Other then physically destroying currencies, in real life there’s no “money” sink, as mostly everything ends up having value and no money is physically removed from the economy (except the money destroyed, as I referenced above).
This game, anything bought at a vendor, anything traded on the trading post, anything that involves trading currency with an NPC is a subtraction of the currency from the economy. This means that it’s gone, it’s literally out of the flow.
If we ignore credit (which is a huge oversimplification in the real world) this is more or less correct.
In both cases the rates are related by a simple relationship:
Accumulation = Generation – Destruction
In the real world economies, as you pointed out, the rate of currency destruction is low. That means to keep accumulation low, generation must also be low.
In GW2, generation is enormous – just look at the amount of raw gold created every time you go out to play. This means that destruction must also be enormous if accumulation is to be kept in check.
The strength of GW2’s money sinks rests on the 15% TP fee – because it scales up with the amount of money in the economy. Even T3 cultural armor is only a one time sink, and only pulls a flat amount of money out. The TP fee takes 15% over and over and over again – the game cannot generate more money than the TP fee can sink.
Secondly, as player base increases, wouldn’t inflation go down as the money is spreading out.
If the amount of money in the economy was fixed that would absolutely be the case.
It isn’t fixed, though: the rate of gold generation scales with the number of players (more players farming = more players generating gold). So if you doubled the number of players, you’d also double the rate of gold generation, and double the rate of gold destruction, and with the way these things scale you’d have roughly double the amount of money sitting around in the economy.
Can someone correct me here if I’m wrong? as I understand it, unless core components of the economy change (TP fee, where the money goes when buying from a vendor), all inflation is temporary.
You’re right that all inflation is temporary – in the real world central bankers work really hard to balance money flows to keep inflation within an acceptable range. Since WWII they’ve done a pretty remarkable job of keeping inflation in a controlled range, enough so that most people kind of understand slow, stable inflation to be ‘normal’.
But it’s all temporary. In reality there are a bunch of different market forces pulling on supply and demand on a large scale, and those are all changing over time – not just when something big changes, but as people accumulate wealth and their goals and farming patterns change. Big bursts of inflation, or deflation, in the economy these days are going to be from something changing – and recently we’ve had a lot of big changes.
