|Inflation in WoW - Prepare or Lose|
Inflation is a term that describes the erosion in purchasing power of a currency. As more currency (gold in WoW) is readily available, prices tend to go up. The resulting problem is that the value of that currency gets weaker as the same amount of currency can't buy as much as it used to be able to buy. Inflation is a great threat to the value of your stockpile of liquid gold in World of Warcraft. If you just sit on your gold from expansion to expansion, it loses value. The same amount of gold will be able to buy you less in the future.
In·fla·tion - A persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency (opposed to deflation).
In World of Warcraft, the inflation gets worse as more expansions are released. Quests give more gold, looted items sell for more, higher level character corpses loot for more coin, bosses and creatures drop more gold, and these all help contributed to more gold being more easily attainable. Players start to have more personal gold than before, even if they are not using any ways to make gold in the auction house or with professions. It's just simply easier to get more gold. Since players can easily obtain more gold, they are able to spend more on the same items.
Using Inflation To Make Extra GoldCombating inflation is a strategy we must prepare for at the end of an expansion. Liquid gold is affected most by inflation. The value of the gold piece will continue to go down. To combat the devaluing of the currency, we have to invest more of our liquid gold into commodities. We can make an inflation hedge by buying commodities that we know will increase in value. If we buy at today's price and sell at a future inflated price, we can not only make a profit, but we have protected that invested gold from the devaluing effects on inflation. The key is to make inflation hedges with commodities that will rise in value. Good examples are hard to obtain pets (think Argent Tourney pets), farmed commodities, rare mounts, etc. Before the new expansion drops, we will be devoting an entire episode of Auction House Junkies to inflation and inflation hedging.
The formula for using inflation to your own advantage is pretty straightforward.
Buy Materials Now At Today's Prices, Then Sell Your Crafted Goods At A Later Date At The Inflated Rate.I will use my own Netherweave Bag stockpile as an example.
I stockpiled around 7-8 entire guild tabs full of Bolts of Netherweave Cloth during mid-Wrath of the Lich King. I paid around 4-6 gold average per stack of Netherweave Cloth when I made the stockpile. At the time Netherweave Bags were selling for 9-11 gold each. Today, at Cataclysm's end I am still working off of that same massive stockpile that cost me much less than the current value of 8-12 gold per stack of Netherweave cloth. Currently Netherweave Bags are selling for 15-25 gold each on my server. So by forming a prepatch stockpile, I was able to lock in my crafting costs at the older cheaper rate. I was (and still am) able to sell the resulting crafted items at the current new inflated rate. And I can also undercut deeper than competitors who are stuck crafting from the current inflated materials rate.
So have you started to think ahead to Mists of Pandaria and what items to be buying as your inflation hedges?
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