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

[Azurymber]

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.

[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.

[Xatsh]

In order to get richer you have to be rich already

sounds about like real life.

[Dark-Saviour]

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.

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....

[Billie21]

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

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

[Azurymber]

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

[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.

[Azurymber]

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.

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)

[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...

[Azurymber]

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...

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.