An economic primer on how to get rich off the new housing system!

I'm sure a lot of people know this, but I'm also sure quite a few people don't. So I thought I'd explain the idea of deflation due to a reduction in the money supply and how it will probably affect the economy over the next few months. Hope it helps you make an informed decision! :]

Tempted to buy a house under the new system?
Is your FC about to spend 300-600mil?
HOLD ON A MINUTE! By saving your gil, you could become even richer!

With extreme prices, the goal of the housing market is to act as a "gil sink"
Essentially, this is a mechanism that removes gil from the game economy

Imagine that the game economy had 100million gil, split up between everyone
And suddenly, 50mil of that 100mil disappeared
What would happen?

This is called money supply in economics
And monetarists argue that reducing the money supply leads to deflation

What is deflation? It's a general decrease in the price level of goods and services.

So what does this mean for you?
If lots of FCs blow 100s of mils of gil on housing, the money supply in eorzea falls
If money supply falls, people are less willing to pay large amounts of money
So prices for everything drop!

Let's take a relevant example:
in 1.0 all gil was cut to 1/10th of its value. if you had 100mil before 2.0, you ended up with 10mil in 2.0.
What happened? Prices dropped. A LOT. In the first week or two people were still paying huge amounts of gil for items (1.0 prices). But these quickly plummeted, resulting in very few items selling for under 2mil on legacy servers.

So what will happen now?
With 100's of mils disappearing, prices will in general drop
So what's the smartest thing to do in this situation?
Not give away your 300-600mil.
Why?
Because a month from now it may buy you TWICE as much or more.
While you still may only have 300-600mil, its real value will have increased, as it will be able to purchase considerably more items.

So ask yourself which you would choose
Lose 300mil and get a house
Keep 300mil and in a month or 2 have it be worth twice as much (e.g. get 300mil free)

Put another way, the cost of a house isn't it's listed price. You need to take into consideration the opportunity cost (the amount of extra value you are losing by spending your 300mil now)
So the cost of a house may be double what you are actually seeing (in real terms)

This also means once you spend your 100s of mil, it will be -a lot- harder to make that gil back, as selling items on the AH will net you considerably less.

If you don't absolutely need a house, saving your money while others spend theirs can make you and your FC filthy rich! And since housing prices are supposed to go down, you can always get a new house months down the road, at a much cheaper absolute price.

So you're saying to get rich you have to be rich in the first place.

At least I know where I went wrong. Good Primer.

In order to get richer you have to be rich already

sounds about like real life.

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Originally Posted by Thagyr

So you're saying to get rich you have to be rich in the first place.

At least I know where I went wrong. Good Primer.

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This.

Hoarding my 30K gil doesn't seem like it'll accomplish much... >_>

And if you're not going to put your money towards a house... What would you buy?
I mean, in my case, I'm grinding luminary tools, sure, but other than that....

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Originally Posted by Thagyr

So you're saying to get rich you have to be rich in the first place.

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No, it simply means that saving your money right now, equals to increasing your wealth.

I'm saying if you are able to afford a house (as an fc), you can skip the house and double the value of your investment.
Imagine if someone told you tomorrow you could either by an xbox one/ps4, or wait 1 month and then get that xbox one/ps4 free

Put really simply. If you can afford a house now at the very high prices, you can probably get a house "free" just by holding onto that money.
If thats a bit confusing think of like this:
you can spend 300mil for a house today (and if you spent that 300mil on items instead today you could get 50 top-tier peices of equip)
or you can wait a month or 2 and then buy a house, and the leftover money you have would buy you 50 top-tier items (or you could get 100 top tier items and no house)

Even if you don't have much gil now, holding onto that money in a system like this is almost guaranteed to see it go up in real value (e.g. items you buy will become cheaper so you will be able to afford more). It also means that it might be a good idea to sell things now at high prices before they drop (you will get more gil than you could get a month from now, and that gil will buy you twice as much as it would today)

This is all assuming that lots of FCs spend millions on houses
And that there is no new "huge" input of gil (e.g. fate or dungeon rewards) that matches what is being spent on houses.

So even if you have only 30k, that 30k may buy you twice what you could currently buy a month or 2 from now

unless noone buys large houses lots of money is going to vanish. seeing even at half price its like 50mil xD 300mil at half price on legacy and thats the lowest they go. sorry just blow your cash so they can drop the beginning price to a much better number k. not giving into the money sink is the problem if we only add more and more money and don't get rid of it and when i say rid i don't mean buying and selling to actual players i mean to npc's so the money is actually gone more things like this happens. less money means lower prices = good there is nothing to actually buy that you need so ruining the economy because you wanna have a large gil total screws everyone in the end.

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Originally Posted by Musashidon

unless noone buys large houses lots of money is going to vanish. seeing even at half price its like 50mil xD 300mil at half price on legacy and thats the lowest they go. sorry just blow your cash so they can drop the beginning price to a much better number k. not giving into the money sink is the problem if we only add more and more money and don't get rid of it and when i say rid i don't mean buying and selling to actual players i mean to npc's so the money is actually gone more things like this happens. less money means lower prices = good there is nothing to actually buy that you need so ruining the economy because you wanna have a large gil total screws everyone in the end.

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Sadly lots of people know this trick and are more interested in gear
Quite a few people i know will not be investing any gil in houses
So i posted this to give others and equal chance
People who blow their money now will have a hard time buying things in the future. people who save their money will have a significantly easier time

I'm not telling anyone -what- to do. Just explaining the situation so people can make a reason-based choice (rather than a herd-based one)

I don't like it when laymen speak of Economics. It irks me, because they always make their point excessively long winded.

Don't except a big drop in prices. Most of it will be concentrated on the expensive itens and even then...

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Originally Posted by Toranja

I don't like it when laymen speak of Economics. It irks me, because they always make their point excessively long winded.

Don't except a big drop in prices. Most of it will be concentrated on the expensive itens and even then...

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I have a degree in it and run a company o_o sorry.
And given that FCs have 300mil+ saved up that could buy them at minimum 150 "top-tier" items on a legacy server AH (2mil or less each). That alone is a pretty clear indicator
The fact that people never expected prices to be this bad is an even better one (it means FCs will have to get donations from members who would have otherwise spent the money) to pay for the houses. So that coupled with the previous point is a very clear indicator of deflation.

Or nobody bothers buying a house and the prices of everything stay the same.

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Originally Posted by Merciless

Or nobody bothers buying a house and the prices of everything stay the same.

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This + new ways to Make Gil = some inflation.

Actually I'm less worried about inflation and more worried about recession.

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Originally Posted by Dyvid

Actually I'm less worried about inflation and more worried about recession.

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Recession can be caused by both inflation or deflation.
You can't really have a recession in game because it's based on investments and loans and GDP (which are not in ffxiv)

So you're probably thinking of deflation

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Originally Posted by Azurymber

I have a degree in it and run a company o_o sorry.

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On the Internet, no one knows that you're a dog.

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Originally Posted by Baneus

On the Internet, no one knows that you're a dog.

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i'm a cat, can't you tell by my display pic and the "mew" in the comments? callin me a dog! so animalist!

This would've been fine and dandy ... if the assumption that gil was worth anything was true. Let's say you hold off on your big housing purchase. What are you going to spend your gil on? The markets have been declining since launch because everyone has access to everything; you merely pay for convenience/laziness. Gil is worthless outside of housing at the moment. Thus, you don't actually gain any value even if gil in the system is reduced.

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Originally Posted by Azurymber

Recession can be caused by both inflation or deflation.
You can't really have a recession in game because it's based on investments and loans and GDP (which are not in ffxiv)

So you're probably thinking of deflation

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Not really! The game has no item decay system like in real life! that is your true GDP.

Crafting nets nothing now and after 2.1 it will become nearly impossible to make a decent coin! Gil will be constantly taken out of the game more than the server can replenish from housing, repairs, transport and other stuff.

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Originally Posted by Lyrinn

This would've been fine and dandy ... if the assumption that gil was worth anything was true. Let's say you hold off on your big housing purchase. What are you going to spend your gil on? The markets have been declining since launch because everyone has access to everything; you merely pay for convenience/laziness. Gil is worthless outside of housing at the moment. Thus, you don't actually gain any value even if gil in the system is reduced.

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When new content is released with items that are worth something you would have considerably more than others and thus it would be relatively cheap to get high demand stuff.
But of course you are right, if gil will never have any use outside of housing, might as well blow it on a house.

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Originally Posted by Atheena

Not really! The game has no item decay system like in real life! that is your true GDP.

Crafting nets nothing now and after 2.1 it will become nearly impossible to make a decent coin! Gil will be constantly taken out of the game more than the server can replenish from housing, repairs, transport and other stuff.

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I don't understand sorry.
If it's nearly impossible to make decent coin
and money keeps getting taken out of the economy
then you have deflation (prices go down) and any money you saved is worth more.

I don't get the GDP comment.
Recession is based on GDP, employment, investment, bankruptcies, business profits, etc
None of that exists in game

However if the game had that then yeah you would get a recession
Or if you're arguing that the inability for people to make gil is equal to a recession i guess that is pretty legit

But in that case, saving gil now is still the best option (as you wont be able to make it if there is a 'recession' and people will be desperate to sell so prices will plummet)

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Originally Posted by Azurymber

I don't understand sorry.
If it's nearly impossible to make decent coin
and money keeps getting taken out of the economy
then you have deflation (prices go down) and any money you saved is worth more.

I don't get the GDP comment.
Recession is based on GDP, employment, investment, bankruptcies, business profits, etc
None of that exists in game

But in that case, saving gil now is still the best option (as you wont be able to make it if there is a 'recession' and people will be desperate to sell so prices will plummet)

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There will not be enough gil to supply the servers! Yes prices will bottom out on items, but if every person on the server is flooding the market with stuff, how in the world can smaller FC's on these Legacy servers even afford the basic of stuff? After the 50% reduction @ 90 days it is still alot of gil the player base. Remember we are all fighting to sell stuff!

This would be a great idea if there were any "top tier" items to be bought in game. All the highest ilvl gear is gained through coil or myth for pve; pvp gear may be an exception to this but frankly it will most likely be vastly overpriced while everyone is trying to gear up their own characters. Also the highest ilvl pvp gear requires you to be max pvp rank to wear and if you're getting to the highest rank you may as well save for the gear that you need.
Also there are more gil fountains being added to the game, and no gil sinks that I can see besides housing. As far as I can see this means that the server will just be able to generate way more gil than the economy can sink making gil pretty worthless.
So while your gil may be worth more if you don't buy an fc house, there's nothing to spend that money on(besides a house).

The whole point of the original post is based on the unwritten rules of economics. If you buy something immediately, you're being punished by spending the full price due to wanting to buy it right then. If you wait for a price drop, you're rewarded by not having to spend as much money.

Has nothing to do with being rich. But in the case of housing, it does require the examples to take on those ridiculously expensive figures just to make sense in context. But it could be applied to real life, too. Buy a PS4 now? Or wait six months and buy it for half the price?

I'm certain that Yoshi and company have been devoted to decreasing the gil in circulation from the start.
They chopped it to 1/10th on launch and it has continued to decrease rapidly ever since.
Market taxes and teles far outweigh the gil pumped in by quests and have done so for months now.

The 5% x 2 flat rate in the markets is a great way to slowly equalize the richer legacy worlds with the new ones.
But i think the patch notes elude to the fact that this did not happen as quickly as intended.

The high housing prices are just another element to that. Gil will continue to be stripped out of the economy until the value of a single gil is near the value of GATH's 1 gil ... but as we know from Gathenomics, our gil will never be worth as much as his.
Me, personally, i'm saving my gil. Up to 39mil now.

The price only falls to 50% and since the costs on some server is astronomical it's pretty much meaningless. Even if you can somehow flip housing life real life (which I seriously doubt), very few people is going to have the capital to do so, not to mention even if you could do that you're still liable to lose most of your investment just like a real housing bubble.

The only way to get rich in this mess is to be the guy who is supposed to buy the housing deed and just run off with the money.

[QUOTE=Azurymber;1669329] snip

My FC has 7.9 mil saved up and we are not spending it on the small or medium, we are going for the largest and best, but you know what we are not spending a dime on anything we craft our own stuff and farm our own stuff.

If players dont buy the FC lands like Yoshi thinks they will sooner or later lower the price anyways, but I could be wrong he could just never lower the cost. The later is more likely to happen as he is determined to take even more gil out of the game. Regardless the economy sucks, as most items that are crafted are useless and if you can sell something it is normally materials but again things are dirt cheap might as well farm instances for gil.

Very informative. Thank you very much.

There is litteraly nothing to do with gil once you hit endgame coil though. Buy food? Can't get any good crafted gear and if your sitting on 300+million gil the crafted accessories and incurring melds are a drop in the bucket and probably something you allready have gained.

Legacy servers actually seem to have much LOWER prices of goods than the lower tier servers. Hell most items are half the price you see on non-legacy.

Potash-Coke-whaever on Aegis is sub 10k, Lich it was 22k.

nothing will fix anything until there becomes a better purpose to the actual game resources outside gear....... under cutting is so bad its just sad gil sinks or none ppl have killed the markets

Lets not ignore the fact that money is nearly pointless in game.

Luckily they are also increasing the money supply by increasing gil rewards from various tools players have. For example, dungeons that previously didn't have gil drops will have gil, leves are getting a bigger gil reward, treasure hunting events, etc.

We don't know what data SE currently has on the money trend, but from the public outcry on the forums it seems like a large majority of gil in circulation is sitting with a low percentile of players. Hopefully housing gets the money moving again or out of the markets to force equilibrium again.