Reply #20: Yeah, the Harry is rather out of character, but the humor and logic more than [View All]

[iris27]

make up for it. This cracked me up:

"Are these coins the pure metal?" Harry said finally.

...

"Of course," said Griphook.

"And can anyone coin them, or are they issued by a monopoly that thereby collects seigniorage?"

"What?" said McGonagall blankly.

Griphook grinned, showing very sharp teeth. "Only a fool would trust any but goblin coin!"

"In other words," Harry said, "the coins aren't supposed to be worth any more than the metal making them up?"

Griphook stared at Harry. McGonagall looked bemused.

"I mean, suppose I came in here with a ton of silver. Could I get a ton of Sickles made from it?" ... "So... how much would you charge in fees, as a fraction of the whole weight?"

Griphook's eyes were intent. "I would have to consult my superiors..."

"Give me a wild guess. I won't hold Gringotts to it."

"A twentieth part of the metal would well pay for the coining."

Harry nodded. "Thank you very much, Mr. Griphook."

So not only is the wizarding economy almost completely decoupled from the Muggle economy, no one here has ever heard of arbitrage. The larger Muggle economy had a fluctuating trading range of gold to silver, so every time the Muggle gold-to-silver ratio got more than 5% away from the weight of seventeen Sickles to one Galleon, either gold or silver should have drained from the wizarding economy until it became impossible to maintain the exchange rate. Bring in a ton of silver, change to Sickles (and pay 5%), change the Sickles for Galleons, take the gold to the Muggle world, exchange it for more silver than you started with, and repeat.

Wasn't the Muggle gold to silver ratio somewhere around fifty to one? Harry didn't think it was seventeen, anyway. And it looked like the silver coins were actually smaller than the gold coins.

Then again, Harry was standing in a bank that literally stored your money in vaults full of gold coins guarded by dragons, where you had to go in and take out coins out of your vault whenever you wanted to spend money. The finer points of arbitraging away market inefficiencies might well be lost on them. He'd been tempted to make some sort of snide remark about the crudity of their financial system...

But the sad thing is, their way is probably better.

On the other hand, one competent hedge fundie could probably own the whole wizarding world within a week. Harry filed away this notion in case he ever ran out of money, or had a week free.