Now, the Sickle-Galleon ratio is 17:1. But a Galleon is larger than a Sickle, by a significant amount, as can be seen here; , and gold is denser than silver, by a significant amount. Assuming the coins are similar thickness, the Galleon is about 1.7 times larger than the Sickle, and about 3.1 times heavier. So the ratio by weight is around 5.4:1 silver-to-gold.
That means each cycle of arbitrage is a multiplication by, well, we’ll round down to 16 for various transaction costs in our Fermi estimate. 100 Galleons becomes 1,600 after one cycle, and 1,600 becomes 25,600 after cycle 2.
Okay, that “couple times” didn’t quite get us all the way there from 100. Harry needs to manage to get his hands on (considering the uncertainties on transaction costs) more than 234 but almost certainly less than 300 Galleons and run through the arbitrage cycle twice to get the 60,000 galleons.
It’s easy to do an arbitrage chain a couple times, but people will start to get suspicious fast.
Suspicious? Sure, but will they care? He is dealing with Gringotts, or more specifically with specific goblins at Gringotts. They will be following their job specifications, probably their legal obligation, giving their company a profit and adhering to tradition. Gringotts wins, Harry wins, law is followed.
The people who lose are anyone who has invested in wizard cash (which is being inflated). But they aren’t involved in the transaction and don’t lose enough or rapidly enough that they would object before he has finished farming. In fact they only start experiencing negative effects once Harry starts spending.
In the early 1990s, gold was around $400/oz and silver was around $5/oz. Which is an 80:1 price difference. Considering that in the wizarding world, it is only 17:1, he can make about 4.5:1 each time. 5 times of doing that with 100 galleons will yield 180000 galleons, which he needs 60k of. Shouldn’t be too much trouble.
It might be even better, considering the possibility that there might be more bounties he can collect.
What I’m more worried about are the implications on the Muggle side, and the fact it could endanger (even if lightly) the Statute of Secrecy. That is likely to draw political troubles from the wizarding world, and may be very well ruled illegal.
With heavily leveraged trading on forex ( http://en.wikipedia.org/wiki/Foreign_exchange_market ) , he can make 100 galleons into 100 000 galleons in one hour (with leverage of 0.2% you earn profits from trading of X, but you only need to really have 0.002 of X). And you can do this over internet, by a few back and forth trades that lasts for a few minutes.
He has a hundred in his back yard. Worst comes to worst, he arbitrages that up to 60k.
Edit: or time machine+stock market. In retrospect, that’s a much better solution.
Yes, I rather doubt that he will have trouble for lack of clever plans.
It’s easy to do an arbitrage chain a couple times, but people will start to get suspicious fast. I doubt he can go x600 as trivially as that.
April 1991 price of silver was $3.9707/oz troy, gold was $358.38/oz troy. That’s a 90:1 silver-gold ratio, ounce to ounce.
Now, the Sickle-Galleon ratio is 17:1. But a Galleon is larger than a Sickle, by a significant amount, as can be seen here; , and gold is denser than silver, by a significant amount. Assuming the coins are similar thickness, the Galleon is about 1.7 times larger than the Sickle, and about 3.1 times heavier. So the ratio by weight is around 5.4:1 silver-to-gold.
That means each cycle of arbitrage is a multiplication by, well, we’ll round down to 16 for various transaction costs in our Fermi estimate. 100 Galleons becomes 1,600 after one cycle, and 1,600 becomes 25,600 after cycle 2.
Okay, that “couple times” didn’t quite get us all the way there from 100. Harry needs to manage to get his hands on (considering the uncertainties on transaction costs) more than 234 but almost certainly less than 300 Galleons and run through the arbitrage cycle twice to get the 60,000 galleons.
Suspicious? Sure, but will they care? He is dealing with Gringotts, or more specifically with specific goblins at Gringotts. They will be following their job specifications, probably their legal obligation, giving their company a profit and adhering to tradition. Gringotts wins, Harry wins, law is followed.
The people who lose are anyone who has invested in wizard cash (which is being inflated). But they aren’t involved in the transaction and don’t lose enough or rapidly enough that they would object before he has finished farming. In fact they only start experiencing negative effects once Harry starts spending.
In the early 1990s, gold was around $400/oz and silver was around $5/oz. Which is an 80:1 price difference. Considering that in the wizarding world, it is only 17:1, he can make about 4.5:1 each time. 5 times of doing that with 100 galleons will yield 180000 galleons, which he needs 60k of. Shouldn’t be too much trouble.
It might be even better, considering the possibility that there might be more bounties he can collect.
What I’m more worried about are the implications on the Muggle side, and the fact it could endanger (even if lightly) the Statute of Secrecy. That is likely to draw political troubles from the wizarding world, and may be very well ruled illegal.
With heavily leveraged trading on forex ( http://en.wikipedia.org/wiki/Foreign_exchange_market ) , he can make 100 galleons into 100 000 galleons in one hour (with leverage of 0.2% you earn profits from trading of X, but you only need to really have 0.002 of X). And you can do this over internet, by a few back and forth trades that lasts for a few minutes.
But you probably can’t do it over the Internet in 1991.
Oh, right.
It’s funny how we(I) take some things for granted.
Also, I think you need some credentials to be allowed even much less leverage. Of course, magic can help a lot with that.
He also has a father who teaches at Oxford. I suspect he could run stuff through Dad if that was the biggest stumbling block.