TLDR – The effect of the update increased demand, kept money supply current, but decreased supply. Although the net effect in the macro sense may be neutral because increased value may offset decreased item generation, the arbitrary nature of the reward systems may cause people to stop engaging in economic activity and withdraw from the market. This could drive deflation or general economic paralysis by encouraging people to hoard for a legendary/gems/premium item, and buy nothing else.
Full version:
In thinking about the update, a few macro fundamentals are important to keep in mind. The first is the rate at which currency (gold) is introduced into the economy. The second is the rate at which currency leaves the economy. The third is what currency is actually used for in the game – items, and how they are introduced into the game.
The introduction of the megaserver will have a minor, negative impact on currency generation. The megaserver nerfed world boss farming (RIP world boss train), which provided rewards primarily through the guaranteed rares and useful mats (or rares converted to ecto), which were sold on the TP for pre-existing currency. The only impact on currency generation would come from the few silver that came from event completion and from vendoring trash/blues/greens: fewer events and items → less coin generated.
The champ bag nerf had a more direct effect on currency generation. Although this will have a stronger impact on the people who endlessly trained in FGS/QD, I think it will have more limited on the economy as a whole, and will be balanced out by the increased dungeon and PVP rewards, as well as the armor cost removal.
Similarly, the recent patch didn’t do much to impact the rate at which currency leaves the system. I suspect armor costs were largely nickel and dimining people anyways, which is why they got axed.
Where I suspect the patch will have the biggest impact is on item #3, the supply of valuable items. Increased demand due to wardrobe system + decreased supply of rares (thus indirectly nerfing (a) precursor availability through forging/reduced drop rate from world bosses and (b)ecto supply from salvage) and mats used for making special skins will result in higher prices, at least in some areas.
So, if people can generate about the same amount of currency as before, but items are more scarce, this is really a distributional issue. I think for many people, myself included, wealth was generated by selling drops on the TP. But remember, there is a player on each side of any TP transaction. So the benefit will primarily accrue (a) in an arbitrary fashion, to random people who luck out with a good drop, or (b) people who make good investment decisions with time-limited skins.
The economic consequences will thus turn on how people react to greater item scarcity. Price levels tend to be sticky, and only change over time. Moreso in this game, where sellers are stuck with a sunk cost in the item listing fee. But if people perceive that it will be harder to obtain the item that they want, it may reduce overall economic participation, which in turn could lead to broad deflation.
For instance, I used to run the WBT to obtain rares, which I would then sell and save the proceeds to purchase precursors. Now I don’t think its worthwhile to farm bosses because the opportunity cost, in terms of fun/time, is too great vis-a-vis how long it would take me to buy a precursor at the new, higher price level. So, now I’m no longer generating as much currency as I used to, and incidentially, the psychological effect has made me much more miserly with how I spend money in general (the wealth effect). Another example – before the patch, I would drop 50g on a dye or gems because I thought I could make it up with a reasonable effort. Now, not so much.
The same could be true for champ farming if reducing coin drops killed the incentive for more risk averse players, even though the net effect may be broadly unchanged. Paradoxically, it would drive income inequality by making the rich even richer.
As such, if too many people feel that currency has become too dear and thus stop engaging in market transactions, deflation could take hold across the economy. To be certain, the price of some status items like legendaries and the incidentals like t6 mats may remain high, but the price I am willing to pay for all other goods has fallen. In effect, you will see a two-tier economy – skyrocketing premium items, while collateral markets falter.
Of course, the role of gold <—> gems conversion could have an effect on all of this. If desireable items are on the gem store and people are not willing to buy gems with dollars, this could exacerbate the deflationary spiral. Conversely, if people are willing to convert dollars into gems and then into gold, then it will abate deflationary pressure. I’m sure anet would love the latter.
