I saw in many local forums now (I wont mention names) people just keep giving each other Merit. And the more I looked into the
Merit system its a naturable behaviour. You will reward those who reward you. This does not improve forum quality at all.
I think you are right about this. In small communities, those that you help will tend to help you, and merit will be "circled" amongst those who are 'liked' in the community. This is a difficult problem to address because communities should have merit sources to give the community merit, and overregulation of communities can cause real harm.
Increasing the total sMerit available might somewhat alleviate this problem as sMerit will be less scarce, and there will be less of an incentive to send sMerit to only your friends.