Gold Capped: Staying ahead of inflation
by Fox Van Allen 
Aug 15th 2011 at 6:00PM
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:
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
Reader Comments (Page 1 of 3)
Tigris Aug 15th 2011 6:13PM
Something you didn't mention: while it is true that more and more gold is being added to the Azerothian economy every day, gold is also being REMOVED from the economy every day. Repair bills are one way, but also massive expenditures like the Pyrium-Laced Crystalline Vial for the Sand Drake are also present. I don't think it actually totally offsets the amount of money flowing in, but such expenditures help slow down the inflow of money a bit.
emberdione Aug 15th 2011 6:23PM
The amount created is far greater than the amount "lost" though. Think about those repair bills. I am a dungeon runner and raider. I spend about 50g a day in repairs, and up to 250g on a raid boss night. 50x7=350. Which is about 4 dungeon runs, and I do 7 every week, meaning it is only burning a little over half the amount of money created.
Once you consider things like guilds paying for repairs with the Cash Flow and challenges money, the amount lost gets that much smaller in relation to the amount created.
emberdione Aug 15th 2011 6:33PM
I meant to also say and that is *just* counting the money created. That doesn't count dailies (usually around 20), vendor trash, or random drops.
As for the 250 on a new raid boss, that is only a few times. Once your team figures it out, bam, now you are generating all that gold without the losses of wiping.
wow Aug 15th 2011 7:58PM
@emberdione "The amount created is far greater than the amount "lost" though. Think about those repair bills."
There is absolutely no way to prove that. Without the actual data, it's easy to make an argument that there's more lost than created.
emberdione Aug 15th 2011 10:11PM
Well they took out the wealth tab on the website, but on my character's statistics tab it lists average gold earned per DAY at 313+, total gold looted 24k+, gold from quests is over 45k.
Total deaths in raids and dungeons is 2.4k+. At 10g a death (that's at 85, so we are WILDLY overestimating, but still) that puts us at 24k+g in repairs.
Which barely evens out to my total gold looted. THAT'S JUST THE LOOTED PART. That's not counting the 45k from quests. If you subtract my TOTAL gold acquired 324k+, minus my auction earnings (254K+), there is 75k remaining, close to my looted and quest gold together is.
So by my characters stats, repairs eat up less than a 1/3rd of all my "created" gold.
I could post the numbers for all of my many many alts, but they are all fairly comparable and fall within the same range. It leaves me with 45k to spend on mounts, skills, talent re-specs, and so on. Also, this only counts since Wrath, but I have been playing uninterrupted since Wrath, raiding everything throughout, so that counts all the painful learning of bosses, the 7 WEEKS worth of wipes on LK, and the months of blindingly frustrating cata dungeons and raids. Actually, when you stop to consider the lowered prices of mounts and riding speeds (one of the larger gold sinks in the game) it is entirely possible that Blizzard is intentionally de-valuing gold.
So yeah, there is a way to prove that.
Minstrel Aug 16th 2011 1:47AM
While money created is probably greater than that taken away by repairs, WoW could always institute new gold sinks. Anything that players spend money on that isn't a transaction with another player removes gold from the economy. Epic flight, dust of disappearance bought from the NPC vendor, talent tree wipes, auction house cuts from sales, etc.
So while WoW inflation is obviously occurring right now (based on data points like Fox mentioned, the cost of a top-of-the-line BoE epic), it doesn't *have* to, as he suggests. If Blizzard really didn't want inflation, they could add in more gold sinks (like faster item decay or larger AH cuts or some new thing altogether). I'm sure they tune gold sinks to produce a level of inflation they're comfortable with. It doesn't have to be 0, but it could be.
Bill Aug 16th 2011 1:34PM
There is no perfect estimation for how much gold is removed from inflation without getting into player statistics. Almost everybody buys mount training of every sort now, and everybody has to repair now and then. But the major transactions in-game happen much, much more for some players than others. Every time you buy a motorbike mount there is the illusion that you are giving your gold to another player for redistribution into the economy, when the majority of it goes to cover the material cost. Some players might make numerous unseen transactions with NPCs, some players might make them much more or less than others. But overall, major transactions make up a significant part of the inflation slower, yet they are seriously difficult to keep track of.
Zankoku Aug 15th 2011 6:22PM
Hiya Fox!!!
Not really Gold-Capped On Topic question here, but something that is definitely interesting.
About 2:00 PM PST, I opened my personal bank and noticed that there was more space under my bank bags than usual. It is enough for another full row of bank bags.
Could this be future planning by Blizzard, or a graphical anomaly?
Asked my roommate to check too, and his client (separate computer) also showed the extra space.
Astoreth Aug 15th 2011 7:48PM
I would kiss a murloc for another row of bank bags.
emberdione Aug 15th 2011 9:53PM
I'd alot more than kiss a murloc. Up to and including very naughty things to King Varian, Bashiok, and Metzen.
Zankoku Aug 16th 2011 5:51AM
Ehhh... got the standard "It's an addon conflict. reset your interface and cache" GM ticket response.
Telwar Aug 15th 2011 6:30PM
I suspect that if the Transmogrification ethereal isn't just a cruel joke on Blizzard's part, that will wind up being a huge gold sink.
Samuel Aug 15th 2011 6:35PM
Real World Comparison?
Blizzard and Government ecnomic policies. Our Govts are somewhat responsable, because in the end bad economics end up in real world treats: crimes, corruptions, deaths, bad health, and so on.
Virtual worlds and like fantasy places where if something is really expensive now and tomorrow Blizzard makes that item rain, deflating my 9999% you just suck up and keep playing your game.
jaenicoll Aug 15th 2011 7:04PM
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.
Great article but your points on the inflation in the USA, UK etc being low are inaccurate. Its true that that the inflation that is reported is around 2-4%, but that figure no longer represents what we think it means.
Core inflation no longer includes energy nor food in its calculations and is manipulated by substituting and removing items to present the appearance of low inflation figures. The truth according to Shadowstats.com (which measures inflation using the original, more honest techniques) is around 15%. I'm pretty sure most people's grocery bills will bear that truth out.
wow Aug 15th 2011 7:58PM
So one random website tells you something and you believe it? I suggest you do a little of your own research. shadowstats.com is nothing more than tin-foil hat garbage with no data to back up their conclusions.
jaenicoll Aug 15th 2011 10:04PM
Other than the fact that they have been following all the prices for years and use the old formulas to reach the true price of inflation and have massive credibility in the economics community, they must be just a random website.
I suspect you haven't a clue what they actually do. Please show us your research that brought you to the conclusion that they are "tin-foil hat garbage with no data to back up their conclusions".
I've done mine and they are the real deal.
Grumpy Wow Guy Aug 15th 2011 7:10PM
"The purchasing power of 1g is always falling, and it's falling quickly."
Dude, gold is over $1700 per ounce.
:P
Eccentor Aug 15th 2011 8:13PM
That is probably a major reason why some people want to go back to the gold standard.
Cambro Aug 15th 2011 11:36PM
For anyone wanting to make some real-world cash from their real-world gold jewelry, consider the following:
-- many places will try to scam you
-- even the honest ones will pay you a fraction of what the gold is worth (which is of course how they make a profit)
-- jewelry that is not solid gold may only be 50% of its weight in gold (I read that a 10k ring is only 50% gold), which will have to be heavily processed to separate the metals, potentially lowering the amount you'll get for the gold
-- if my quick googling is accurate, there are about 28 grams in an ounce. One gram of gold @ $1700/ounce ~= $60. A solid gold wedding band weighs 1-1.5 grams. You'll get less than $100 market value for your wedding ring; good luck getting more than $30. Mow 2-3 lawns cheap instead and hang on to your ring.
Vyx Aug 15th 2011 7:11PM
You imply that inflation in Wow is always going to continue, but that is just an assumption. If they feel prices are getting to a point where they are a barrier to entry for new players they can easily add gold sinks, increase repair costs at high level, decrease rewards in the next xpac, etc.