Buying into Inflation: Get it while it’s Hot!

Nearly every market in existence has what we will call a “gold sink” — a way of pulling currency out of the market, coined from the “sinks” we see in virtual markets. In actual markets, you can treat taxes and fees as the sinks. In virtual markets, however, you have planned and intentional periods of deflation — and there’s a good bit of money to be made off them.

Gold sinks in virtual markets are the only means of trimming inflation, which inevitably happens as a community advances in progression and buys up all the one-shot sinks. In World of Warcraft, prices have already been comically inflated by about 20 percent since the launch of Wrath of the Lich King (going off the canonical Cardinal Ruby price, of course), and have risen by at least 500 percent since the game launched.

From that, we can guess that inflation rates in virtual markets are pretty much mind-blowing. The yearly inflation rate, going off just face value for the data, would maybe float around 100 percent each year. Of course, that isn’t quite how it works — seeing as the virtual economies receive a massive overhaul and reinvent themselves each time a new expansion pack launches.

With expansions come a fresh set of sinks, and it ends up forcing both direct and indirect periods of deflation within the first six or nine months of the expansion’s launch. The direct inflation comes immediately after the expansion’s launch, as players are forced to divert their funds to the sinks in order to get a hold of the advantages they offer, such as faster movement speed and better equipment.

But for the three months or so in advance of an expansion, a psychological deflation has a tendency to slap virtual markets in the face as players tighten their belts and get ready to save up for the upcoming sinks. The mentality is kind of self-defeating, as sometimes the best value purchases can be made here and actually increase your production capacity when the expansion arrives.

This is the absolute worse time to be holding any salable goods — not even the Cardinal Ruby. No commodity is safe, no consumable is safe. In advance of Wrath of the Lich King, we saw prices of commodities slam into the ground, falling about 80 percent two or three months before its release.

For buyers, this is the time to strike. Heavy raiding players got a steal for their commodities and consumables while completing the last raiding segment of the second expansion, Sunwell Plateau, and in the end finished the expansion with the best gear — and were the first to the next level cap.

Things aren’t quite as simple in real markets — we can never plan for deflation, and usually it’s a negative for the market. But you can easily save yourself a good bit of trouble by planning for deflationary periods and capitalizing on the general stupidity of the rest of the market.

(Image borrowed from Christopher Penn, as my new computer has led to a loss of all significant auction screenshots)