Could the WW have something like a credit crunch?

[moonlite_tryst]

I'm not an economist and only have the vaguest idea about things such as GDP, inflation, deflation, customs and excise, but I do get that countries survive by trading with other countries, providing a marketable product or service, or selling a natural resource in demand by others. A ridiculously simple overview I know..

Which leads me to my questions:

How do you think the wizarding world economy works?

Do Uk wizards trade with other communities around the world and what do you think the UK wizards could offer?

Do galleons rise and fall in price like other monetary systems? Would Voldemort's actions have had a negaive impct on the WW economy?

How does Gringott's operate?

Do the goblins charge their human customers and would they have something like the Muggle money markets to make a profit on all that gold etc sitting in their vaults?

Could famillies like the Malfoys, Blacks and Potters have amassed their fortunes by taking advantage of generations of Muggle labour or Muggle ambition, such as trading in tea, porcelain, opium etc?

I'm thinking this gathering of wealth on the back of Muggle labour is very likely because there must've been Muggle borns throughout the centuries. Would the heir to a grand estate been made to renounce his title because he was a wizard?

Thoughts?

Comments

[oldenuf2nb.livejournal.com]

Intriguing question... and I think, the answer is yes. Especially in the cases of the Malfoy's and the Blacks. I can see the WW profiting from Muggle consumerism, without Muggles knowing that they are buying wizard produced items.

And in regards to Gringott's, I think the goblins would absolutely have bank charges.

[romaine24.livejournal.com]

I just have a second, but, yes, UK wizards would trade with others.

Here's a snippet from the Lexicon that would back it up.

Trade Restrictions:

Class A Non-Tradeable Goods
(e.g., dragon eggs) (FB)

Class B Tradeable Materials (Dangerous and Subject to Strict Control)
(e.g., Erumpent horn) (FB)

Class C Non-Tradeable Substance
Venomous Tentacula seeds (OP9)

Ban on Importing Flying Carpets (GF7)
(classified as a Muggle artifact)


In addition, there's this about Percy.
Percy spent a lot of time while working in the Department of International Magical Cooperation writing a report about the need to standardize cauldron thickness to prevent the market being flooded with defective thin-bottomed imported cauldrons (GF5).

So I think you can assume that there is trading going on between the wizarding communities.

ok gotta run.

[beatnikspinster.livejournal.com]

Oh god. The WW economy tortures me when I think of it. The WW economy really hasn't been thought out at all in canon. Not one bit. I'm going to ramble a bit. It may have nothing to do with what you asked. SORRY! Feel free to ignore it. :)

Transfiguration & Precious Metals/Jewels
How can their money be gold, silver, and copper, if those materials can be conjured? If precious metals can be pulled out of thin air, or transfigured, then they're valueless for trade. It leads me to believe they can't. Or at least can't exist conjured/transfigured for anything but a limited amount of time. It's been suggested before, in an unrelated place, that the WW can "make" gold to exchange in the Muggle world. but the very act of being able to "magic it up" makes it valueless in the WW. Therefore galleons can either not be made of gold, or gold can't be transfigured, or galleons only have value outside the WW.

Muggle Trade
The WW could access wealth by trading goods with the Muggle world that are easier to access or transfigure. The influx of goods would drive down the value of the commodities. In large amounts, this would cause serious damage to the Muggle economy with deflation.

If the Malfoys, Blacks, and Potters amassed fortunes based on Magical-Muggle trade, the results would most likely be disastrous for the Muggles. The worst could be passed along to the general population, but it would still impact the Muggle upper classes. They would be in the position of power to learn of the source of the deflation. The resulting friction could be a serious problem. The WW may cast a xenophobic eye on the non-magical world, but those in a lateral position of power would go toe to toe with the sense of entitlement.

There's this blog entry (http://scottneigh.blogspot.com/2006/09/political-economy-in-harry-potter.html) with a lot of questions about the WW economy. It's Marxist and a bit pedantic, but still has some good points about the inconsistencies.

[graylor.livejournal.com]

The wizarding economy is a mystery to me. If you can Transfigure things into gold and you have a gold-based economy... ?

Personally, this seems like a big gap area in the books so hand-waving/exploration is certainly warranted by fic-writers.

The wealthy wizards would have many options in the Muggle world. To a certain sort protection rackets would certainly appeal ("Nice ship you've got there, squire. Pity if something happened to it.") That sort of thing could have even given rise to the Ministry's regulations.

Then there's "semi-public" magic ("Better hire that Weasley bloke, lucky bastard, never got hit by a storm with him aboard even if he is right useless at gutting fish.") Where everyone knows something is happening but no one says anything explicit.

And then, for the modern Malfoys, my favorite, "cheating" at stocks. Divination in the form of arithmancy is popualar enough to be taught regularly: why not apply that information to Muggle markets? Add in the ability to manipulate gold/silver/whatever markets through transfiguration and you have an excellent, presumably mostly legal, racket.

It's not like travel between worlds is restricted for wizards: with enough money, I'm sure they could get their fingers most anywhere.

[raitala.livejournal.com]

Oo, interesting question! I think there must obviously be an international trade in magical objects, materials, ingredients etc. There must be small enterprises, making the honeyduke's sweets, making parchment, robes etc. The WW has shrunk so much, at least in Britain that any large-scale operations or land-holdings would be too difficult to hide. I imagine there must always have been tie ins to the muggle economy, land and property ownership and investments. It is perfectly possible to keep the statute of secrecy and maintain a substantial portfolio of muggle assets. I'm sure the goblins would be adept at maintaining an untraceable fog of off-shore accounts, trusts and companies obscurely registered. Who knows, maybe the whole off-shore tax haven system was initiated by wizards :D

The short answer as regards a similar credit crunch...

[wemyss.livejournal.com]

... is, No. An almost equally short answer is, No, because the Wizarding World uses commodity money rather than fiat money.

The long answer, including all your points, will require its own post.

And here is that longer answer I promised.

[wemyss.livejournal.com]

http://wemyss.livejournal.com/182444.html?#cutid1