The Value of a Galleon

[RandomPasserby]

Once again, I've been thinking. This time, about money.

I generally dislike the £5=1 galleon conversion. The fact that the Weasleys would have about £8 in their vault in CoS, the fact that £5000 would get you a shop front in the UK wizarding world's biggest shopping centre, that Ollivander can live on £1400 a year (£35 per wand x approx. 40 students per year, spread out over an 11 month period + the occasional adult who needs a new wand) makes no sense to me.

And then I had a thought.

We have no idea if the goblins have any concept of interest or inflation. Given that people's money is physically stored in vaults, I'm not sure they do.

So what if, way back before Voldemort and Grindelwald, before either of the world wars (let's say 1900 because I have data), there was an uptick in muggleborns entering the wizarding world and the goblins decided 'eh, screw it, we're going to standardise the conversion rate of pounds to galleons' and picked 1 galleon = £5 because (at the time) it was a reasonable figure.

Which would make sense, since in 1900 the average UK wage was £67 a year. That's about 13 galleons. So a wand would be nearly half the yearly wage of a muggleborn parent (which begs the question how many muggleborns couldn't afford to go to Hogwarts? Not including poor children who would have been working by eleven).

And, because the goblins (and the wizarding world as a whole) didn't understand inflation, the conversion rate stayed exactly the same for the next 90-something years.

Which would mean that by 1991, they still had the 1 galleon = £5 figure but inflation would mean that the actual figure should have been closer to 1 galleon = £500.

To be honest, I'm not much better at maths than JKR is, but I thought it was an interesting idea.

[Kitty279]

I'm not good at maths, either, but even I noticed that the prices didn't fit too well. It appears to be another occasion where JKR picked a sum just on a whim and never thought it over properly.

Anyway, your theory is the first one that makes some sense to me. Yes, that could be an explanation for the strange conversion rate that doesn't fit with the prices we know. Though if that was true, then the school shopping must have been amazingly cheap for the Muggleborns by the 1990's.

One of these days I should start a list of inconsistencies and plotholes - but that would be so much work with everything we find.

[RandomPasserby]

It would put the value of the Triwizard Tournament prize at half a million pounds (and frankly, I know very few people would wouldn't risk something for that much money), if we say the Firebolt was 300 galleons that puts it in the same price bracket as a luxury sports car (about £160,000), the Weasley's would have a little over £500 in their bank account (still below the poverty line with a nine person household, but not as dire as £8 in the bank) and Ollivander's yearly salary would be about 280 galleons (so a little under £160,000 a year - which makes sense seeing as he's the best/only wand maker in the UK).

And now I'm picturing some canny muggleborn figuring out 'OK this conversion rate hasn't changed since 1900', getting their parents to convert all their money to galleons and then informing the goblins that the conversion rate is very, very out of date.

You'd make a mint.

[Kitty279]

By the time we got a look at the Weasley vault, they were only seven; Bill and Charlie were already on their own. But it's still not enough for seven.

They could probably bankrupt the goblins, lol. But considering the magical world still lives in the nineteenth century, you really have to wonder what else could be exploited.

[8lottie8]

There's a fic that mentions this
It's called m.fanfiction.net/s/8993792/1/One-World

[Kitty279]

Thanks, will have a look when I have time. For the time being I bookmarked it.

[8lottie8]

that's okay

[teflonbilly]

I agree with everyone that the 1 Galleon to 5 Pound Stirling conversion rate makes absolutely no sense from the context of the books (as written) if we use current market exchange rates, but let's use this exchange rate as the baseline.

Let's say the value of the Galleon was originally fixed using the Gold Backed Pound Stirling at the ratio of 1 Galleon to 5 Pounds Stirling in gold.

The last gold standard for Britain (when fixed in the year 1817) was 7.3 grams of gold to 20 Shillings; or expressed differently: 0.2347 troy ounces to 1 Pound Stirling. Spelled out: 1 Galleon = 5 Pounds Stirling (Gold) = 1.1735 troy ounces of gold.

Using the historic market rate of 201.88 Pounds Stirling / troy ounce of gold on 7/31/1990 the day Harry found out he was a Wizard):

This makes the Galleon to the then Great Britain pounds exchange rate to be:

1 Galleon = 236.90 Pounds ($436.78 for us Yanks)

THIS exchange rate makes MUCH MUCH more sense for how prices worked (at least early in the books)

This breaks down as follows:

1 Galleon = 17 Sickles = 493 Knuts

1 Sickle = 13.94 Pounds

1 Knut = 48 Pence (0.48 Pounds)

Which means Harry dropped 153.29 Pounds on his Hogwarts Express Sweets buying binge.

An Olivander wand would set you back 1658.3 Pounds (which owing to the fact Wands are usually a once in a lifetime purchase, and owing to its utility makes sense that it costs in that range. No worse than a Personal Computer during that time period.)

8 Galleons and change the Weasley's had in their vault would have been around 2,000 Pounds (which is perfectly within reason for a relatively poor family to have in personal savings, and purchasing school supplies for 5 children would very easily have wiped out.)

All of this solves the issue of Mugggleborns trying to destroy the wizarding economy. Sure you can exchange 5 Pounds Stirling for 1 Galleon, but only if give the Goblins 5 Gold Sovereigns (the original gold standard Pound coin), if you want to use those fiddly bits of paper (which are a completely different currency actually post decimalization) then it'll be 236.90 Pounds to the Galleon.

So, that's my analysis of the problem as I see it.

FYI, with the recent surge in gold prices in the last 5-6 years. The Galleon would be running at 909 Pounds as of today 6/26/2014.