Harry Potter - Understanding The Wizarding FOREX Markets

The world of Harry Potter has always fascinated me and as one of those children who grew up in the media era characterised by the resurgence of magical realism that Harry Potter and other such stories gave me, I feel privileged to think that this aspect of my life has given me a vibrant imagination.

Stepping over the fact that Harry Potter isn't real in the objective sense (I'm fully aware that it's magical realism), I've always felt that there is one primary issue in the Wizarding World of the Harry Potter franchise: their bizarre currency! 


I think that I have finally solved the inconsistencies within the currency however and thereby am able to disband the theories against J. K. Rowling's valuation of the currency against the Great British pound (GBP).

Wizarding Currency:

To give a brief overview to the system of Wizard money, the currency is split into three coin denominations: Galleons, Sickles and Knuts. There are 17 Sickles in 1 Galleon and 29 Knuts in 1 Sickle (and thus 493 Knuts in 1 Galleon). 

Now, according to J. K. Rowling, 1 Galleon is "About five Great British pounds, though the exchange rate varies!"

We know that there is a Foreign Currency Exchange (FOREX) within Gringotts (and thus the expected transfer of wealth between GBP and Wizarding currency), because of this statement and also because we know Hermione's parents have to exchange GBP there in the third book (presumable with which they will purchase school books).


The Issues as I see them:


I'm going to gloss over the assumption that one could logically make regarding the price of the raw commodities that the Wizarding currency is based off (gold, silver and bronze) and take it as red that this screaming error of value against the GBP is just that - an error. With gold currently priced at £24.37/g it seems highly illogical that a Galleon (if we assume it's about the size of a 50p coin - 8 grams) would be worth £194.96. I thereby conclude that the coins are simply coloured as gold, silver, or bronze - they can't logically be made of the solid metals anyway as a result of Gamp's first law of elemental transfiguration (if you can't summon money out of the air, then by extension you logically can't summon its main component).

Excluding the previous point as nonsensical, I the number one inherent flaw with their system of currency as stated by many observers of the series, is that in terms of purchasing parity verses the GBP, their currency is simply in another world (excuse the pun) to that of the Muggle world, even though there's a natural osmosis of individuals between the two worlds on a daily basis, which one would assume would cause a reasonable level of cross currency exchange and relative price comparisons between the two currencies.


To illustrate my point practically, if we assume that J. K. Rowling's rate of 1 Galleon being equal to about 5 GPB is true, then you would logically expect one Galleon to be able to purchase around five loaves of bread in the Wizardng World or maybe two cups of coffee, or one and a half pints of beer in a pub (where I live at least).

However, as fans of the franchise will know, A Beginners Guide to Transfiguration only costs 1 Galleon - no school book I ever purchased cost only £5! Moreover, Harry, Ron and Hermione pay only six Sickles for their three pints of butter beer in the fifth book in the series (about 60p a pint - or about 20% of the cost of a pint where I live) and Mrs Weasley in the second book is reported to only have 1 galleon in her Gringotts account (poor the Weasleys may be, but this seems a little too close to the Wisarding breadline)!


It may be that there is a logical reason for these inconsistencies; perhaps we are meant to assume that Gamp's Five Exceptions to Elemental Transfiguration discounts butter beer (I understand that food and Wizarding currency are two of the exceptions), or parchment. 

The logical argument in favour of J. K. Rowlings valuation would be to assume that there exists a natural inconsistency between the inflation rates of the two currencies, but I feel that this is an unrealistic and overly simplified explanation of the inconsistencies between the purchasing parity of GBP against Wizarding Currency.

Instead, I would put forward the idea that the existence of magic causes an inherent level of deflation within sub-sectors of the Wizarding economy (publishing, drinks, etc) in comparison to the Muggle economy, which is in turn the consequence for the wild variance and inconsistencies between Wizarding currency and GBP. 

Put against, the expected and reasonably consistent positive real rate of inflation in the Muggle world, it is thereby no surprise that there is such a disparity in certain aspects of Wizarding currency in its valuation against the GBP.


Or to quote Snape in How It Should Have Ended's video on Harry Potter: "Magic, duh!".


All the best,

The Masked Stock Trader