Maybe the goblins have established some sort of monopoly on Galleon production, and regulate the amount of it that may be produced in one year? Plausibly the wizards might support that kind of a monopoly to prevent rampant inflation and destabilization of the economy.
Even if their knowledge of economics hadn’t caught up with muggles and they were still thinking in mercantilist terms (and so didn’t properly understand the concept of inflation), they could still understand that things will remain more stable that way. There have always been monopolies on the production of the official currency, with counterfeiters being harshly punished, and the (guild-like) goblins controlling it would fit with the general “old-fashioned” nature of the wizarding world.
If the goblins allow wizards to bring in gold to be minted, as Griphook told Harry, then how would they decide what wizards to work with? Every wizard can steal an effectively unlimited amount of gold from Muggle vaults. If many wizards did so, and then the goblins refused to turn most of that gold into Galleons, this would probably act to break their monopoly as a market in gold and/or other coins naturally emerged.
Unless wizards all agree not to value raw gold at all, only Galleons. That seems implausible.
Unless wizards all agree not to value raw gold at all, only Galleons. That seems implausible.
Why? There are vast advantages in using the currency that everyone else accepts. Real-world alternative currencies rarely replace the official national currencies, either. (Even if you believed that Bitcoin had the potential to eventually do so, gold and Galleons are both physical currencies, so gold wouldn’t have the advantages of a digital cryptocurrency.)
Muggles have never agreed not to value gold, even though vastly more money exists in non-gold-backed currencies today. Which is why those gold vaults still exist.
On the other hand, the main reason Muggles value gold is for jewelry, and it’s more likely that wizards use magic to substitute.
But, again, the fact is that Griphook agrees to convert gold into Galleons at only 5% overhead. So even if a wizard only values Galleons, he’ll want to acquire gold and give it to Griphook.
Griphook says earlier in the fic that “only a fool would trust anything other than goblin stamped galleons”, or words to that effect. So maybe wizards are free to trade gold with Muggles, but raw gold is easy to fake, so nobody is interested in raw gold, and only galleons are valuable. The goblins will stamp some galleons for you for a fee, but they don’t want to hyper-inflate the economy so they only do small batches. Either its near-impossible to fake up galleons, or the threat of goblin war against counterfeiters is too scary for people to try. Or have I missed something?
Either its near-impossible to fake up galleons, or the threat of goblin war against counterfeiters is too scary for people to try.
I think you’re onto something. Specifically, in the books, Goblins possess magic metalworking techniques wizards don’t know how to duplicate—and they know how to detect them. (It’s a point of contention as part of the whole “give us wands” thing.)
What if the Galleons are actually fake gold created by Goblins, and they can tell ‘fake’ currency because it’s real?
You’re suggesting that there are two substances, difficult to tell apart, both called “gold”. On what grounds does one decide which to think of as “the real thing” and which to think of as “an imitation of the real thing”?
On the grounds that if the goblins can tell them apart, there must be some difference. Remember, something doesn’t need to have a physical use to have value—see Bitcoin, or intellectual property, or stock options. Simple scarcity is sufficient to create value if people decide to value it.
Simple scarcity is sufficient to create value if people decide to value it.
“If people decide to value it” makes that a tautology. Leaving that aside, scarcity is necessary but not sufficient. The only surviving painting by a contemporary of Leonardo da Vinci of little renown will be valued, but less than one by Leonardo.
Silver has two stable isotopes, in roughly equal proportions. I doubt there’s much monisotopically refined silver in the world. It would cost more to make it, but it wouldn’t be worth more, unless someone wanted some that badly for a practical purpose.
As phrased it’s tautological, but my point was the implication—people can choose to value whatever they want, value is not intrinsic to an item. Lack of scarcity does provide an upper cap, though—air will never be valuable on the surface of Earth—so if people have chosen to value something, then scarcity is the remaining factor needed for it to have value. (I phrased it poorly, but I think it’s still strictly correct)
air will never be valuable on the surface of Earth
Actually, some cities have featured “air stations” or “air bars” due to smog, historically. I don’t know if they still exist, I haven’t heard of a contemporary one.
But which is “real” and which is “fake”? “Real” and “fake” are not objective properties of things. If only goblins can tell the two golds apart, why would anyone care? For practical purposes, for everyone else except Harry Potter there would just be “gold the goblins for unknown reasons say is type 1” and “gold the goblins for unknown reasons say is type 2″. Harry would be trying to find out what objective properties distinguish them.
The goblins are the central bankers of the wizarding world. They are entrusted with providing a reasonable money supply, and they’re free to use methods of their choice to create that(well, subject to assorted speciesist laws). I don’t care why the Federal Reserve says to use cotton money instead of plastic, as long as they run the money supply sufficiently well that I trust them.
I don’t believe that goblins’ magical power could outsmart that of wizards in this way. Particularly with the emphasis on wizards having access to wands and spells.
But then goblins would still want wizards to bring in real gold for “minting”. And wizards would still steal or trade for all the Muggle gold to give to goblins, and billions of Galleons would be circulating as a result. And we don’t observe that.
But does the Ministry—who are the ones with aurors—want muggles wondering why there’s so little gold nowadays? Not to mention the sudden rich people messing up the established power balance.
Again, why would the Ministry not take the gold for themselves instead of guarding it for the Muggles? Note that the explanation has to hold across all of recorded history, in many nations and times.
Why would the Ministry do that? I’m kind of drawing a blank here. Sure, the Magical government (maybe not the Ministry, since you can be fined for breaking the statute of secrecy) could probably pull it off (although it would have all sorts of repercussions.) But … I’m having a hard time imagining them doing so.
Honestly, can you imagine a Muggle government doing something like that? I mean, it’s not perfectly analogous, but I’d say your average army could fill in for magic here.
I didn’t mean the Ministry would steal Muggle gold and put it in the Ministry fund. I meant some Minister, or Head Auror, or other well-connected person, would steal it for himself (plus bribes to the guards to look the other way).
And yes, I totally believe that Muggle ministers would do that if they could, and in fact have done so many times in Muggle history.
I didn’t mean the Ministry would steal Muggle gold and put it in the Ministry fund. I meant some Minister, or Head Auror, or other well-connected person, would steal it for himself (plus bribes to the guards to look the other way).
Oh, right. Yeah, that’s a bit more plausible, I have to admit.
And yet … still very hard. Unless you’re already really really rich? I guess?
And yes, I totally believe that Muggle ministers would do that if they could, and in fact have done so many times in Muggle history.
It used to be that governments would debase their coinage whenever they needed money. Today, of course, we’re all taught that constant inflation is good for us.
Which, while admittedly very annoying to those poor suckers who already possess money, is rather different to launching a strike team to physically empty bank vaults.
Everyone does what they can. There have been many incidencts when Muggle governments expropriated privately owned gold (or other riches). They wouldn’t do it to themselves, of course, so the central bank vaults remained safe.
But the point is, only the arbiters of ultimate power (or their clients) can be truly rich; if anyone else is richer than they are, they will tend to take the riches by force. In the HP-verse, wizards have the ultimate power.
Except wizards don’t view themselves as the “arbiters of ultimate power” over the Muggles. Statute of Secrecy.
Now Voldemort, I admit, would probably have done something like this once he took power. Or Grindelwald. But neither of them won, so… manifestly, no wizard has successfully seized power to rule over the Muggles (except maybe waay back and it got covered up) because the SoS is still a thing.
Maybe the goblins have established some sort of monopoly on Galleon production, and regulate the amount of it that may be produced in one year? Plausibly the wizards might support that kind of a monopoly to prevent rampant inflation and destabilization of the economy.
Even if their knowledge of economics hadn’t caught up with muggles and they were still thinking in mercantilist terms (and so didn’t properly understand the concept of inflation), they could still understand that things will remain more stable that way. There have always been monopolies on the production of the official currency, with counterfeiters being harshly punished, and the (guild-like) goblins controlling it would fit with the general “old-fashioned” nature of the wizarding world.
If the goblins allow wizards to bring in gold to be minted, as Griphook told Harry, then how would they decide what wizards to work with? Every wizard can steal an effectively unlimited amount of gold from Muggle vaults. If many wizards did so, and then the goblins refused to turn most of that gold into Galleons, this would probably act to break their monopoly as a market in gold and/or other coins naturally emerged.
Unless wizards all agree not to value raw gold at all, only Galleons. That seems implausible.
Why? There are vast advantages in using the currency that everyone else accepts. Real-world alternative currencies rarely replace the official national currencies, either. (Even if you believed that Bitcoin had the potential to eventually do so, gold and Galleons are both physical currencies, so gold wouldn’t have the advantages of a digital cryptocurrency.)
Muggles have never agreed not to value gold, even though vastly more money exists in non-gold-backed currencies today. Which is why those gold vaults still exist.
On the other hand, the main reason Muggles value gold is for jewelry, and it’s more likely that wizards use magic to substitute.
But, again, the fact is that Griphook agrees to convert gold into Galleons at only 5% overhead. So even if a wizard only values Galleons, he’ll want to acquire gold and give it to Griphook.
What if the Galleons are actually fake gold created by Goblins, and they can tell ‘fake’ currency because it’s real?
That way, only the Goblins can test for ‘real’ vs. ‘fake’ currency because the wizards all have it backwards.
Griphook says earlier in the fic that “only a fool would trust anything other than goblin stamped galleons”, or words to that effect. So maybe wizards are free to trade gold with Muggles, but raw gold is easy to fake, so nobody is interested in raw gold, and only galleons are valuable. The goblins will stamp some galleons for you for a fee, but they don’t want to hyper-inflate the economy so they only do small batches. Either its near-impossible to fake up galleons, or the threat of goblin war against counterfeiters is too scary for people to try. Or have I missed something?
I think you’re onto something. Specifically, in the books, Goblins possess magic metalworking techniques wizards don’t know how to duplicate—and they know how to detect them. (It’s a point of contention as part of the whole “give us wands” thing.)
You’re suggesting that there are two substances, difficult to tell apart, both called “gold”. On what grounds does one decide which to think of as “the real thing” and which to think of as “an imitation of the real thing”?
On the grounds that if the goblins can tell them apart, there must be some difference. Remember, something doesn’t need to have a physical use to have value—see Bitcoin, or intellectual property, or stock options. Simple scarcity is sufficient to create value if people decide to value it.
“If people decide to value it” makes that a tautology. Leaving that aside, scarcity is necessary but not sufficient. The only surviving painting by a contemporary of Leonardo da Vinci of little renown will be valued, but less than one by Leonardo.
Silver has two stable isotopes, in roughly equal proportions. I doubt there’s much monisotopically refined silver in the world. It would cost more to make it, but it wouldn’t be worth more, unless someone wanted some that badly for a practical purpose.
As phrased it’s tautological, but my point was the implication—people can choose to value whatever they want, value is not intrinsic to an item. Lack of scarcity does provide an upper cap, though—air will never be valuable on the surface of Earth—so if people have chosen to value something, then scarcity is the remaining factor needed for it to have value. (I phrased it poorly, but I think it’s still strictly correct)
Neither air nor water are scarce on Earth; but clean air and clean water have value.
Actually, some cities have featured “air stations” or “air bars” due to smog, historically. I don’t know if they still exist, I haven’t heard of a contemporary one.
But which is “real” and which is “fake”? “Real” and “fake” are not objective properties of things. If only goblins can tell the two golds apart, why would anyone care? For practical purposes, for everyone else except Harry Potter there would just be “gold the goblins for unknown reasons say is type 1” and “gold the goblins for unknown reasons say is type 2″. Harry would be trying to find out what objective properties distinguish them.
Fake in the sense that Goblins claim that gallons are made from raw gold, when they actually aren’t.
The goblins are the central bankers of the wizarding world. They are entrusted with providing a reasonable money supply, and they’re free to use methods of their choice to create that(well, subject to assorted speciesist laws). I don’t care why the Federal Reserve says to use cotton money instead of plastic, as long as they run the money supply sufficiently well that I trust them.
I don’t believe that goblins’ magical power could outsmart that of wizards in this way. Particularly with the emphasis on wizards having access to wands and spells.
Also: why would goblins do this?
Because the goblins don’t like having real gold go out of their hands.
But then goblins would still want wizards to bring in real gold for “minting”. And wizards would still steal or trade for all the Muggle gold to give to goblins, and billions of Galleons would be circulating as a result. And we don’t observe that.
’cause it can be turned into money, so they would want it, so it would be valuable.
I suspect anyone bringing in such a large pile of gold would be immediately arrested, or at least investigated, unless they had a damn good story.
Why? The goblins take a percentage for the minting, so they want the minting to go ahead.
But does the Ministry—who are the ones with aurors—want muggles wondering why there’s so little gold nowadays? Not to mention the sudden rich people messing up the established power balance.
Again, why would the Ministry not take the gold for themselves instead of guarding it for the Muggles? Note that the explanation has to hold across all of recorded history, in many nations and times.
Why would the Ministry do that? I’m kind of drawing a blank here. Sure, the Magical government (maybe not the Ministry, since you can be fined for breaking the statute of secrecy) could probably pull it off (although it would have all sorts of repercussions.) But … I’m having a hard time imagining them doing so.
Honestly, can you imagine a Muggle government doing something like that? I mean, it’s not perfectly analogous, but I’d say your average army could fill in for magic here.
I didn’t mean the Ministry would steal Muggle gold and put it in the Ministry fund. I meant some Minister, or Head Auror, or other well-connected person, would steal it for himself (plus bribes to the guards to look the other way).
And yes, I totally believe that Muggle ministers would do that if they could, and in fact have done so many times in Muggle history.
Oh, right. Yeah, that’s a bit more plausible, I have to admit.
And yet … still very hard. Unless you’re already really really rich? I guess?
Well, maybe via war...
Nope, sometimes the government just steals everyone’s gold.
That … doesn’t seem like a great example.
It used to be that governments would debase their coinage whenever they needed money. Today, of course, we’re all taught that constant inflation is good for us.
Which, while admittedly very annoying to those poor suckers who already possess money, is rather different to launching a strike team to physically empty bank vaults.
Everyone does what they can. There have been many incidencts when Muggle governments expropriated privately owned gold (or other riches). They wouldn’t do it to themselves, of course, so the central bank vaults remained safe.
But the point is, only the arbiters of ultimate power (or their clients) can be truly rich; if anyone else is richer than they are, they will tend to take the riches by force. In the HP-verse, wizards have the ultimate power.
Except wizards don’t view themselves as the “arbiters of ultimate power” over the Muggles. Statute of Secrecy.
Now Voldemort, I admit, would probably have done something like this once he took power. Or Grindelwald. But neither of them won, so… manifestly, no wizard has successfully seized power to rule over the Muggles (except maybe waay back and it got covered up) because the SoS is still a thing.