ECONOMICS CLASS

November 15, 2008 - Instructor: Fancy
Topic:  How Exchanges Work

Catspaws says, "In the years and eons Fed has been around, the person I go to when I really can't understand something has always been Fancy."

Catspaws says, "Perhaps because he is a feline, perhaps because he's Fancy, I don't know."

Fancy grins.

Catspaws says, "But he is the smartest cat I know, and the most suitable person I know to teach all exactly how exchanges work."

Catspaws says, "This knowledge is important for every rank in Fed above the early hauling ranks."

Catspaws exclaims, "So, without further ado, please put your paws together for the Magnificent Fancy!"

Fancy smiles, nods in acknowledgment, and says, "Thank you, thank you."

Fancy says, "OK, figuring out how the planetary exchanges work in the new Fed took some experimenting.  Like many others, I initially assumed that planets only made money when the commodities were in stock."

Fancy says, "However, I also noticed that when I did stock up on my deficit commodities, I kept losing more and more money."

Fancy says, "One day, I decided to just bring in a few bays of a few commodities, checked my treasury balance before I sold them, after I sold them, and again after time had passed to consume what I brought in."

Fancy says, "I noticed then that my treasury balance did go back up, even though the commodities I had brought in were still in deficit.  That's when I figured out what really made money in Fed."

Fancy says, "Simply the completion of production and then buying from the exchange, or selling to the exchange and consumption of the commodiites.  Alan had made Fed 2 so that it pays to trade a little of a lot of commodities, rather than a lot of a few."

Dinger nods

Fancy smiles, "And what had worked in the old Fed, namely bringing in massive amounts of commodities where your planet runs a deficit was in Fed 2 a sure way to lose money, while what was considered "dumping" in the old Fed, was what made money.  Fed 2 is definitely not the old Fed. :)"

Jazir smiles, "Hear hear :)"

Meteu asks, "so if I were to dump in old Fed I'd make money?"

Veexe asks, "I noticed haulers can still dump an make money, that kills planets though?"

Fancy says, "Now one thing I have seen others talk about when walking up commodities you produce is setting the spread on those commodities to 6%.  To me, I would think it cheaper to have your spread set at 40% for that duration so that you spend less for the production."

Fancy says, "The difference would be like paying 420 IG/ton for woods with a 40% spread versus 510 IG/ton at 6% when near your max, and on an even bigger scale when your producers are further from your maximum stockpiles."

Fancy says, "For Veexe's question which I now see, if haulers bring in a little of each of several commodities so that the stock on hand the planet has stays in deficit, the planet will make money off the goods sold to it."

Fancy says, "And to answer Meteu right before Veexe, in old Fed, your treasury got charged market price for production each cycle, but would only get paid for consumption if the stock on hand was out of deficit."

Fancy says, "So what was called "dumping" in old Fed was selling a several tons of commodities to a planet's exchange, but not enough to get it in stock so that it would make money in that version."

Jazir says, "Precisely. That kind of trading used to be devasting to POs in Old Fed. Here, it will make them money"

Fancy says, "Exactly."

Veexe drawls, "so its the opposite here. if I sell too much of one thing to an ex it could hurt the planet..."

Meteu asks, "is that why we have the unofficial 7 bays rule?"

Fancy says, "And continuing to sell after the commodity is in-stock, while that built up a cushion that planet owners would continue to be paid for consumption in the old Fed, causes losses in this Fed because of half the goods being lost in that situation."

Fancy says, "Yes, 7 bays of 75 tons each exactly fills up a -525 ton deficit without invoking the half lost portion."

Dinger says, "we called it skimming in old Fed, taking the few higher prices and moving on"

Fancy says, "So Alan has come up with a way to encourage trading all the commodities, and to trade with numerous planets when you do."

Fancy says, "For myself, I have set up some trade routes to take to other planets what my planet produces surpluses of, and bring back the deficits I need."

Dinger says, "I set up so that I haul 6 bays of two commods to one planet, Andrew may have saw that tonight"

Fancy says, "My trade routes usually buy 2 bays of 7 commodities.  Sometimes 1 or 2 bays of each of more than 7 commodities."

Dinger says, "and bring in two as well, not necessarly from the same planets I haul into"

Munabilo says, "so, if someone had their defs filled, let's say with 6 bays each, no matter how many defs, at first it would look like they're losing money, but they would make it all back, plus some, when they were consumed right?  ::wink::"

Fancy says, "Correct."

Dinger agrees

Fancy says, "However it may be difficult to tell whether a planet's starting stock is -525 tons or -75 tons when you start selling."

Fancy says, "So in an effort to avoid doing harm, I go for the "little of a lot" approach - 2 bays each of 7 different commodities, assuming I can find 7 commodities the planet needs that I also produce."

Dinger misses hiring haulers to do his dirty work

Zarquad says, "me too dinger.  maybe it'll come someday"

Dinger says, "I miss that more than a transporter"

Dinger says, "I agree with you Fancy. I have made 10Mig a day for the last 3 days just hauling in"

Dinger says, "just 6 bays of my highest 10 defs"

Dinger says, "about every 4 or 5 hours"

Fancy says, "I suppose if I really got ambitious I could decide more exchanges to haul out to, though I have limits of how much my exchange needs hauled back in."

Munabilo says, "yeah, it's something i've been doing lately too, i've been doing 3 bays of 4 commods at a time, but yeah, still the same idea"

Fancy says, "Right now, 7 trade routes seems to satisfy all my deficits quite well for a while."

Fancy says, "With four of those involving trade routes with biological worlds."

Dinger says, "also, I have 13 Meg that I can use to help make a build, because I am making personal cash too"

Dinger says, "we need Duchies too"

Jazir says, "The cost of production is one of the greatest mysteries of this Fed, I find"

Fancy says, "It ought to be interesting to see how duchies will work in this Fed."

Dinger smiles

Dinger says, "yeah, it would be different"

Jazir says, "Old Fed was easy, 9/10ths of exchange buy price. This one, I am not so sure"

Fancy says, "Cost of production is the same as what your exchange buys a commodity at at the time."

Fancy says, "At least I haven't noticed any difference between the two."

Jazir says, "I was wondering whether it was Value, not a function of buy price"

Fancy says, "However, your outlays for production stop when your maximum is reached in this Fed."

Jazir says, "Right. But consider the evenly matched commod. A commod that say, produces one and consumes one.."

Zarquad says, "that's a wash jazir.  no affect."

Jazir says, "If cost of production is buy price, and the planet pays sell price on the one point of consumption, it would be a profitable commod"

Fancy says, "From what I have observed, a commodity with equal production and consumption will do nothing to the treasury in this game."

Zarquad says, "agreed fancy.  as far as I can tell, the echange figures the net effect then costs it."

Fancy says, "Only changes in stock will affect the treasury balance, whether outlays for production, or inflows for consumption."

Munabilo says, "i'll throw something out there, how I understand (and actually verified) it is this: value is what the exchange deals in with the "populace", I call it internal business.  For external business, which is selling and buying through the exchange, it's value with spread applied, which yields what you see on the exchange displays"

Jezz says, "You can only make money from the goods in your exchange.. if it's an equal prod and consumption the goods never reach the exchange"

Jazir says, "Aye, my observation is the same. My thinking is thus that cost of production is value, or a function thereof, with the planet's consumption price being equal to it"

Salvador is looking at you.

Fancy says, "And any extra production or consumption above consumption or production then takes place at exchange buying or selling prices."

Jazir says, "Ah, I see"

Fancy says, "So for woods on Toontown with -7 on the production/consumption balance, my treasury will gain the selling price of 7 tons of wood per cycle if my stock on hand is above -518."

Dinger nods in agreement

Fancy says, "And for crystals on which Toontown is +3, my treasury will lay out the cost of 3 times the exchange buying price for crystals every turn that the stock on hand is below my set maximum."

Jazir says, "Precisely. But it makes nothing off purely internal trade. (After the initial sink down to bottom when you promote)"

Fancy says, "Right, no calculating how much to lay out for 18 tons of crystals produced, then how much income from 15 tons sold."

Jazir nods

Fancy says, "Just the net +3 tons times the buying price."

Fancy winks, "If it is not already at the set maximum. ;)"

Fancy says, "Now that I understand how the exchanges work, Alan had once talked about planet owners being able to set maximum deficits as well as maximum stockpiles.  I have a feeling that planet owners would set the largest deficits they could if we could do that, to make for a maximum of trading activity to make money as possible."

Munabilo says, "it would be nice to set the max stockpile at 0 at least, instead of 200"

Fancy says, "That would also mean being able to close off surplus producers, though.  I don't think that's in the cards."

Munabilo says, "producers can be closed off, right?  set min and max to be the same"

Fancy drawls, "Come to think of it, yes..."

Fancy says, "However, even if we could, I wouldn't use it myself."

Munabilo asks, "you wouldn't set deficits so that there's no chance of losing half bays?"

Fancy says, "In case I got an exchange event that turned a consumed commodity into a producer, in which case I could make the spread on as many tons of the commodity as could be produced while it lasts."

Munabilo shrugs

Fancy says, "So if I got an event on explosives, turning my -8 into say +20, I could let explosives produce and produce the whole day of the event, and then when the effect ended, my exchange would then consume it all over time in the following days."

Fancy says, "And if I could capture 20% on an average of 470 IG/ton on 20,000 tons, that's a nice chunk of change without any hauling necessary."

Fancy smiles, "It also helps to have others who will bring you what you need. :)"

Dinger says, "grins"

Dinger grins

Catspaws winks, "Fancy brings alot of my stuff ;)"

Fancy says, "Mainly leisure commodities."

Dopplershift says, "sounds like a staff conspiracy, lol"

Catspaws says, "Nah, he knows I'm lazy."

Dopplershift drawls, "Welcome to the club....."

Fancy grins like the Cheshire Cat.

Dopplershift says, "thanks for the lesson, i learned a bit"

Fancy smiles, "You're welcome Doppler. :)"

Catspaws winks, "Fancy always HAS known more than anyone else ;)"

Jazir smiles, "Indeed, a most learned cat :)"

Fancy pulls out and dons a mortarboard cap.

Jazir adds on a doctoral hood to Fancy's attire

Catspaws says, "Thank you so much, Fancy."

Catspaws says, "We'll have you back again, you can be sure."

Fancy smiles.

Catspaws says, "Perhaps doing futures next time."

Catspaws says, "I'm really curious to hear how you'd do a futures class."

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