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.
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.
