Looking from the Outside In

One of the things that occasionally run in my mind is the question of who actually profited from the Great Depression of the 1930's? After all, it's not like wealth somehow just disappeared. Money, yes, but wealth is a different issue.

Part of the issue for the Stock Market crash of 1929 was excessive speculation. Stock prices just soared to record highs based on some assumption that the market could do no wrong. Then there was the economic equivalent of a sneeze that knocked down the house of cards that was built on Wall Street, and suddenly the economy went to pot.

Obviously the ones that managed to make well out of the stock market were the ones that sold at the high speculative levels then didn't return their gains until afterwards. In my mind, that fair. From a certainly point of view, trading shares on the market is much like a grand game of poker, where one tries to guess who is bluffing on value. The ones that convince others that a security is worth more or less than what it is worth do better.

But what if there are some that have an unfair advantage? In the parlance of the 1980's, it's called insider trading. As a society that attempts to inject a sense of morality into capitalism (which is neither moral nor immoral, but rather amoral), we tend to throw the proverbial book at them, and since gains almost always come at someone else's loss, this is not a bad thing for society to adopt.

Now when we look at Second Life, it is interesting to ask the same question: who is profiting off of the bank ban? If we try to look at it from the stance of naiveness, then it will be the banks themselves that are profiting. After all, they no longer have to pay interest and can blame Linden Lab for their stinginess!

Alas, customers are not stupid. (Well, most of them aren't.) They know that if a bank is no longer paying interest, it is not in their best interest for their deposits to remain in the hands of another avatar. Hence we see the phenomenon of the "bank run". This was of course what was happening in the early days of the Great Depression as banks were indeed collapsing, and some were collapsing due to the loss of operating capital. In other words, those that got out early were the ones that prospered.

But what can a financial institution do to prevent a bank run? For the stock exchanges that have not been paying interest, it should be a non-issue as they proclaim they have the funds on hand. I certainly hope this is the case, and I believe that it is. Of course some stock exchanges are connected to banks that do generate interest (which is not unusual even in RL), and some are going through the crunch of liquidating holdings in order to match deposits on record.

Ah, but there is one that is not seeing this problem. The World Stock Exchange, which is connected to an institution call One Bank, is simply closed, with their ATMs non-functional. In a general sense this isn't a surprise; other banks have at least discarded their ATM withdrawals or put low limits on them. However, what make WSE's case interesting is that they closed before the bank ban was announced!

It could be pure coincidence, but others have noted the timing of WSE's closing with Linden Lab's announcement and are highly suspicious. I personally do not like to make judgements without solid and incontrovertible evidence, but I too have to be a bit on the suspicious side.

If it is simply a coincidence, then it would be useful to have suspicions allayed. After all, rumours are the hallmark of panics in the economic realm. However, if there is something afoul, then I hope that it is exposed for what it is. Only then can we in the SL community be doing what Linden Lab is looking to impose. Voting by feet is the way economic democracy works, and it would be worthwhile to discern who does not deserve our votes.