Either 'yes', or A. there's some sort of magic that stops galleons from being used in the muggle world, B. there's some major incentive (law to prevent mass goblin revolution) to not do so, C. there's magic that prevents golden galleons from being 'melted down' at all if you aren't a goblin, D. muggleborns are far more interested in being able to do magic than becoming a millionaire in a now defunct world, or E. all of the above.

What you've described there applies to every scenario, by the way, not just the 'OhShitThere'sAnEconomy' one. Why wouldn't that happen anyway? Why wouldn't muggleborns go in with any amount of muggle money, purchase gold, and sell it off for a profit (because when selling it to the muggle market with most of the galleon/pound exchange rates fielded in this thread, you will be making a profit) - why does that only apply when markets (and value=rarity) are added to the exchange?

Take your pick of the answers above. Or come up with you own. But we're left to assume it doesn't happen, and that's not what I'm saying, it's what JK Rowling said.

The point you should have contended there was 'she did it deliberately'.

Edit Oh ok, what Sesc said.

 

All of which is making shit up to explain the plot holes, which as I've explained is an exercise that'll drive you to exhaustion because it never fucking ends. Just like how you have to fiddle the exchange rates to explain how the fuck the Weasleys are living way below the poverty line when Arthur's got a government job as head of a department, why members of the chronically underpaid wizarding world wouldn't commute to the muggle one where the minimum wage is apparently equivalent to a very respectable salary and just exchange it all for galleons at Gringotts, and so on.

My point isn't that it's impossible to explain all these away, it's that having to do so is an eternal headache - so if you're going to write a story that involves a lot of economics or whatever, don't even try to make canon work. Go in prepared to scrap everything and start over, or prepared to have to fix canon in a thousand ways just to have it make any sense.

 

Something twisted that came to my head: What if every price in HP universe had meaning? We know from HBP that 7 is the most powerful number hence a wand, the most important tool in a wizard life, costs 7 galleons. Although that idea is best left from a fic that focus more on the ritualistic aspect of magic, it could be a good (albeit harder and complicated) way of coming up with prices.

 

@Tehan: Fair enough. The 'she didn't do it deliberately' it is, and I agree.

But 'value = rarity' is a somewhat feasible explanation to that particular problem, and yeah, is applied to a figure which probably wasn't thought through (in that the magical world would have to have roughly ten times the amount of gold than the muggle to make the exchange 1:5, or something like that). It saves having to overhaul an entire monetary system if you can look at the simplest answer and apply it to canon, in the same way that you can say 'well, things are priced as they are because magic is introduced to the mix, making some things harder/easier to produce than others and thus dearer/cheaper, respectively' even if it kills a little of the creativity / artistic license involved in world (re)building, and 'gold is cheaper to wizards because they have more of it' is as simple as it gets while fitting somewhat with canon.

Methinks umbridge was taken not at the point so much as at the way I presented it.

 

If you want to have a logical exchange rate, it can not be fixed. Here is a basic idea.

Price of Gold => varies
Mass of Galleon => Fixed
Exchange rate = Current price of gold * Mass of a galleon => varies

But this raises another problem.

Like Price of Gold varies, Price of Silver does as well. I won't go into calculations but basically -> Knut to Sickle to Galleon ratio exchange rate will vary as well.

Which brings us back to the fact that HP economy sucks. If you really want it get realistic, destroy everything and start from scratch...

 

The 'gold is common and therefore cheap to wizards' thing would work if the wizarding world existed in a vacuum, but it's got very strong ties to the Muggle world - a constant influx of muggleborns, muggle parents of said muggleborns wandering around Diagon Alley, all of the wizarding institutions can be accessed from the muggle world, et cetera.

The easiest way to fix it is to make the galleon some other sort of metal (like, say, the nickel-brass alloy of the British pound). I know Harry describes galleons as gold as several times, but assaying is not among his talents, and I don't think canon ever explicitly describes them as gold in a way that can't as easily mean gold-coloured - like the British pound coin or Australian dollar coin. It's not so much a retcon as a handwave.

 

I remember reading a fic where James Potter (Lily's idea I guess) did this very thing resulting in the "never need to work for his whole life" scenario. Though that was like years ago...

 

The word you're looking for is 'twee'.

 

Vernon is the sole worker in the Dursley family, and they own a 4 bedroom detached house in suburban Surrey. Even with 1990s housing prices that would be hideously expensive. To get an idea, current prices for that kind of house are £450,000-£600,000. And we know he has a reasonably high up position at Grunnings.

There's no way he's earning $34,000. Vernon's got to be earning at least £50,000 (in modern times to afford a house like that you'd need at least £70,000 salary, but 1990s is a lot of inflation ago).

In 1991 exchange rate, £50,000 is around $85,000.

 

This. Summoning a hair and cutting off a switch of bark and then combining them doesn't seem like a terribly difficult task with magic. But printing and binding books on a large scale would take either some heavy duty magic and materials, or a muggle printing press, which brings it's own problems. Maybe thats why books are expensive?

Still, fucking brooms. They're like sports cars you buy your children.

The actual currency conversion rate can never be properly nailed down because of Rowling's gaping...plot holes, so no matter which interpretation you use you're going to have to change it somewhere. Personally I like keeping the exchange rate low and upping the price of a wand. If a galleon is at 15 pounds, then a wand is 105 pounds. But if a wand costs 40 galleons then it comes to 600 pounds, a figure that seems closer to what wands deserve.

 

Or, you know, magic. One idea is to have it be magical gold that looks and acts like something else entirely to non-magical beings. This could be a bit tricky to implement with muggleborns' parents but it seems doable to me. Have we ever seen a Muggle interact with wizard currency in the books?

 

Again, though, this is inventing a string of 'could be's' in place of a canon-compliant solution. We're told it's gold. By all means, use whatever method you want to handwave the economy in your stories (@everyone), but I'm going to agree to disagree: my own tenuous handwave here is that while it's true wizards don't exist within a microcosm (I think the societies are co-reliant), goblins do. Muggle banks do not have dealings with goblins. /shrugs.

@ashura: We see Hermione's parents exchange sterling for galleons, if memory serves, in the second or third book.

 

My bad, I used the Median (lowest average) instead of the average for my guesstimations

I'm Canadian and the only Surrey I'm familiar with is an absolute shithole that no one wants to live in (they topped the country 3 years in a row for most B&E's and stolen cars). Not an excuse for failing to do the research thou...

 

The two biggest oddities for me that you mentioned are:

1. Wand cost out of kilter with everything else.
2. Exchange rate doesn't reflect value of gold.

Pick your preferred band-aid, or better yet ignore it. But I think I rather like the possibility that:

1. The price of wands is bureaucratically fixed at some arbitrarily low level. Perhaps the idea would be to ensure that all people have the financial means to afford wands. Though even then, you get to wondering why the Weasleys couldn't afford some - just how poor are they? Maybe it's not that they literally couldn't afford them, but consider a new wand to be a luxury, since old ones appear to work well enough.

2. For the exchange rate thing, I like what Sesc and GL said. And you can boil down their arguments into a single sentence: Goblins (or wizard bureaucracy) artificially separate the Wizard and Muggle economies.

They keep the Galleon pegged to the GBP at an artificially low value, and use some sort of voodoo magic to ensure that all exchanges must be done through the goblins.

 

Don't forget they've been living there for a while already in 1981.
Which means that either Vernon is quite a bit older than the generation of Harrys parents, or he bought such a house in his mid-twenties.
He had to either inherit quite a bit, or already have a very well-paying job to afford the huge loan.


@blazzano
Another explanation for 2. could be, that the exchange rate is hugely subsidized for muggleborns, so that they'll be able to get started in the wizarding world. Up to an upper limit of course.

 

Something similar. Say the price of wands is fixed at seven galleons. Subsequent wand purchases, however, for the same person could are considerably more expensive, set at a more appropriate price when compared to other products (i.e. the potion text that's been mentioned a few times) to account for the discrepancy between the two. This way ensures everyone can still afford a first wand.

Regardless, the Weasley's vault didn't have any Galleons when it was visited. Seven galleons is a lot in terms of sickles and knuts. Or perhaps it is simply a lot of money for the Weasley's to afford when put on top of the school supplies for five children. No doubt Arthur and Molly save up as much money as possible while Hogwarts is in session so they can afford to feed and cloth their children on their return/pay for Hogwarts the following year.

 

Arthur's salary (or lack thereof) doesn't make much sense in general context. Them not being able to afford new wands when they manage to buy 5 sets of Lockhart's works doesn't add up, really.

 

Something to think about is the idea of the philosopher's stone and how it can turn shit into gold. The Flamels were alive for a long time to say the least, so how much gold did they create? With the relatively small size of the wizard community and the isolation of the purebloods from muggles, perhaps the large influx of gold over multiple centuries time lowered the value of it?

Of course, that completely ignores the question of how any moderately intelligent muggleborn could miss the ridiculously easy way of gaming the system...

Or maybe, and this is extremely unlikely (or not), JKR is bad at math and you should just use some creative license?