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Gold Capped: Staying ahead of inflation

Every week, WoW Insider brings you Gold Capped, in which Fox Van Allen and Basil "Euripides" Berntsen aim to show you how to make money on the auction house. Feed Fox's ego by emailing him or tweeting him at @foxvanallen.

Do you remember the moment you hit 1 gold for the first time? I do. I was killing mobs in Ashenvale, vendoring Light Feathers and other various trash drops. It was an epic moment. That first piece of gold felt like so much money.

It wasn't a lot of money, of course -- it just felt like it. But still, it was worth a heck of a lot more than one piece of gold is worth today. The reason: Azeroth suffers from a constant state of hyperinflation. The purchasing power of 1g is always falling, and it's falling quickly.

Thankfully, though, you don't have to stand by and be a victim.

The inevitability of hyperinflation

In the "real world," inflation is an all-but-unavoidable fact of life. Forty years ago, the average home cost about $25,000. Today, the average home costs about $200,000. With a few limited exceptions (deflation does happen), prices are always increasing long term. And if prices are always increasing, that means the relative value of a single unit of currency is always decreasing.

Thankfully, in the United States, Canada, United Kingdom, and Australia, inflation has largely been in check in recent years -- maybe a couple of percent a year. Things are getting more expensive, but they're getting more expensive slowly.

That's not true everywhere, however. When Zimbabwe hit some tough economic times a few years ago, the government responded to the crisis by printing more money. And when inflation started to eat away at the value of that money, it printed more still. Zimbabwe was suffering from hyperinflation -- an economic crisis so dire that the purchasing power of their country's currency was getting cut in half every 24 hours. At Zimbabwe's absolute nadir, it printed these:

Ultimately, Zimbabwe had no choice but to abandon its currency.

What does this have to do with World of Warcraft? Well, I'm glad you asked.

We don't have a central bank adding currency into the economy, but still, each and every day, there's more money in the economy than there was the day before. Down a raid boss? A few hundred gold gets added to the economy that didn't exist before. Run a random heroic? You just created 83g, 28s out of thin air -- and so did the four people you ran the instance with. Daily quests. Trash drops. All of it adds huge amounts of money into the Azerothian economy.

Azeroth isn't Zimbabwe, but the effect is the same. Constantly adding more and more currency into a market makes the existing currency worth less. And at the rate players are earning money now, the value of the Azerothian gold piece is in a freefall. A top-of-the-line, bleeding-edge epic might have cost 30,000 gold in Wrath of the Lich King; in patch 4.2, on my server, the latest-and-greatest epic cost 70,000 gold. And if that sounds bad, ask someone who played WoW during the days of vanilla how hard they worked to get the thousand gold needed for an epic mount.

Inflation in Azeroth. It exists, and it's brutal.

Whip inflation now

Don't expect the Orgrimmar Federal Reserve or Varian Wrynn-anomics to bail us out of Azerothian hyperinflation. It's a fact of the game, and it won't be going away. Still, that doesn't mean you just have to stand there and take it.

If you've got a decent store of money that you want to use in the future -- to buy new equipment the moment Mists of Pandaren (or whatever the new expansion is) drops, for example -- you don't have to just hold on to your money as gold. And though you can't buy stocks or bonds, you can still find some solid investment vehicles if you're creative enough.

What makes for a good in-game investment? Really, just about anything that's going to be harder to get in the future. If you're hard up for ideas, consider these:

WoW TCG mounts A lot of people play the WoW Trading Card Game because it's a fun way to bring Azeroth to the real world. That being said, another group of people buy TCG packs hoping to find loot cards -- cards with codes redeemable for unique in-game items. And some of the most sought after items from TCG are the bind-on-use mounts.

Inevitably, old loot cards wind up being retired. Mounts like Reins of the Spectral Tiger, Mottled Drake, and Magic Rooster Egg get harder and harder to get. And if something is harder to get, the basic laws of supply and demand suggest that the value is only going to go up.

Some of these mounts are quite difficult to find on the auction house, but from time to time, they pop up. When they do, and provided you're looking to sock away a solid chunk of in-game cash, send the seller some in-game mail (or add him to your friends list and contact him directly in a whisper if he's online). That auction house list price is usually a shot in the dark by the seller; you can frequently negotiate the price way down.

Don't worry about insulting the seller with a lowball offer. If negotiations go south, you can always sign on using a different character and start fresh. Just be prepared to unload a lot of your bank account; TCG mounts often start around 100,000 gold and sometimes sell for much, much more.

Rare and exotic pets I love in-game pets. But I hate grinding to get them. And I sure as heck know that I'm not the only one.

Pet collectors are a pretty fanatical bunch. Rare drops like the Disgusting Oozeling and grind-heavy Argent Tournament pets like the Elwynn Lamb are always solid sellers. And they're only getting more expensive as time goes on. You don't have to grind them yourself, of course -- keep an eye out on the auction house for prices well under your server's average. Even if you're paying an amount near the market price, rest assured -- these aren't getting cheaper as time goes on.

The best part about these pets: While they're often expensive, they're not as expensive as TCG mounts. Many pets sell for a few thousand gold; others sell for just a few hundred.

Shadowmourne treasures When patch 3.3 landed, plenty of folks rushed to complete their Shadowmourne legendary. It was a great weapon, and it carried a bonus besides: If you killed the Lich King while someone in your party had it, the big bad would drop an Unsealed Chest. The treasures within could be exchanged for five different BOE items: Muradin's Favor, Jaina's Locket, Reins of the Crimson Deathcharger, Tabard of the Lightbringer, and Sylvanas' Music Box.
Some are more fun and desirable than others (I like Muradin's Favor best myself), but they all have one thing in common -- they're rare and only getting rarer. Only one Unsealed Chest dropped per Shadowmourne. And while it's still theoretically possible for new players to go through the trouble of creating a Shadowmourne and defeating the Lich King ... not a whole heck of a lot of guilds are going to do it.

It doesn't take a genius, then, to figure out that these items are going to appreciate in value. The overall supply continues to dwindle. Buy cheap, hold on to it, and then sell it down the road for a (hopefully) terrific profit.

... or, just hold on to your gold

None of the above investments are guaranteed. Past performance is no guarantee of future blah blah blah. But one thing is guaranteed -- holding on to large amounts of gold and not doing anything with it is a sure loser. After all, Azerothian inflation is easily over 100% a year.

Inflation wreaks havoc on savers. If you've got a bank account earning 1% interest while inflation is 2%, you're actually losing purchasing power as your bank account grows. And since there are no interest-bearing accounts in Azeroth (that's some sweet 0% interest your guild bank is earning), the purchasing power of the gold you have on hand is decreasing if you do nothing with it.

Hold on to your gold if you want. Just know that it'll never be worth as much as it is today. And while those large account balances are nice to look at ... in the long run, spending it now is better than saving it long term.
Maximize your profits with more advice from Gold Capped. Do you have questions about selling, reselling, and building your financial empire on the auction house? Fox and Basil are taking your questions at fox@wowinsider.com and basil@wowinsider.com.

Filed under: Economy, Gold Capped

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