The world of Harry Potter is one that is rich, complex, and detailed. J.K. Rowling made it that way, because that is what J.K. Rowling does. Arguably, one of the greatest strengths of the original seven book series is how totally immersive it is. You can lose yourself completely in Hogwarts, or Wizarding London, or Hogsmeade. It seems to be a big part of the reason so many of us love the books as much as we do. It’s to the point where American muggles in their twenties and thirties strongly identify with the Hogwarts house they know they would have been sorted into. (Myself, I’m a Ravenclaw, though I have great admiration for Hufflepuff House and often wish desperately that I could be a Hufflepuff. It’s just not meant to be, don’t try to comfort me…)
But once you really start digging into this incredibly detailed world, it’s hard to escape the feeling that there is something going on at Gringotts Wizarding Bank. That is, the problem may not even be rooted within the bank itself, but something is certainly amiss in the wizarding economy of London. For reasons impossible to fully understand, magical currency is quickly losing value, and things don’t look good.
When eleven-year-old Harry Potter enters his vault at Gringotts Wizarding Bank for the first time, he’s greeted with a seemingly endless pile of glittering gold. Gold means galleons, in terms of wizarding money, and galleons are the largest unit of currency in magical England. Harry’s parents, who were killed when he was only a baby, left him plenty of the large coins. When we watch Harry step into that underground vault, we don’t know quite how rich he is (though we understand pretty well that he doesn’t want for much), because we don’t fully understand the value of a galleon itself. However, one year later, we get a small hint when Harry visits the wizarding bank with his friends, the Weasley family, and their nearly empty vault is shown in stark contrast to Harry’s glittering one. The Weasleys are poor, and though they have a collection of smaller coinage, they only have one gold galleon… for their entire household of seven people.
Yet, the Weasleys manage to acquire school supplies for all five of their school age children, including expensive textbooks. They have to scrimp and save and buy many things used, but in Molly Weasley’s words, they “manage.” At this point in the series, the year is 1992, and it would seem that a single galleon can go pretty far, indeed.
***
So, let’s talk about the money.
In the fourth book in the series, The Goblet Of Fire, Harry accompanies the Weasley family (minus Molly) to the Quidditch World Cup. There, they meet Ludo Bagman, a Ministry employee, former Quidditch star, and avid gambler. Fred and George Weasley are eager to jump into the betting themselves, and that’s when something really interesting happens.
“We’ll add five galleons for the funny wand, then, shall we…” Ludo Bagman says, in reference to a joke wand, made by Fred and George Weasley, which turns into a rubber chicken.
It is at this precise moment in the series when Ludo Bagman gains my undivided attention. I grew up decidedly working class, and my mother taught me how to write my own budget on a scrap of paper when I was a teenager. I’ve spent my life paying attention to numbers not because I love them, but for the same reason Molly Weasley pays attention to numbers—and remember, Molly Weasley, mother to Fred and George, two years ago only had one galleon in the bank.
Five galleons seems an extraordinary price for something that turns into a rubber chicken and has no real, practical function, but no one bats an eye. And it’s not an isolated incident, either. In the same book we learn that a pair of omnioculars (magical binoculars with special features such as instant replay) cost ten galleons, and Dobby the house-elf make ten galleons a week (a rate that Hermione informs us is, in fact, “not very much”).
***
A galleon is a gold coin, and it’s worth is the same as seventeen sickles (silver coins). The knut is the smallest unit of wizarding currency (copper coins), and it takes twenty-nine knuts to equal a sickle… therefore there are four hundred and ninety three knuts in one galleon. But, as it turns out, that’s about all we know about the galleon. Its actual value is incredibly tricky to nail down, in part because it’s never compared directly to any other currencies. So while we may know the individual prices of certain items (a wand, a pint of butterbeer, a fake wand that turns into artificial poultry) in the wizarding world (at least at a specific point in time) we don’t really have a larger context within which to place them. When young Harry takes that first trip to Gringot’s with Hagrid, we don’t know if a galleon is something like a dollar, or something like twenty dollars.
I have been looking into the matter (I told you: reluctant Ravenclaw), and I believe that the facts show that wizarding currency is woefully unstable, and the galleon is suffering from dangerously high rates of inflation. All of which has troubling implications for the wizarding world, Gringotts bank, and the Ministry of Magic. Here are just a few of the monetary facts that can be gleaned from the original seven books:
In Harry Potter And The Philosopher’s Stone, shortly after visiting Gringotts, young Harry purchases his magic wand, the most important tool he will ever own as a wizard, for seven galleons. Since wands are so powerful, it stands to reason they would also be quite expensive.
In The Chamber of Secrets, as mentioned above, the Weasleys have just one galleon for their entire family. They also, apparently have “a small pile of sickles” and it’s up to the reader to deduce how much currency we’re actually talking about. At seventeen sickles to the galleon, however, I think it’s nearly impossible that there’s anything more than three or four galleons’ worth of wizarding money in the Weasley’s vault. This is the year of Gilderoy Lockhart as Defense Against the Dark Arts teacher, and his books are said to be quite expensive. The Weasleys purchase as much as possible secondhand, but they do seem to buy at least three sets of Lockhart’s books (Ginny receives hers from Harry, and it’s possible that the twins would be able to share).
In The Prisoner of Azkaban, Percy Weasley bets ten galleons on a Quidditch match, which seems utterly absurd, but is also apparently a bluff as he tells Harry he doesn’t have the money. Is the value of the galleon falling? It’s hard to say.
Which brings us to book four, The Goblet of Fire, when suddenly a fake wand that does nothing but turn into an artificial bird costs five galleons, only two galleons less than the genuine article (Harry’s wand) did three years earlier.
Then, one year later, Harry rather casually tosses a galleon on the table of a tea shop, to pay for a pot of tea, in The Order Of The Phoenix.
These numbers are a bit tricky to work with, but I think we can at least say that the worth of the galleon appears to have depreciated quite rapidly. I’d estimate that if a galleon were worth around twenty-five U.S. dollars in the first book, by the fifth book its value has fallen to less than half that. That seems bad to me, but I’m no economist.
So I looked up the inflation rates for the U.S. dollar in the same time period. As it turns out, the internet is full of rather handy inflation calculators! The average inflation rate between 1991 and 1995 here in the United States was 2.83% per year, and to have the same purchasing power as $100 in 1991, you’d have to have $111.89 in 1995. Calculating an exact inflation rate for the galleon is of course trickier—most inflation calculators I found use CPI (consumer price index) and the wizarding world just doesn’t have one of those. But we can still use our estimates to compare American inflation in the 1990s against inflation in the wizarding world: to have the same purchasing power as 100 galleons in 1991, by 1995 you would need at least 200 galleons.
***
I first learned about exactly what inflation is and how it works by listening to NPR’s Planet Money podcast. The people who make Planet Money aren’t economists either—they’re reporters, but they do talk to economists and other experts. In 2010, they did a story on inflation in Brazil, how it got dangerously out of hand, and how it was finally reined in; in Brazil in 1990, the inflation rate was about 80% a month, almost comically higher than that of either the dollar or the galleon.
But the story does shed some light on what living with a drastically high inflation rate is like—the situation was so bad that prices in stores actually went up daily, and people would try to run ahead of the person changing the prices in order to pay yesterday’s price. Here’s a quote:
Inflation was a pain for people who shopped in stores as well as for people who ran those stores because the problem is you can only possibly know that inflation was 80 percent a month in retrospect. At the time it’s actually happening, you have no idea. This is one of the pernicious effects of sustained high inflation. You assume because prices were going up in the past that they’re going to continue going up in the future, but you don’t really know how much, how much do you tell the sticker man to raise prices by.
Another Planet Money story—this one about inflation in the United States in the 1970s—sheds further light on the economic situation unfolding throughout the Potter series. The inflation rate for the U.S. dollar in 1974 was about 10% a year: much lower than that ridiculously high Brazilian rate and considerably lower than what we’ve seen in the wizarding world, yet higher than what Americans live with today. Despite being so much lower than the fluctuations in value that wizards treat as normal, inflation in the 1970s was considered a “silent thief.”
***
So what could be causing the high inflation rate in the wizarding world? Obviously, it’s hard to say for sure, given the mysterious goblin origins of wizard gold. In Brazil, the high inflation trouble started in the 1950s, when the government printed extra money to pay for a new capitol in Brasilia. When you add more money to the economy, the value and purchasing power of currency goes down.
Wizards, however, are not in the business of printing paper money—we’re basically talking about the gold standard, here. Rowling herself is no help, stating in interviews that the galleon is worth around five British pounds. That number assumes the galleon’s inflation rate more or less keeps pace with that of muggle money, which according to my calculations can’t be true (and I’m more interested in what is in the books themselves, rather than what Rowling has to say about them after the fact). My best guess (given that wizards cannot, in fact, simply make more gold out of thin air, and the Philosopher’s Stone was destroyed) is that Cornelius Fudge’s government is leaning on the Gringotts goblins to mine gold faster, and produce more galleons, to fund the Ministry of Magic. That, in turn, would lead to a rise in inflation, and a decrease of faith and trust in the system of wizarding currency.
***
What we can be fairly certain of is that living with high wizarding inflation is stressful and difficult. Many witches and wizards are already highly isolated, and live under a government that doesn’t appear to be democratic (and easily sways towards corruption). On top of that, the magical people of England also deal with all the problems of a high inflation rate.
In Wizarding England in the 1990s, faith in the galleon must be fairly low. Because of that, folks would be likely to spend their galleons as quickly as possible, rather than letting them sit and lose value (perhaps that explains why the Weasleys have such a miniscule amount of cash in their vault). Resource hoarding is potentially a problem, as well—for a rich family like the Malfoys, it probably makes more sense to invest in rare artifacts of the Dark Arts than it does to keep a pile of galleons around, knowing that they could be worthless soon enough.
One thing is certain: Gringotts Wizarding Bank may be the safest place in the world, as Hagrid notes, but even the savviest goblins and the heaviest protective enchantments can’t do much to ensure the actual value of all those golden galleons stashed away in its vaults.
Katherine DM Clover is a mother, recovering fine artist, and a writer fascinated with the tiny weird details of each and every story. She’s been published at The Washington Post, Crixeo, Everyday Feminism, and many other fine publications. She lives in Detroit, Michigan with her wife and child, and their three cats, and she just learned how to make pie crust. Read her blog, Post Nuclear Era, or follow her on Twitter.
There is actually a correlation. The original editions of Quidditch Through the Ages and Fantastic Beasts and Where to Find Them had prices in real and wizarding currencies.
there are two things being conflated here – income and savings. Although there are definitely inconsistencies in the use of galleons, the weasleys are effectively living paycheck to paycheck.
A better way to think of it is that the vault money is savings / investments, which many families have very little, while others have large amounts. The former can live well off of their income, but do not have excess money to save. Just because a family has little to no savings does not mean they have little to no income.
I guess the Weasleys just don’t have much excess income to save in their vault?
I think the simpler explanation is that the worldbuilding wasn’t quite as intricate as advertised and Rowling just didn’t keep good track of what the value of a galleon was supposed to be. (Although I’m no one to judge — I once accidentally changed the name of an entire alien species between the first and second stories in a series.)
The question is, how big is a ten-galleon hat?
From Harry Potter and the Methods of Rationality: Chapter 4: The Efficient Market Hypothesis
And
@@.-@. I was just about to comment that the bank had a big arbitrage problem if anyone ever figured it out. You beat me to the source.
There is at least one thing to take into account that may affect how you look at Prices in HP: Not the value of each item, but What was paid and by whom.
Bagman gave the Twins 5 galleons for the fake chicken wand, not because they charged him 5 galleons, but simply because that’s what he gave them. Ludo, although he owes a lot of money to goblins, is a famous Quiddich player and high-level member of the Ministry; presumably he is used to living high. He;s also almost famously genial and outgoing: No doubt he’s a huge tipper. My perspective on this is, he basically handed them what he thought would be appropriate, but like many other wealthy people, didn’t think much of the actual *value* of what he was getting.
The same thing applies to Harry dropping a galleon for a pot of tea, for a slightly different reason: Harry isn’t *used* to thinking in galleons. He almost certainly wouldn’t have dropped a twenty-pound note on the table to pay for a pot of tea; but he knows he has stacks and stacks of galleons at Gringotts. It just doesn’t mean that much to him. If you pointed it out to him, he’d likely be surprised. Keep in mind this is a kid who tried to *give away* a thousand galleons.
As far as the Omnioculars: Think about any sporting event you’ve ever been to. Merchandise for sale is always overpriced. Sometimes to a ridiculous degree. I was at a Professional baseball game where team jerseys by the official MLB manufacturer were being sold. In later looking up prices online, I found they were being sold for FIVE TIMES their actual cost versus buying direct from the maker. That’s the sort of thing you have to expect, and the World Cup would likely be even more so.
So I don’t think the inflation is as much a problem as you might think: Context, as they say, is everything.
Bagman’s offer of five galleons for the twins’ wand is a weak data point. As Pufnstuf notes @6, he’s likely pretty freehanded with the way he throws around cash. He may also be quite generous here, because he knows it’s fairy gold and thus worthless. His offer has more to do with him keeping up appearances than actual value.
I think MadCardigan also make a good point @2 about svings v. income. The Weasleys don’t have a lot of savings, but Arthur brings home enough for them to get by. They are, in essence, living paycheck to paycheck.
Re: the Weasleys and savings vs income. What we don’t know is how wizard paychecks work. Are they paid in sacks of actual coins? Given a check? Magical direct deposit? The question being, do the Weasleys have money at home that they use for regular purchases and only visit Gringott’s when they need to get money out for larger expenses, such as school supplies for the kids.
I think that, despite point about them living paycheck to paycheck, one Galleon plus doesn’t really seem enough to buy all those supplies, so maybe Molly had more money on her from home and only visited the bank to get additional.
Someone please figure out how much it would cost to buy a Big Mac in Wizarding London and add it to The Economist Big Mac Index. Please?
@9. And figure how long an average wizard working at a wizarding McDonalds would have to work to be able to buy a Big Mac.
Most wizards don’t study maths at school (arithmancy is optional, and sounds more like divination than maths, although Hermione seems to like it despite her dislike for divination). If goblins are the only ones who understand the worth of money it’s not surprising that wizard economy is strange.
We all love Rowling for her amazing, mind blowing, evocative world building. At the same time she is utterly terrible at the information behind that world building. She’s either bad at maths or just doesn’t care. The money makes no sense. Quidditch scoring makes no sense. She makes mistakes about ages and classes (to the point that in some circles of fandom her mistakes earned the name ‘a Flint’ after the character from Syltherin’s Quidditch team listed as being a 7th year, two years running). Wizarding Britian’s population makes no sense in relation to the population of Hogwarts, let alone size of the worldwide wizarding population. Anyone trying to do something concrete with what we’re given in cannon ultimately has to throw up their hands and make assumptions, some of which will contradict at least a portion of what we’re told in the books, because in the end, whatever the reason, Rowling’s just bad at Maths.
@12/longstrider: Couldn’t Flint have flunked out and had to retake the year?
@13 That’s one explanation, but we’re never given any support of that being a potential punishment. But if he’s failing then he’s got issues with academic eligibility for being the Quidditch team captain (though that’s never discussed). We’re given no mechanism for retaking your OWLS/NEWTS which he would have been taking at the end of his first 7th year. There are also dire implications around Harry leaving one of his OWL tests early. Crabbe and Goyle are portrayed as being the bottom of their class and we never see flunking floated as a possibility. It’s also not something that you see in British Boarding School stories, which Harry Potter is heavily based on.
@12 “The money makes no sense” I’m pretty sure it’s a commentary on pre-decimalisation money in the UK. Which also made no sense.
A wizard did it. The simplest answers are usually the best.
@15 Wiredog, yes the Galleon/Sickle/Knut relationship is certainly a commentary on the predecimalisation money. I was referring to the thrust of the whole article with the wildly fluctuating worth of a galleon.
Gonna jump off the JK Rowling hype train here – her worldbuilding is pretty thin. It’s wonderful from a “lets have a 12 year old kid get immersed in a fun world,” but it totally breaks down when you look past the surface of basically any assertion about the Magical community. The issue of money is just one of many worldbuilding flaws.
Her universe is evocative, but not particularly deep.
@14 – That is indeed the explanation JK Rowling gave in an interview back in the day. Marcus Flint had to redo a year. Some fan caught her on it.
@12 – I agree that Qudditch scoring doesn’t make sense. That’s one thing that always bugged. She went way overboard with the 150 points for catching the snitch. 50 points would be much more understandable. Also, she should have differentiated between school Qudditch and professional Qudditch, like in the World Cup. Maybe make the snitch faster for professionals and put further distance between the goalposts to make it harder for the Keeper, while making them smaller to make it harder for the Chasers. That sort of thing.
@@@@@ 15 and 17 – but predecimal currency actually does make a lot of sense in that it operates in base 12 and base 20, both of which are easier to divide than 10. 12 can to go two sixes, six twos, three fours or four threes; 20 can go ten twos, two tens, four fives or five fours, and the additional shilling to get a guinea means you also have the seven threes and three sevens options. 240 pennies in a pound give you far, far more ways to divvy up a pound than 100 pennies do, and that’s leaving aside halfpennies and farthings.
Which makes it pretty ridiculous that Rowling comments on this by using money based on sodding prime numbers, the effect of which is exactly opposite to that of Britain’s predecimal currency, and forgets how her own currency works almost immediately with the “seventeen sickles for an ounce of dragon liver” error.
Not only is Rowling terrible at maths, she doesn’t think about the mathematical reasons why things are (or in this case were) as they are.
I wasn’t born until over a decade after decimalisation. I still pine for real money.
This may or may not be the same issue, not the buying power Rowling gives galleons is low enough I suspect the coins have very low gold content.
This article is an entertaining example of how fiction and pop culture can be used effectively as a teaching tool: simpler than real-world case studies, and more compelling than contrived ad-hoc examples.
Yet it also illustrates how one can end up with a ridiculous conclusion when applying a rigorous analysis without properly assessing the quality of the input data. The wildly inconsistent purchasing power of the galleon, and characters’ perceptions of its value, should be a bit of a red flag. Combine that with inconsistent chronology, plus inconsistencies in the number of students and teachers at Hogwarts, plus inconsistent distances and travel times between various plot-relevant places, plus…well, it seems that anything having to do with numbers in these books is inconsistent! Any conclusion based on taking such numbers at face value is thus unreliable, even if technically not wrong; to propose such a conclusion as a hidden story element without any other support from the text is amusing but silly.
—
JKR’s worldbuilding, like that of similar cultural phenomena (e.g. Star Trek, Star Wars), is akin to that of a good stage production: primarily there to support the story, detailed and self-consistent enough to allow the audience to imagine some additional depth, yet full of gaps and contrivances when viewed up close and in isolation from the story. I wonder how much genre authors suffer in this regard by comparison with Tolkien, which is a bit unfair since he built his world to amuse his family and himself for decades before he wrote his most famous works. And yet for all his effort I’m not sure the economy of Middle-earth would stand up to scrutiny either. :-)
Maybe the coins are “gold-ish”, like in Ankh-Morpokh. They are apparently inscribed with serial numbers, which would be unnecessary if they were specie money.
I think we’ve got too many issues with the world-building to make sense of the economics, but it does strike me that Hermione could probably spend ten minutes with her parents’ accountant and learn more auditing skills than the entire wizarding world, including Gringrotts.
I think one of Rowling’s hidden themes is that magic makes people dumb.
Consider that England hosted the Quidditch World Cup in GoF. Such events are bound to cause some overcharging.
I think one of Rowling’s hidden themes is that magic makes people dumb.
Definitely. Because if you’re a wizard, you don’t have to try hard. It’s like the Slavers in Larry Niven’s Known Space books. They were telepaths who could dominate any creature within twenty miles, permanently. But once you evolve that power, you don’t need to go on evolving intelligence, because you can just dominate something more intelligent than you and order it to do your thinking for you.
It’s also a bit of an error to say that increasing the money supply is the only thing that causes inflation. That’s the monetarist view, which is based on the argument “if suddenly there are a lot more sheep in the market, the price of a sheep (measured in dollars) will go down; so if suddenly there are a lot more dollars in the market, the price of dollars (in sheep) will go down.”
Recent experience doesn’t bear that out. The money supply has increased vastly in the US over the last ten years, and inflation has remained low – lower, in fact, than the Fed would like it to be. (The same is true in many other countries.)
Here’s what actually causes inflation:
1. A rapid increase in demand for stuff, beyond the ability of supply to respond. Demand goes up, prices go up. So if the economy’s booming and everyone is consuming a lot, you’ll see prices rise.
2. A rapid decrease in demand for money. Imagine a situation where people are losing faith in money; if, for example, your government is about to be overthrown by an invader. Those Reichsmarks will be worthless in a couple of months; so if you want to pay me for my sheep in Reichsmarks, I’m going to want a heck of a lot of them. Or: inflation is so high that I know any currency I hold now will be worth less tomorrow, so I want to get rid of it and buy something else. (Locked-in expectations of inflation; that’s also how you get a price-wage spiral.)
3. A sudden drop in the supply of stuff. Basically the reverse of 1.
Now, if the government decides to finance a deficit by printing money, you can get hyperinflation. But that depends on you having paper money – and wizards are, obviously, still on the gold standard.
In “Harry Potter and the Methods of Rationality”, an often hilarious rethinking of the universe where Harry is raised by a scientist, becomes a Ravenclaw, and uses the scientific method to examine the workings of magic, Harry has a realization when first visiting Gringotts:
1. The sickle to galleon exchange rate is set
2. Raw silver and gold can be minted into wizarding money by Gringotts for a small fee.
3. The muggle price of silver and gold fluctuate, and certainly aren’t 17-1.
He can essentially use the different exchange rates to generate infinite money, by buying raw silver, getting it minted to sickles, exchanging it for galleons, selling the galleons as raw gold, buying more silver, repeat. (It may be a gold to silver conversion, depending on the muggle exchange rates).
As it happens, I have a somewhat similar problem with the John Wick movies (which I love unreservedly), where we see people using the same denomination of coin to pay for either a drink or a hotel room.
@12: You’d almost think that … she’d made it all up!
There’s an easy answer to all this: JKR didn’t really care about the stuff that doesn’t matter. Sometimes fans just go a bit too far. Thanks to wiredog for the link to ‘Methods of Rationality’ though, that was great!
@Paul (28)
There used to be a country (iirc, it was called the “United States”) where there was strong political movement, bimetallism, to have silver and gold, both, as legal bases for currency at a fixed rate of exchange. It’s probably a good thing it failed to be implemented.
@3 Christopher Bennet, that’s the first thing I thought of too. It’s more a failure at worldbuilding by Rowling. It’s undoubtedly fun to write an apologetic article, but there are limits:) And at least money is not at all central to the story or there would be a big problem.
By contrast The Name of the Wind does it very well, with Kvothe’s unending money woes. Practically not a page goes by without some mention of him scrounging for an iron shim or copper jot. It isa great (though admittedly sometimes tiresome) way of anchoring the story in some sort of reality (and of course it’s justified by Kvothe’s particular history and situation). Other authors might use the passage of time, especially if their tale is largely journeying. Robert Jordan does it with smoothing skirts I suppose!
People who anchor their story incorrectly can be exemplified by Christopher Paolini (I offer no apologies) especially in his later books when he never fails at an opportunity to mention that there is this impending confrontation between Eragon and Galbatorix. Yawn.
The idea that the MoM is “leaning on the Gringotts goblins to mine gold faster, and produce more galleons” seems implausible. Knowing goblins, they’re mining as fast as they can already, and historically gold-mining rates have been hard to increase without new discoveries. But there are a couple of other possibilities:
It’s not clear who coins Galleons. Presumably some authority at the Ministry of Magic? (Or are they an international currency?) But rapid inflation in a precious-metal standard, absent vast new mines, generally means one thing: adulteration of the currency. This is the precious-metal equivalent to printing more money; the coiner (i.e. the government) reduces the amount of actual precious metal in the coins, but demands that they be accepted at the old rate. They can thus create more coins from the same amount of gold, but once people figure it out, inflation becomes rampant. If the MoM has a persistent budget deficit and can’t float loans in the open market, this may be how they finance it.
It’s also not clear if Gringott’s makes loans. I have to assume they do, since otherwise what’s the point of having a bank? Something has to pay for all those elaborate security measures. If they make loans, operating like a fractional-reserve bank, that means not everyone’s gold is actually in the vault at any given time — some of it is lent out, with other gold being rapidly shuffled in when the customer wants to come and look at it.
All well and good, but let’s say the MoM is again running a budget deficit, and comes to Gringott’s (effectively the Wizarding World’s central bank) looking for a loan. (Or a “loan”, since governments are bad about paying these back.) If Gringott’s can’t say no to their own government, they have to provide, regardless of the state of their reserves. Even if they contract other lending to compensate, the government may keep spending money faster then they can call in loans, which means that reserve levels at the bank fall — more outstanding loans balanced on an increasingly small capital base. This also results in inflation, since Gringott’s is increasing the effective money supply, “creating” more currency by decreasing banking standards.
This is the really dangerous scenario, because it leaves Gringott’s vulnerable to a bank run. If everyone comes to withdraw money at once, the goblins won’t be able to pay, since much of what’s “in” their vaults is actually on loan to the MoM. The MoM, strapped for cash itself, won’t be able to stage a rescue, and the whole house of cards comes tumbling down. Gringott’s fails, gold hoarding is rampant, Harry Potter is destitute, the MoM repudiates its loans, and unemployment skyrockets as a severe depression begins.
@33: So if Voldemort had a lick of sense, he should have taken a page from Auric Goldfinger and simply found a way to curse all the specie in the Gringott’s vaults. Much less effort to establish his dominance over wizarding Britain than recruiting Death Eaters and taking over the Ministry!
(“Do you expect him to talk?” “No, Mrs. Potter, I expect him to die!”)
You forgot that the Weasleys won 700 galleons in between book 2 and book 3, although they might have spent it all.
http://harrypotter.wikia.com/wiki/Daily_Prophet_Grand_Prize_Galleon_Draw
“When you add more money to the economy, the value and purchasing power of currency goes down.”
You’d think, right?
Turns out it’s a bit more complicated than that. I don’t understand it well enough to summarize the controversies. The way I like to think of it, though, is that money is backed by goods and services, including some that don’t yet exist. Under certain circumstances, printing money can help those goods and services come into being — so the value and purchasing power of the currency can remain stable or even go up.
How do you define those circumstances? Pass.
@34,
I think it’s been adequately demonstrated that Voldemort was out-organized by two 11-year old children who grew up outside of the wizarding world, probably because they grew up as muggles.
@37: Alas, the interest in my Bond joke seems on the low end. How deflating. ;-
As an economist and lifelong SFF reader, I can confidently report that most SFF writers can’t write a working economy. Not at all. In most cases, there’s no retconning that can possibly explain the economy as demonstrated in the books. It’s so bad (worse even than Lois McMaster Bujold’s “command” of military ranks) it’s not even worth trying to examine or figure out, not even for a dedicated examiner like myself. Precious and rare are the examples of books that get it right. Bujold’s “Ethan of Athos” is one of the few that demonstrate an understanding of economics, to the point of internalizing what are usually externalized costs – in this case, that of “free” child-raising labor.
@39,
No doubt you’re right about economic systems, but I think we need to expand this to society in general.
On the other hand, don’t beat up Ms Bujold too much on military command systems. These have varied too much by country and by time. While military organizations have analogous structures, they don’t have identical structures, and they do not have identical titles for comparable ranks. For example, major is the most senior enlisted (UK “other rank”) in the French Army, while it is the rank immediately superior to captain in the US Army, and it doesn’t exist in the Royal Navy, at all. Denmark uses the same rank titles for all enlisted ranks in all services. Several of the Scandanavian armies, e.g., Norway didn’t have non-commissioned officers, with sergeants and petty officers included in befal, which included [army] lieutenants and captains. In earlier times, ships would have [sailing] master, who would be responsible for running the ship and a captain, who was the military commander of the ship but may not have the skill to, oh, tell a topmast from a topknot.
I’m kind of giving Ms Rowling a pass on her financial system: it’s far from obvious that the real-world financial system is, in any concrete terms, anything but arbitrary.
Funny, I never really thought about the money other than being annoyed at the random numbers from knuts to sickles to galleons!
My favorite example of an HP worldbuilding flaw is this: there is absolutely NO WAY that any of the muggle-born students would just casually and easily adopt the use of the quill pen!
@brendaa (41)
The use of quill pens is one of the reasons I think JKR was showing that magic made people dumb. Come on, not even fountain pens, let alone ball-points.
The use of quill pens is a great way to signal in group/out group without being blatant about your discrimination. Muggleborns being at a disadvantage is almost certainly the point, putting them in their place right from the outset. It will make their homework and class note taking harder, making it more difficult for them to get good grades, and probably also marking their handwriting out for life as being that of a muggleborn. Same with the difficulty in using their overcomplicated currency, Muggleborns will always struggle to calculate prices out on the fly and will probably be at greater risk of poverty through poor financial skills. Poor grades, bad handwriting, and money problems for muggleborns, just goes to show that purebloods are naturally better…You know how it goes.
@swampyankee: I don’t think magic makes wizards dumb, it makes them lazy. And why not? Why learn engineering (or even basic carpentry) when you can cast a spell to prop up your house? Why learn psychology or project-planning skills when a simple flick of your wand can confund the people who momentarily got the best of you? It’s actually quite sensible and efficient if you have the ability to do so.
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Is the continued use of an arcane monetary system, in an economy that would require constant behind-the-scenes intervention to keep from collapsing, really so inexplicable for a wizarding culture that somehow manages to remain astoundingly separate despite a constant influx of new members drawn from the overwhelmingly larger muggle nation surrounding them? Wizards, in their quest to maintain their identity, seem quite determined to hold onto old ways that are inherently unstable and unnecessary, doing whatever is needed to keep it going. Realistic and sustainable? Almost certainly not. But does that represent a failure of world building, or the core conceit that the audience must accept to make the story go?
@43, considering that muggles take math in school, I think it’s unlikely they’ll struggle with the money any more than a wizard who hasn’t learned about modulo arithmetic….
Interesting article but in the end the truth is that Wizarding money and financing is one area Rowling messed up. As you point out in the article, she is all over the place in assigning monetary values to items in the books, and her stated exchange rate (1G = £5) is laughable. The galleon is described as a large coin but looking at real world gold coins the current value of (for example) a South African Krugerand is around £1000! The gold alone in any sort of galleon coin would have to be worth several hundred pounds at the very least.
Another point for those of you commenting on the monetary system used in Harry Potter as silly or archaic. At the time events in the first book began (1981) the British had only been using their “modern” decimal monetary system of £1 = 100 pence for around 10 years. Before that they used a system were £1 = 20 shillings, and 1 shilling = 12 pence. This was obviously the inspiration for the Galleon, Sickles angel Knuts used by wizards.
@43 – that’s kind of chilling, but I also agree with the below that in some ways, Muggles may have advantages. I agree with the others who have said JK Rowling goes to some lengths to show that wizards aren’t exactly great innovators (and that also goes for their general ideas/culture/social structure).
Economics tends to go over my head, but this, and the comments, was an interesting read :)
Here’s a simple explanation for inflation: Voldemort.
Gringotts has a break-in in Book One. That probably caused a few scares and runs on the bank.
Hogwarts gets attacked by a monster in Book Two. The public probably thought it was a terrorist action, what with a human writing “the Chamber of Secrets has been opened” on the wall and all. Panic could cause inflation.
Book Three: Sirius Black, top criminal, escapes from Azkaban, the “no one’s ever escaped from here before” prison. Large-scale panic. Financial situation worsens.
Book Four: Terrorist attack at the largest public wizarding event in the world, followed by murder at the highly publicized Triwizard Tournament. See 1-3.
Book Five: Large-scale corruption in the Ministry, along with slander campaign against Harry which probably required more spending. Then, later on, mass-breakout from Azkaban, the “okay, only ONE person’s ever escaped from here before” prison.
In the wizarding world, dark wizards are a REALLY big deal; wizards seem to have far fewer criminals than Muggles. Voldemort inspired a level of fear and terror that Al Qaeda, ISIS, or other singular individuals have never caused in real life. Even the slightest hint of Voldemort’s activity could cause panic, rash spending, hoarding, and any manner of problems that could lead to inflation.
If there IS inflation in the wizarding world, I’m betting Voldemort caused it, as he started to ruin the pretty little head-in-the-sand utopia the Ministry had created.
@49
JK must be relieved that she can once again blame Voldy for everything :)
I don’t think it’s something meant to be considered so much. It’s not complicated, and I don’t think J.K. Rowling that about inflation of the wizarding money when writing these in depth and imagery filled books. If anything maybe she did this on purpose to show the idiocrcy of currency and banks. Money has no true value than what our governments have believed you to think it does. Your house has value, and the skill to build that house has value, your car has value, and the ability to make a car has value. But money truly has no value. I mean think of the countless number of innocent people who get murdered over money, and power and the secrets kept in order to keep all that money and power. Value is in the eye of the beholder. If all currency was gone tomorrow, you would look at 10 million dollars and a bucket of Kentucky fried chicken and for once, you’d chose the chicken because the food is truly worth something, your life. Money only has value because the government makes it so. So I think J.K. Is trying to show you to have more value and love for family, friendship, loyalty, in her world’s case magical ability, knowledge, she shows this through Sirius giving Harry a fire bolt broom, which quickly mended the wound of losing his Nimbus 2000 which had great sentimental value for him as it was one of the first gifts given to him by anybody, and showed him there are caring and good people looking out for him, Philosopher’s stone, Minerva gifts harry a nimbus 2000 broom. It isn’t painful to have lost the broom. The broom is replaceable, even a house is replaceable. But they still hold more value than money or a gold coin. Life is value, not paper or gold. So don’t over analyze how the galleon as a currency is inflated, which again it’s a book series, who cares if their money is inflated, they can do magic…who needs money…so again I truly think J.K. meant to be inconsistent with the ministry value of a galleon to show currencies true uselessness in any world magical or non magical