What EA Should Do to Reduce Inflation

fifa15-coin Date: Feb/06/15 02:51:45 Views: 1256

The FUT market is heavily inflated at the moment.

When talking inflation, economists distinguish between supply and demand. The demand side translates into the amount of FIFA coins in circulation, whereas the supply side is the items up for sale measured in amount and quality.

What happens right now is that the demand side grows heavily, whereas the supply side doesn't grow at all.

By design, the FUT economy is balanced: The intention is that the gamer is exchanging his real money for coins by buying new packs. The good thing about packs is that they not only produce a limited increase on the demand side but also on the supply side, as people tend to discard some items and put others up for sale.

Unfortunately, people have started exchanging their real money for coins instead of packs, meaning that the supply side growth per spend dollar is far lower and the demand side increase is far higher than they were supposed to be.

In reality, we have a situation where the Central Bank (aka EA) has lost control over the money supply, which is dangerous to any central bank and one of the primary reasons why it's illegal to print your own money.

What do Central Banks normally do when they face inflation? The quick answer is demand side intervention, and that basically means increasing the price of money. The price of money is expresses in two ways: By the interest rate and by the foreign currency exchange rate. A real Central Bank fights inflation by increasing the interest rate or by increasing the exchange rate against other currencies.

With regards to the interest rate, there are no loans in FUT at hence no interest rates.

With regards to the exchange rate, EA is not in control, because EA isn't the only party issuing money. If EA was in control, EA could lower the match earnings or discard prices, but this won't have an effect on the prices in a market where people aren't buying packs. In fact, it will just make people buy even more coins and hence stimulate inflation even further.

Another option is to increase the EA tax, meaning that more coins are taken out of circulation be transaction than is the case today. Although this may have an effect, it won't be very popular, as it will bother a lot of innocent players, who rightfully will feel that they are paying the price because for someone else's unwillingness to obey the law.

In conclusion, I don't believe that a Demand side intervention will work, unless EA is able to regain possession of the note printing machine by kicking the coin sellers out of the game. Although we are dealing with a central bank which effectively has full legislative and judicial control, it obviously lacks the executive power to deal with the parasites feeding of it's back. Thus, I'm pretty sure that this battle was lost a long time ago.

What about supply side intervention then?

EA is not only a central bank but also the sole producer of goods on the market, meaning that EA in theory has the means to fight inflation by increasing the supply of goods instead of reducing the demand.

EA could increase the occurrence of high value cards in packs or even better put cards up for sale from accounts controlled by EA, meaning that the coins will be removed from circulation at the same time.

The obvious concern seen from EA's side is that EA has a strong interest in keeping the number of Ronaldos-per-active-player steady. Increasing the supply will make the relative advantage of owning a Ronaldo smaller, and at the same time mean that a lot of people will stop buying packs because they already got the cards they wanted and the coins they needed.

To conclude from all of this, there seems to be no easy answers and not a lot of options available, unless EA finally decides to put a plug in the hole and start removing some of the coin making glitches found in the game today.