Another alternative altogether is a closed economy (no faucets, no sinks). Provided you keep currency circulating (which is harder than you would initially think) and you account for fluctuations in the total number of players (and the age of those players, which determines their expected net worth) you can use such a philosophy to create a stable economy that wont suffer from inflation. The only problem is, you really have to think things through and the smallest mistake will cripple your efforts for quite some time. Item permanency must be closely tied to availability: if items never "expire" then they will become less scarce, becoming less valuable in general, leading to hyper deflation which can be just as bad as inflation. Similarly, if you can acquire 10 short swords in the time it takes 1 to degrade, then you will never run out and flood the market with them, leading to ultimately the same result as them never expiring.

You also have to be careful about handling money. You can't spawn NPC's that drop currency, and quest givers cannot give out currency as quest rewards (unless it comes from somewhere, which usually is never the case). Even new players cannot start with a pocket of gold, as all of these are money faucets. Money needs a means of circulating between hoarders and normal players (tax?), between NPC's, and between players (ie, there has to be a motivation for exchange, meaning it must be convenient and rewarding).

There are actually more considerations than I could ever possibly hope to list... and you'll need to be ready to compensate for all of them. So far as I'm aware, every single sufficiently old closed economy in MMO's has failed to date, but then, every single sufficiently old open economy has failed as well. I say this because no matter what, your system can't be perfect but at least you have other alternatives to consider.

On the New Player being given currency to start I had an idea around that for the genre I was aiming to design. You are part of a greater population, an empire/kingdom/realm/etc, a member of their army in that you fight opposing factions on behalf of your fellow peoples. Now, when you start, you are given chips, or tokens, that when brought to the proper government(NPC) location you could trade them in for a starting weapon, a new hatchet, a hammer for smithing, just basic starting goods. This would allow players to get a few things to help get them started, these items would not be able to be traded or sold.

On economies in general I was trying to think of a way to prevent markets from flooding. The first thought that came to mind would depend on the size of the player population. If you have 1000 players they can gather much more than 100 players, so you slow down the rate at which items can be acquired the larger the population becomes. This isn't something that would make off hour farming more lucrative, that is not the goal. With mining I had the thought of what if the #1 thing you gathered was stone? Great, you can make stone weapons, or you can put the stone to a greater use and build a structure with it. This eliminates the buildup of stone as you would need to constantly use it to repair stone structures and build new ones. Make the ore that comes from the same harvesting node a rare thing. Scale the percentage of finding it based on your player population size and the rarity you wish to make the material.

I guess I just mean to say is find a way to have bulk basic resources be in constant demand so the "cheap" stuff is never useless while keeping the rarer stuff more in demand and less easy to acquire. The rare stuff can NEVER be a requirement to compete, just a luxury. In this game though you could compete with stone weapons, but anything better than that and you would get slight upgrades, not insanely powerful weapons that make stone obsolete, but slight upgrades for various materials used.

Balance time instead. In simplest terms the only real resource in an MMO is time. Even something like an RvR game a war isn't won by winning the "war"(intentional) it's won by making your opponents no longer see something worth their time.

You also need to remove "leveling" and similar goals from crafting(technically leveling by spamming items). This pretty much adds a broken level of unreasonableness to the economy(materials worth more than finished products) because it's worth the player's time to make stupid economic decisions to level(driving resource demand up, finished product supply up, while not changing item demand). The first fix I would do for this is to go lesson based(see EvE Online leveling, earn lessons spend however you want even if you never used the skill) which would flat out stop most of the unreasonable drive. The next thing I would do would make making 2nd tier resources the the best leveling items for a trade the most efficient way to level(IE making bars, molds, and similar) for this to truly work this needs to be true at all levels even "past max". I would also add the ability to "sacrifice" final tier items to achieve some nice effect or another.

For fixing money supply I would add floating drains that don't directly involve other players. For instance house "leasing" would be on a per auction basis, essentially if cash supply goes up the amount of money people have more money to spend therefore spend more. Meaning you have a floating drain that adjusts with your economy and without developer input. Things like an auction tax also achieve this same effect.

You also need to add "no tier" level abilities that encourage trade. One loose design I've had is that travel tends to take a long time, but major areas(cities) tended to have "world stones" where you could freely grab a piece to travel back to the stone, this item of course tradable(when auction houses based on a per city basis).