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This article discusses the currency market. Some people spend a lot of time there, others have never visited. This is a beginner’s guide to the exchange market.

Currencies

First thing to know is that there are only 2 currencies, Gold and Citizenship Currency (CC). This may surprise some who are used to seeing AUD or other currencies in their account, but that is all cosmetic. What your holdings of CC is called depends on your citizenship, but underneath the user interface they all have the same value and are interchanged without you knowing it. When you buy an imported weapon from a Polish citizen you buy in AUD and they receive income in PLN, the entire transaction used CC with different labels depending on citizenship.

What determines the exchange rate?

Like any market the exchange rate (or ‘price’) of currency is driven by supply and demand.

On the supply side, Gold enters the system via citizens’ gold purchases and rewards and disappears through company purchases, training ground upgrades, purchase of bombs and special items. CC leaves the system through citizens' RM company and storage purchases and government setting MPPs but the supply side is less clear. It seems clear that admin intervenes to balance the supply of CC or it would constantly decrease as citizens purchase RM companies or die with positive CC balances. This intervention is most likely through purchases on the commodity market to soak up over-supply or by purchases of Gold on the currency market or both depending on where the need is greater.

Like any market you can somewhat predict the direction the price will move based on knowledge of supply and demand factors. When there is a special offer on gold the gold price will drop due to increased supply, when there is an offer on special items that can only be bought with gold the gold price will increase. Nothing complex there, just basic market economics. Gold traders, usually using government organisations to bypass the 10 gold per day purchase limit for citizen accounts, facilitate the currency market moving to new equilibrium quickly by pricing in the effect of these changes and trying to make a profit in the process.

The floor price

If you’ve watched the market for a while you’ll note that there is a floor price at $0.005 Gold/CC (or $200 CC/Gold) depending on whether you’re buying or selling. The reason for this is a very old, legacy law that many newer citizens may not be aware of. This is the law that allows congress to issue money. Money can be issued at a price in gold. If you review the wiki article on this law you’ll see that the price for issuing 1 unit of currency is 0.005 gold. Obviously if the exchange rate ever dropped below this price every government in the eWorld would issue as much money as they could to take advantage of the arbitrage and the higher supply of CC would reduce its value and drive the exchange rate back to 0.005. Currency traders know this, so any time the exchange rate drops below 200 CC per Gold they buy it up knowing that until admin removes the law such a low rate cannot be sustained. This effectively creates a floor price for the gold/currency exchange rate at $200 CC per gold or 0.005 Gold per CC.

I hope this article has been of some use, if you have any specific business, economics or public finance topics you’d like to hear about please let me know in the comments or PM to Paul J Keating.