting items and selling them to the game system. (Yes, we can sell to each other, but that comes later. For now just concentrate on actual currency injection via the game system). However, the major currency injection comes from the game system itself via questing and quest rewards.

 

Currency is destroyed when we spend money on repairs, buy items from vendors and use travel services. Some of us even pay a form of a "tax" when we list items on the Galactic Trade Network. Keep in mind, when the currency is destroyed in such a way, it doesn't get reissued by the game system in a balanced way. In fact, there is no balancing protocols in place within the SW:TOR economic system. I.e, if everyone stopped questing and doing dailies, but however continued to travel, repair items and list items on the GTN, the rate at which currency was destroyed would far exceed the rate at which it was created. There would be no correcting action taken by the game system to facilitate a balance.

 

Now For The Complex Bits

 

SW:TOR has minimal money sinks. In fact, there hasn't been a new money sink (a way of extracting currency from the system and destroying it) for months. Here's the troubling part...

 

SW:TOR is about to become the first MMO game in history to extract tens of billions of units of currency from it's game system overnight. No other game in MMO history has done this, not even games like WoW and Eve. Eve has a complex economy, however it's one that's actually managed a bit and has checks and balances. WoW's economy has declined, but it's been a slow, gradual and arguably a "naturally occurring" decline. Some may point to games like SW Galaxies as an example of an economy tanking hard. However, while that bust was indeed fast, it was still drawn out over time and for a time while the game was holding on at less than 100K subscribers, the economy stabilized.

 

SW:TOR will however have what is tantamount to an economic crash. What's worse, this crash is actually 3 crashes which will occur 3 times over the course of a few months on 19 August, 16 September and 14 October. It will be a TKO to the economy unless we take steps ourselves to correct it.

 

Why will the economy crash? Galactic Strongholds. Now, to be clear, my opinion if the impending game system is great. I love the idea, loved the experience and preview of it on PTS and I think the game needs these systems badly. However, our economy will suffer greatly for it. Overnight, tens of billions of credits will be destroyed as we pay for stronghold unlocks and guild ships.

 

 

What Happens After The Crash?

 

The day after 19 August, the wealthiest people in game will be down to their last 5-20 million credits. The middle class in game will be down to their last 1-5 million credits. And the average players, which tend to have at most, maybe 2 million credits, will be broke or near broke. Only a small percentage of players (those taking a break from the game and those who simply do not like spending money) will maintain their pre-stronghold level of wealth. And remember, there will be a lot of guilds who make obtaining a guild ship a priority and thus hitting the middle class very hard for their personal wealth.

 

Remember, if just 5 guilds on each side on any given server purchase the basic guild ship, not counting unlocks later, it will extract :sy_auction:500,000,000 from the game. Lets give a low end estimate and assume that each server only has 1,000 players who purchase 1 million credits in stronghold unlocks. That will extract :sy_auction:1,000,000,000 from the game per server.

 

So what happens? People will of course have less money. This money will, in most cases, be invested in personal luxury items like homes and guild ships. Guild ships will never pay for themselves under their current design. They are not investments, they are a tool. People with less money will now be looking for lower prices on items such as mounts, color crystals, R&R items and consumables, for example. Listing wars will ensue on the GTN. Cartel items from cartel packs will become cheaper and the rare items currently for sale will drop. However, those of you looking for a Crate-o-matic for cheap will still see them priced just out of reach for the average player. Still, prices will drop considerably. Except in one area - The price of guild ships and strongholds - and that is where the real problem presents itself.

 

The crash will effect all of us such that our personal wealth will diminish as compared to current prices. However, it will indeed scale with the fluctuating, and certainly crashing market. You will absolutely see items which were listing for 100,000 credits fall to 30,000 credits and less if some people panic. 70% price fluctuations are normal, both in times of crash and boom. In fact, during a crisis such as imminent drastic weather such as a hurricane or earthquake, it's normal for prices to jump up 70% for basic necessities like food and water. However, a Porsche will always sell for it's MSRP, no matter if the weather is bad or good. The only time a Porsche will drop in price is when it's driven off the lot or if the demand drops considerably. The point is, things which are in inevitable demand, like life-sustaining goods, will fluctuate depending on crisis and boom as well as supply and demand. Luxury items tend to fluctuate in price based on supply and demand only. High priced items will only fall in price based on the confidence of the seller in the market conditions. One of those conditions is supply. With that in mind, understand that an ST-7 Walker will not become less rare from packs. However the purchase of packs may become less rare. Packs can only be purchased by cartel coins as a matter of market injection. They end up on the GTN only after cartel coins are spent. This brings me to the final points...

 

 

How To Self-Correct The Crash

 

BioWare doesn't seem to have a team of economists to consult with or else this problem would not be upon us. The problem we face is that the player based economy will suffer a crash while the game system economy remains stable. It's as if prices for guild ships and strongholds are based on current wealth and not the wealth of future players. After the crash, the 'Earn 10 Million Credits" achievement will actually be a feat for most people. To be clear, I'm not calling for prices of strongholds and guild ships to fall. That's another debate which I don't want to engage in. However, I do want to make some recommendations for us to take and use to stabilize the economy post crash. A lot of these recommendations focus on the middle class of :SW:TOR, or our "middle class" players. Like it or not, they make up the bulk of the economy so far as sustained transactions and more importantly resource generation.

 

1) Avoid Abuse of the Middle Class/Casual Players - I've seen guilds planning (and some already implementing the scheme) to charge individuals 1 million credits to join their guild so they can buy/recover the cost of their guild ship. Don't do this. Players will be seeking guilds with guild ships, it doesn't mean they can afford to pay for it, even a little part. The best approach is to make it a guild effort to work towards a guild ship naturally, not force taxes upon current and new guild members. Driving away the casual players with schemes like taxation for amenities will harm the economy. Casual players could tend to play less and production will suffer. Be good to casuals.

 

2) Accept Lower Prices or Accept Long Term Investment - First of all, don't panic. Understand that as your personal wealth diminishes, so to will the prices within the market fall. You will still be able to afford the basics and you can still save up for that flashy status mount or that cute armor set. But what if you have an item you are speculating on like a mount or armor or a color crystal which you've invested in by spending credits or cartel coins? The fact is that you will not be able to sell your Korrealis Baron mount for 50 million credits like you had planned. In fact, you may not even be able to sell it for 25 million credits post crash, at least not for a long, long time. "But I bought my crate-o-matic for 30 million credits. I'd like to sell it for at least 30 to make my money back. It's so rare!" Sorry to say, your investment was sound last quarter, but this quarter it's not such a good idea. You can wait until Q2 of next year and reintroduce your item at your pre-crash asking price and hope that the market is stronger, but for the time being you will need to accept the lower asking price which is more realistic. However, if you did sell your item for 15 million instead of 30 million, be aware that the prices on everything will have fallen and you can scale your wealth to the new market.

 

3) Maintain productivity - Do not lose confidence in the game itself such that you "take a break" in protest. If you compare your time spent away from the game in protest versus being in game and being active, your time is better spent remaining productive, questing, raiding and participating in Guild v Guild world events than it is in silent protest while you play Minecraft or Star Citizen. You won't be sticking it to TOR or BioWare, you will just be mismanaging your wealth and losing productivity. If you know there is a chance you will come back, then don't leave. Also, be supportive of the casual player so that they remain productive. The hardcore people may have more personal wealth and time to play, but the casual, middle class players, add up and can far exceed the productivity by volume of our hardcore players. Be a wise GM and Guild Officer, maintain your casual base.

 

4) Intermingle The Classes - Even the hardest of the hardcore guild should allow a corps of casual players within it's ranks. This will promote growth in the economy and stability as casual retention on our servers will not suffer as badly as they would should we make ourselves exclusive once guild ships are available.

 

5) Remember the basics - Remember that while wealth can be generated from the GTN, the injection of currency is manifested by the game system itself. Get out and quest. Level up some new characters, do dailies, gather resources using crew skills in world as opposed to send your crew on paid quests. Reliance on GTN wealth is perfectly fine, however do not ignore farming and questing as sources of income. Lastly, don't be afraid to engage in player-to-player subsidazation. Helping out your friends goes a long way to stabilize the economy such that we retain people within the economy and increase the chance for future productivity. It's not welfare, it's community.

 

Nobody knows what will happen in the post-crash economy of SW:TOR, not even BioWare. It's not likely they will even acknowledge the issue. In fact, it's not likely that they have anyone qualified to acknowledge the issue in terms of pure economics. However, this event will be unprecedented and fascinating to live through. BioWare tends to have tunnel vision when it comes to some aspects of their game. If not, they wouldn't have a Rakghoul event going on during a real world, unprecedented Ebola outbreak. Maybe if it were in the US it would matter and thus cause mindfulness. The economics of their own game could have used review from a university economist. Things like arbitrage pricing theory, hot money (cartel coins to credits and credits to cartel coin artifacts) and consumer confidence would have been discussed and a possible market precognitive optimization scheme could have been implemented. It's too late for that now. Now, it's up to us.

 

 

Thank you.

 

- Kimi

 

 

 

 

 

I'm Interested In Your Ideas

 

Personally, just caring about the keeping the markets stable only, I would have liked an alternative method of obtaining guild ships like a massive quest line including tackling Ops content and so on. I would have also been happy with a cartel coin only method, however I like to buy cartel coins and I am in a "thriving minority" there. I also thought up an alternative currency for guild ships similar to tokens we already use as a stand alone method of obtaining guild ships. What do you think? Without resorting to bashing BioWare or getting into the tangent of RL politics, what would you have done to solve this issue, given that you acknowledged it in advance and saw it as an issue?

[RaiderMid]

I think you are overestimating how many people will actually mess with GSH let alone burn all their credits on it.

 

Even if there was a collapse. Who cares? This is a game.

[Vandicus]

See: definition of money supply.

 

Compare it to TOR where savings do not in fact make it back into the money supply and for extended periods of time might not function as part of the normal money supply in regards to price, and you've got a totally different type of economy.

 

 

In addition much of the consumption of private funds for guild ships happens in advance of the actual guild ship launch(as people are donating funds to the guild bank they might normally be using on themselves). You can already see some of this on the GTN, especially in regards to some raid mats(which I think will bounce back once people realize they're necessary for crafting in 2.9).

 

Furthermore, deflation of AH prices in an MMO really isn't a problem. It simply encourages playing more as its easier for players to buy goods than before.

[light_senshi]

I see two problems with your thesis. First off, most people will not be investing in the guild ships. Yes, I recognized them as a money sink from the beginning. It's going to affect a small group of people who have the money to spare and really no one else.

 

Bigger issue: unlike real life, the money supply is infinite.

[Zoom_VI]

Wait I thought deflation was a good thing.

Particularly if your someone who has never seen 3 mil credits ever.

Edited August 11, 2014 by Zoom_VI

[RaiderMid]

Wait I thought deflation was a good thing.

 

It is if you are the buyer. Not so much if you are the seller.

 

Edit: And if you have patience, you can be both and make a killing.

Edited August 11, 2014 by RaiderMid

[DreadtechSavant]

I think you are overestimating how many people will actually mess with GSH let alone burn all their credits on it.

 

Even if there was a collapse. Who cares? This is a game.

 

Agreed.

[Nickious]

I know this is going to sound really rude and I'm sorry, but I didn't read. This title made me a lol a alot though. Its a game. Its not likes its the real life coming of the second Great Depression.

[MSchuyler]

Didn't we JUST go through this? Uh, yes:

 

http://www.swtor.com/community/showthread.php?t=755402

 

And the answer is the same:

 

Yours is a prediction, not a certainity. Professionals have had mixed success predicting stock markets, and this is no exception. It assumes a number of factors. The primary one is demand for guild strongholds. We don't have clear statistics on the sizes of guilds, but my impression is that most of them are fairly small. These folks are not going to be able to afford a stronghold and won't be buying one. Large guilds will, of course, but the contribution for every member will be small. A 100 person guild, for example, will only need a 500K contribution from every player. For any player of consequence, that's chump change.

 

In order to have the GTN assumption work, you have to assume the 500K will come from players refraining from spending on other items in favor of a stronghold and thus have less money to spend on GTN items. If they do not have to refrain, no price adjustment will take place. The expensive pieces are guild strongholds, of course. Given that you get a personal stronghold free just for subscribing by X, there is no particular pressure because of these existing. Some of the household storage slots are expensive, but they are really not necessary. As has been explained elsewhere, these are not essential, just convenient. There are too many ways to circumvent them to make them essential to the game. Nobody is going to be expending money on decorations if they are short on mods.

 

Another issue is that of discretionary money. If necessary,people will refrain from buying fluff before they refrain from buying necessities. People are still going to need essential items such as mods, armor, crystals, crafting materials, etc. in order to properly play the game. The demand for these items won't lessen until players stop leveling. On the other hand, fluff pieces that are not necessary may take a hit. You don't really need a beast mount when a STAP speeder will get you there just as fast. A beast mount doesn't help you with stats. It's simply a cosmetic item.

 

You would thing that the CM would be in the category of fluff. there is little there that is essential, but as long as BW continues to pour money into the CM with monthly CC grants, the available funds for such things won't be going down. Accordingly, the CM is unlikely to see a drop at all.

 

The basic problem with the assumption here is that these new items will be essential. In the economy, if fuel prices go up, it will affect because fuel drives essentials like gasoline, heating oil, and electricity, which you can't do without. In these cases, the movement of money towards those items is forced. But the items mentioned so far are not essential; they're discretionary. You can play the game perfectly well without them.

 

There have been countless fortunes made and lost on puts and calls over the years. THIS is just a rumor like all the others, and if everyone panics and follows its advice, the GTN will fall TODAY as people flood the market with their stuff trying to get out early and you won't have to wait for 2.9.

[BuriDogshin]

Nope, a crash won't happen.

 

If needed, SWTOR will just do what EVE does, and what central banks in the real world do: dump money into the economy. For example, they could double credit rewards for all missions, as they did for PvP missions a little while ago. Or introduce new one-time-only missions to "celebrate" the launch of GSH and GFS, that have nice credit rewards and may just be bonuses tied to existing content (kind of like the Classic Ops weekly).

 

But even that is unlikely because, unlike in RL, there is no debt in SWTOR. No leveraged investments, no long or short positions: nothing that requires players to spend credits they might not have, nothing to create panic selling of assets.

[Infernixx]

Whole lot of presumption and assumption that original post, all of it basically boiled down to a lot of running in circles and yelling 'omg omg!'

 

I'd bother explaining why, but I'm busy with other stuff, so I'll just say that those presumptions and assumptions are all wrong and there will be people that not only survive in the new economy, but they'll be thriving.

[Sangrar]

what I honestly think will happen is yes there will be a shock in the first few days as people adjust to the new items and such but then over the next few weeks the market will adjust and everything will be as normal as ever.

[AshlaBoga]

Overnight Economic Crash? I doubt it.

 

There are 2/57 people in my guild who can purchase all 4 Strongholds 100%, 100% Legacy Bank, Flagships for both factions and the 75Mx2 to expand those, Guild Strongholds 100% for both factions.

 

So if 2/57 people have have over 400,000,000 credits. I suspect that you're underestimating what it truly means to be "rich" in TOR.

Edited August 11, 2014 by AshlaBoga

[Darth__Reaver]

Interesting read thanks. However I'm counting on gtn to crash that way I can get all the things I ever wanted

[Kaphik]

Here's a tip: you don't need to buy everything in the first few hours. The guild ships and strongholds are being passed along as pve content to us. In other words, grind, play the GTN, do dailies, whatever because this is what we're going to be doing for the rest of this year.

[-SwordSaint-]

I only skimmed the OP, but I'm not worried about a crash because A) I think most people do dailies for their money and only when they need it. If these people are wanting to participate in the giant credit sink, they'll grind extra credits to offset that

 

B) The rest of the player base, the ones who make money off of crafting, are mostly already doing just fine with credits. They might spend some extra, but they'll work to make up for it themselves.

 

In the end, I think the economy is still largely driven by dailies, which people will be driven to do more of, so I don't expect any issues.

[Pietrastor]

Overnight Economic Crash? I doubt it.

 

There are 2/57 people in my guild who can purchase all 4 Strongholds 100%, 100% Legacy Bank, Flagships for both factions and the 75Mx2 to expand those, Guild Strongholds 100% for both factions.

 

So if 2/57 people have have over 400,000,000 credits. I suspect that you're underestimating what it truly means to be "rich" in TOR.

This isn't even about the whales who always got cash (btw, whales like that are VERY limited in numbers, average TOR middle class doesn't sit on hundreds or even tens of millions like u think it does). Most have been preparing for GSH for weeks now, most guilds are either done or in advance stage of ship fundraising. There's been 1 GTN crash in TOR history - 2.0 details announcement when Molec Stab market collapsed in few hours. Same will happen if they announce something that replaces Isotopes.

Edited August 11, 2014 by Pietrastor

[Vinak]

I'm not anticipating any major changes with the economy.

 

 

• People with huge credit stockpiles will spend a few million credits on frivolous things like they always do.
  
• People without credit stockpiles will feel marginalized.
  
• Prices for some crafting resources will go up.
  
• Daily areas will be busier.
  

 

Everything should stabilize within a month.

Edited August 11, 2014 by Vinak

[AnAnonymousGuy]

I apologize. I didn't read the wall of text. As someone who has studied economics, I didn't really feel the need to read something by someone who has obviously not.

 

Something I don't think you've realized is that a lot of this money being "sunk" from the game is earmarked for that sink. People have been saving. This is not money that would have been used for another purpose anyway. Other people have had this money for a long time and would not have spent it on anything else. Many others will probably be buying the strongholds with cartel coins.

 

In short, think of this money being spent as surplus money. It's money people have earned specifically for the stronghold or who wouldn't have used it for anything else anyway. Prices may dip a little but it won't last long. If anything, the introduction of a vast array of new items will probably increase economic activity. I'm even willing to go as far as to say that we're currently playing in a SWTOR with an artificially high level of credits because of people saving for the strongholds and this will correct itself with their introduction.

 

Remember that it isn't how much money is in supply that's important. It's how much is flowing. The 2008 Crisis didn't occur because money "disappeared". It occurred because the flow of credit shutdown almost overnight. The money was still there but it stopped moving. The introduction of strongholds will not do this.

 

Finally, this game's economy is nothing like real life.

unlike in RL, there is no debt in SWTOR

 

This. This right here.

Edited August 11, 2014 by AnAnonymousGuy

[Halinalle]

OP has rather interesting way to say "OMG! Guild ships is to expensive!".

[wainot-keel]

Crash ? What does it mean it the economy crashes on this game ? We will lose our ships ? People wil have to beg for creds to pay the taxi to move from one outpost to the other ? People won't be able to raid ? Won't be able to send companions on missions ? You'll have to keep listing your Revan's set at 30mil for a few more days ? What, exactly ?

 

I wouldn't worry. Creds are infinite in the game and it's damn easy to produce them. We will be fine.

[Zoom_VI]

I feel better about the fact I don't have 'stock' in the GTN now Edited August 11, 2014 by Zoom_VI

[Infernixx]

The worst thing that will happen is the flood of complaints onto the forums about how expensive Strongholds are from people who don't have any credits.

 

Oh wait, that already happened.

[Drake_Hound]

LoL what it is a game? Lmao..

 

GTN doesn't drive the game, if there was no GTN the game would be dead?

No it would be inconvenient, but definetly not dead!

 

Simply put it doesn't do much at all then a credit sink like nar shaddaa is.

Well and it increases revenue for EA, by selling more cartel coins.

Sell along more gambling packs that consumers can buy for lower prices cause of the huge amount of credit dissapearing.

 

Seriously infact in 6 weeks game time, I was down to 2 million am back at 10 million and not even really farming credits by doing all dailies.

Honestly it just create a incentive to play the game then earn fast CC to GTN conversions at a ridiculous high prices.

But my prediction is, it will not solve the huge amount of cash flow that is still around.

Most people will not spend that much on guildships housing etc, this is based on GSF.

While a nice addition most players simply returned to the base game.

Edited August 11, 2014 by Drake_Hound

[RaiderMid]

The worst thing that will happen is the flood of complaints onto the forums about how expensive Strongholds are from people who don't have any credits.

 

Oh wait, that already happened.

 

I'm done over it. I'm poor. I'll buy 2 strongholds. Coruscant and DK. I won't unlock any rooms and use it exclusively for legacy storage.

I'll live.