For nearly two months, millions of Americans have been shut inside their homes in an effort to curb the spread of coronavirus. Many people have turned to video games as a way to pass the time, and one of the most popular titles of the last few weeks has been Animal Crossing: New Horizons. Players of the Nintendo Switch title move into their own island where they work and hunt for treasure all in an effort to buy things for their houses and impress their friends. With its playful imitation of small town life, it’s no surprise that Animal Crossing: New Horizons has become a major hit while many are stuck inside.

And much like the real world, the Animal Crossing economy is a complicated system that occasionally must be adjusted by a central bank. Rather than turn to the Federal Reserve, though, Nintendo itself recently slashed interest rates in the game in order to address a number of lingering economic issues. In a letter from Tom Nook, a character who operates the village store and bank, players were told that “we have reduced the interest rate offered to all savings accounts.” Although Nook did not specify what the new rate would be, players in online communities estimate that the previous interest rate of 0.5 percent was reduced to 0.05 percent. 

Animal Crossing: New Horizons fans speculate that Nintendo made the changes after some players amassed huge fortunes through dubious means. While some turned entire islands into tarantula farms to become rich, others engaged in insider trading on the “Stalk Market” by shorting the price of turnips. These wealthy players became even richer thanks to the compound interest gains provided by the Bank of Nook’s generous rates. Although the game’s latest update prevents players from easily taking advantage of its economy, some people are spending thousands of dollars in real money to purchase Animal Crossing items on eBay. Meanwhile, the game has become so popular during the pandemic that the Nintendo Switch is currently sold out at stores across the country. Some are available online at a markup, though, which is an issue that Nintendo unfortunately cannot solve with a simple update. 

Questions:

1. How will the Bank of Nook’s interest rate reduction affect the savings accounts of players in Animal Crossing: New Horizons?
2. Why has the Nintendo Switch and Animal Crossing: New Horizons become so popular in the last two months?

Source: Ethan Gach, “Nintendo Slashes Interest Rates In Animal Crossing: New Horizons,” Kotaku, April 23, 2020. Photo by: BagoGames.