Runescape 2011 - The Great Deflation

Many people have nudged me on MSN and asked, "R2Pleasent, what is going to happen to GP prices in the new update?" This question seems very simple at first glance... There will be no labour costs in GP sales, so prices should drop. And of course, to some degree this is true. Right now part of the price people pay for gold is the actual skilled trade of transferring it between accounts. In a Free Trade system, this will no longer be necessary, and therefore this cost will be completely removed from buying/selling gold.

However, there are a lot more factors at play in the transformation towards Free Trade. Some of them are out-of-game (Decreased Labour Cost, Rising Price of GP), and some are also in-game (Deflation, Abolishment of Fixed Values on Items).

First, let's examine the basic out-of-game effects of Free Trade. Labour cost will fall, but GP itself will also rise. This is quite intuitive; right now GP is extremely difficult to move, and therefore has a low price. When GP is easy to move, it becomes a much more liquid asset (easy to buy and sell), and therefore becomes more valuable. So, there will be a balance of GP itself rising in price, and the reduced (or zero) labour costs for transferring. These are pretty straightforward and simple.

Now, the complicated factors which will affect GP prices are the ingame ones. When Jagex removes the Grand Exchange values for items (which is the essential idea behind Free Trade), the Runescape Economy will be strongly affected. Right now, items which can be sold on GE are basically the equivalent to Gold Pieces; they are currency. Nobody cares if you trade them a BGS valued at 16M in trade screen or 16M gold, since you can sell the BGS instantly for the 16M value. However, with free trade, items no longer are as liquid as Gold Pieces. Prices are not predetermined. This on its own means that GP will be much more highly demanded, as it will be required for nearly all trades, as it was in pre-trade limit (2007 and earlier).

The items with the largest effect will not be regularly used ones like a BGS or Dragon Bones. They will be the items which have basically no utility in-game. The 100,000 Earth Talismans in your bank, the 10M Cleaning Cloths. These are items that have been given a fixed value by Jagex, and therefore have become a sort of currency in the GE system. These items will be WORTHLESS when Free Trade comes out. And the impact of this change will be the driving force behind a deflation in the Runescape economy.

"The definition of deflation is when asset and consumer prices continue to fall." This is caused by the amount of wealth in Runescape being DECREASED. Because all items in the old system were basically currency (even junk), the impact of removing these items' value will have a MASSIVE effect on all prices throughout the game. Expect to see all commonly used items fall in value; it is actually already beginning now. Items like Dragon Bones, Abyssal Whips, Bandos items, Dragon Claws... They're all slowly declining.

Is this necessarily a bad thing? Not really. Most items are inflated way above their true values in the GE system. GP has been devalued in the process, and real $ prices have hit record lows. This update will increase the value of GP in-game, and therefore increase its value in RWT as well. This will not be a rapid process, rather it will take place gradually. Already over the past week, the majority of websites and GP sellers have increased their prices. Expect this to continue as the economy in Runescape adjusts towards a new system in which items are no longer treated as currency. The amount you spend should end up buying you the same items as before.

In conclusion, there is much more at play in this system than meets the eye. Expect item prices in-game to drop in GP value, and expect GP value to rise as a result.

 

I would have thought that something easier to move would be less valuable, but I'm not going to disagree due to your vast experience in this field. I'm just keeping my fingers crossed that the price of a Bandos Chestplate isn't going to rise above 20m gold at the time I purchase it. Thanks for the great post though

 

Thanks for this
I, aswell as many others already knew this, and told people that GP prices ( In USD ) won't drop, but they wouldn't believe.

Maybe they'll believe you >_<

 

Awesome thread man, makes sense too. GP itself has no value, it's value is determined by how much stuff you can buy with it. If 100 million gp can buy you a certain amount of gear, and the prices on that gear drop to half there value so that only 50 mil gp will buy it all, then that 50 mil gp should still cost the same in IRL dollars because it gains you the same advancement in the game, the same combat advantages, the same stat boots, ect.......

Also, there is ALOT of junk that will be worthless after the update, eventually people will stop trying and just drop it or let it sit in there bank and mock them for not ridding themselves of it before the update. Whatever they do, it will virtually be removed from the economy because nobody will be buying/selling it.

I do have one question for you though. IF Jagex brings back old wilderness and free trade 100% so that wealth can be transferred via trade or staking without the need for a xfer method, would you or the other gold sellers be willing to share your now out-dated useless xfer methods? I am happy about this update as it will allow me to sell gold once again without the need for a xfer method, but I am still curious as hell as to how you and other prominent gold sellers ran your "Instant xfer gold!". If you do not want to disclose it, thats fine but figured I'd ask as things like that interest me, clever plans to beat the system, plus I spent many a night looking at prices, rs shops, different items trying to find out a decent xfer method to use, so Im curious, LOL.

 

I can agree with this, but I also disagree too. I believe that having an established GP value for items through the GE is important. Like you said, it establishes the items as currency themselves. Once these values are removed, there is nothing that determines what an item is actually worth. As demand goes up with the increase of players of RuneScape, so will item prices. Eventually, items will cost more than they ever should. I believe the RuneScape economy will experience inflation. A perfect example is the US economy. There is nothing that physically backs the worth of a dollar, and because of demand, prices are going and will continue to go up.

 

I have a question for you

will rwt be easy as before?

I mean can you sell some gold from your account to another account without getting caught or you will have to do a fake stake (let's say if you are the seller you will lose the stake on purpose..)


and how much do you think 1millionrsgp will be sold for $?

 

Reading this and then going and reading real world examples of this have shed new light upon the situation for me. The amount of 'currency' in the game is going to decrease (deflation) but my predictions will still not change. I am still holding that the price will see a small drop for the first few weeks to months. Reasons why? Because you will have more competitors in the gold selling market because of the new ease of transfer and they will wanting to make money and will undercut the large sellers to make their quick and dirty money, but after this small drop I believe you will see a rise in prices. I do not believe they will become comparable to those in 2007 because of the state of the Real Life economy, but I do have to say that as in my other predictions it is all up into the gold sellers hands. They will decide what the price is ultimately because they will control the large portions of the wealth and will only delegate it to those that pay the premium for it. The ultimate sellers (such as yourself R2) are the final deciding factor in the equation of gold prices post update.


sources: http://www.friesian.com/money.htm

 

If you trade nothing for 50m gold and get reported, they will see that and know it was RWT. theres no reason anyone would give you 50m for free. As you said, a fake stake would probably be a safer option, of course with you risking something too and the seller intentionally losing.

 

Well said r2p. Here's my reasoning why there's going to be deflation:

There is a constant cycle in the economy of gold-creation and gold-destruction. Usually there is more gold-creation occurring, and so the gold supply tends to increase on net.

If the gold supply is increasing faster than goods are produced, there tends to be inflation (too much money chasing too few goods). For example, PvP introducing billions of gp into the economy.

But sometimes the opposite is true, and that is deflation. If gold-destruction outpaces gold-creation, there can be a fall in the money supply. How is gold destroyed?

The removal of the PvP system and the introduction of the old wildy. Now that there isn't going to be anything new introduced to the economy, there will be less money to be made and usually that means cheaper prices.

 

Thank you R2. I've been getting tired of people who have no knowledge of economics coming in with their theories that make zero sense. This should be stickied and renamed the official economy discussion topic lol. Something you missed that will also have a huge effect on the amount of GP coming into the game is the removal of PVP statues after the FT/Wildy update. That itself should cause a fair bit of deflation . That and the old PVP system returning, where the items you lose don't just magically disappear into the abyss of nothingness should have a pretty great effect on the supply of items such as barrows, bandos, dragon claws, furies, etc.. basically anything that's somewhat hard to obtain, and is commonly lost in PVP.

 

Same but have to listen to 'The GP King' you know? we'll see when it happens.

 

exactly what I expected

also, when BH/PVP came out, it had a massive effect on the amount of gp coming into the game. instead of pking a whip in old wild and getting it as loot, where one whip stayed one whip. it was now possible to get whips and loads of other items without one being removed from the game.

 

People selling personal supplies of gold will undoubtedly increase, however, so will the amount of buyers. Purchasing GP right now is very intrusive; the seller requires your login, password and bank pin. Rest assured that many prospective buyers are put off by this requirement, and will be much more inclined to purchase in a free trade system. There are many people out there who feel that RWT isn't even possible right now. Runescape players who aren't regulars on Sythe.org believe for the most part that gold buying does not exist on the current GE format. So, especially over the long term, these two should more or less even each other out.

 

Great post will. The fact that transferring and the time spent for moving GP will no longer was one of the main reasons why I believe cash will rise as well, I dumped almost all items that I am holding outside a few rares and now just have stacks sitting in my GE slots, ready to take advantage of the increase in GP price.

One of the other things you might not have seen in the demand for GP will go up the introduction of staking. It is an addictive sport, and no doubt will fuel the demand for GP in a huge way.

Great post!

 

That is a great point, the price is going to take quite a while to stabilize though if my guess be true. You have to weed out those people who aren't constant sellers and then the rush of buyers steadily increase since the ease of transfer. I hope this will be good for the community also, bring in more faces but you also have the increase of the possibly of scamming. The is a great thread none-the-less. Straight from the mind of the 'Gp King'.

Thanks,
Nero

 

Just because someone gains millions for nothing doesn't put a neon sign above their head saying "rwter here". I know plenty of wealthy people who plan on giving mils to their friends who have lost things during this whole period of no old wildy/free trade. Of course those trades will probably be looked into more but it's not a guarenteed 'trouble mark'.

Jagex plans on keeping the G.E. and it's "mid" prices to give players a rough idea of item values but will take off the upper and lower limits to allow anyone to sell/buy items for as high/low as they want to.

 

R2, do you have a guess on what gold prices will go back to? Im thinking like 2.50-3

 

Great post R2, We should go into business together!

 

Very good post and 100% correct the prices have been inflated since he came out way beyond what they used to pre 2007, back before the ge the players determined the prices and overall the economy was extremely stable prices of items didnt really flucuate unless an update or for santas when christmas came around. I think it should go back to something like this which is much needed now adays probally the best thing to do is sell you items for cash if you dont wanna lose a lot.

 

It's very hard to speculate on what prices will eventually settle at. $3.00/M seems insanely high right now; but if we look back only 7-8 months ago it was a regular price for many sellers. The market will sort these values out over time, right now all I can estimate is what direction they will go.