Printing money in a fantasy setting

[mr friendly guy]

This is just an idea I had been thinking up for various fantasy stories in my mind.

Numerous fantasy worlds have characters with the ability to transmute common substances into gold rather easily. David Edding's Belgarath and Mallorean pentads come to mind, also Goodkind's SoT series with the use of additive magic. Given this ability, arguably there is a temptation for characters to simply make gold, in a similar manner to how modern economies can print money. Usually the characters will have the "good sense" not to do this. In Edding's books, Belgarath the sorceror mentions that gold is valued for its rarity, thus creating more gold will devalue it.

What happens if characters do this for a purpose? Just going back to the real world for a minute, I remember a story that Hitler supposedly had plans to print counterfeit British pounds in a bid to wreck the British economy. Supposed in a fantasy world, one nation used currency based on gold or some other rare metal, while another had paper or fiat currency (not unreasonable in a fantasy setting even if we are going for a medieval type atmosphere, since the mongols had introduced paper currency IIRC in the 12th or 13th centuries).

Supposed that in a fantasy setting, the nation with paper currency (obviously not based on the gold standard) has this ability and uses it for the purpose of wrecking a rival nation's economy (not to mention being able to outspend the other nation before gold becomes worthless). Assuming no other rival nations have this ability (hence could undo what was done), what would be the fall out?

For the purpose of the story I had in mind, my civilisations would be pre gunpowder age without any magical equivalent of industrialisation, no bigger than in population and land mass than say the largest point of the Roman Empire (ie before it split into Eastern and Western halves) or the largest Chinese dynasties. Tentatively my idea for the two competing nations is more like a Rome vs Carthage (in terms of population and land mass) around the time of the second punic war, although that may change as long as they don't break my above criteria.

Is this a viable unorthodox tactic? How much gold would one need to "magick up"? Has this tactic been suggested before in any fantasy works, or did I come up with an original slant on an old idea?

[Setzer]

I do know that Spain's economy suffered from huge inflation after conquering their colonial territories. Might want to look into that. I'm assuming the process only works one way? Otherwise the other nation would be able to simply make gold rare again.

[Havok]

Would a Fantasy sized nation, presumably fairly low in population, be able to sustain a currency not based on gold, or some other precious metal? Could they sustain a confidence based economy?

[Duckie]

Not to rain on your parade, but gold-based money is a fantasy anachronism. Most ancient currencies were silver, or copper, or tin, or reallly any bloody metal but gold, which was too expensive to be used as anything but an accounting measure. And even the silver currencies they had were highly debased, not solid silver. If you really really must, gold currency would be itself massively debased, probably alloyed with copper (rose gold, as I understand) or silver (electrum?) to make a cheaper metal in casting the coins. And if the price of gold collapsed, since there's no real financial market, the empire using it would merely switch to another coin as the base, presumably a lower-denomination silver coin, unless a power was so wildly bizarre and bizarre as to be using only variously sized gold coins as its money.

For a reasonable sized gold coin that could be used by a reasonable person in an everyday situation rather than as an abstract measure, they'd be smaller than US dimes, is the main problem. Otherwise the coins would be either: A: worth more than an average person would earn in a year, even as a freeman. or B: worth only a fraction in usage as the melted down metal would be worth.

The idea of a gold 'backed' currency didn't exist until fiat money and modern banking, gold was just a really expensive material used for mostly fictional coins (before roman hyperinflation, the gold Aureus was basically just a notation for the state and rich persons to use for counting large sums of money).

Now, this same scenario could happen with silver coins, but you'd need wizards turning shitloads of rocks into silver to do it because silver is so much cheaper than gold and more common.

[Duckie]

Actually, a time where pure gold coins were used has occured to me- the Denarius in late roman times was growing heavily less valuable, to the point where a single gold coin was worth 100,000 silver denarii due to debasement of the metal, shaving of the sides of the coin, and non-metal quality based economic factors that produced hyperinflation.

Diocletlan introduced a coin called the Solidus, made of pure gold. Due to silver growing steadily less valuable, the emperor required taxes to be paid in gold, and minted Solidi. He forbade them being traded outside of the empire, but they were anyhow. For about 600 years it worked, as the gold coins were fragile due to being pure gold (they would dent and wear easily) but would be melted down and remade each time taxes were paid. However, eventually, Abd al-Malik, the Ummayad Caliph, used eastern roman solidi and his country's own gold supplies to make debased gold solidi that were exactly the same weight, but far less pure gold.

Economic warfare doesn't need to be magic- really, the best way is just to produced debased versions of the other country's coinage- it both increases the amonut of metal (decreasing the price) and the amount of coinage, directly causing inflation. (Naturally, this can backfire since it also affects your own coinage, so one should never debase beyond what one's country already has debased coins to).

I am not too sure as to what caused roman hyperinflation on the Denarius- Thanas would know, he knows everything about Rome, or the ultimate efficacy of the Solidus (I have a feeling like every other 'pay only in gold' coin it didn't turn out so well, especially considering the mention of arabic solidi), but widespread usage of gold coins is a rarity in history- that is the only example I can think of.

[Zixinus]

As I understand it, the value of any money isn't what the money itself is worth (ie, gold coins) but what you can get for it. I think that's why gold became as valued in the first place: it doesn't tarnish and its still lighter than some other mediums like pigs, I recall that 1 forint was supposedly worth one good pig. Then again, pigs could walk.

So, making the enemy's money makes that money only less worthwhile when people realise that there is lots of it. You might sabotage trade by having loyal traders buying out the enemy nation's more truly valuable items?

The problem with your tactic is transportation and distribution, with ancient transport being what it is. Money traders will be at panic and there will be some chaos, but since trade is still done based on other stuff than money (again, think 1 forint = 1 pig), collapse might be averted or lessened than if you did the same trick on a more modern economy.

[mr friendly guy]

I do know that Spain's economy suffered from huge inflation after conquering their colonial territories. Might want to look into that. I'm assuming the process only works one way? Otherwise the other nation would be able to simply make gold rare again.

Well I am thinking its reversible, but only one nation knows how to do it, at least at the beginning.

Not to rain on your parade, but gold-based money is a fantasy anachronism. Most ancient currencies were silver, or copper, or tin, or reallly any bloody metal but gold, which was too expensive to be used as anything but an accounting measure.

I did leave the option open that the currency would be based on some other precious metal. In any event, since it is fantasy where magic exists I could simply by authorial fiat state that gold was more common than some other precious metal. Come on, TSR Wizards of the Coast Dark sun setting had iron being rare for example so characters carrying iron / steel weapons must be rich.

Now, this same scenario could happen with silver coins, but you'd need wizards turning shitloads of rocks into silver to do it because silver is so much cheaper than gold and more common.

Any idea how to estimate how much I would need. If its a lot, for my story to avoid mary sues, I would need lots of wizards churning out counterfeit coins instead of a few or else these few would looked over powered and wanktastic.

Economic warfare doesn't need to be magic- really, the best way is just to produced debased versions of the other country's coinage- it both increases the amonut of metal (decreasing the price) and the amount of coinage, directly causing inflation. (Naturally, this can backfire since it also affects your own coinage, so one should never debase beyond what one's country already has debased coins to).

Since one of my nations all but uses paper currency, I am thinking their coinage is pretty debased already. In fact, how much metal and what composition is in an average US dime. Most probably not much compared to ancient debased coinage. Magic just makes it cheaper and easier to forge the enemy's coins. If you think again from the example of Belgarath the sorceror or SoT where Richard manages to recreate the sword of truth from thin air after gaining knowledge from the temple of the winds, then by a similar magical process my characters used to create gold, also allows them to create the cheaper metals for debased currency.

[Samuel]

Come on, TSR Wizards of the Coast Dark sun setting had iron being rare for example so characters carrying iron / steel weapons must be rich.

That was explicatly stated for Kyrnn. Steel coins replaced gold (which was sort of stupid). In story in made more sense- what use is gold if the civilization that preceded you made a million gold coins and all anyone needs to do to get some is to loot some old ruins ?

[Duckie]

Steel coins made little sense for the reason that steel coins could buy steel weapons worth far less than their weight in coins. This means it's profitable to melt down swords to turn into coins and buy more swords to keep doing that with, and that the prices for skilled labour on krynn are negative.

(Transferring arbitrary weights of steel would be better done by bars anyhow, since an ounce of steel is a worthless quantity. Or for an exotic option, chinese knife money (some chinese states used actual working knives as money in prehistory, leading to dulled knife shaped and eventually just vaguely knifelike rectangular coins once the currency abstracted).)

[Darth Raptor]

With the ability to transmute matter at the atomic level, you'd think it would be easy to craft small, lightweight, inexpensive widgets with properties that make them easy to authenticate yet difficult to imitate. Your counterfeiting problem is related to wizards of exceptional talent now or those who are actually involved in the minting. Just like IRL.

[Bluewolf]

Given that many fantasy settings are not that advanced. I assume barter would still be valid. Your spellbook for my cow or something along those lines. That would in fact, come into all this as not all worlds have a currency.

[Duckie]

Not all countries, you mean. The standard fantasy really, really needs to be either far smaller or have far more polities and tribes and the like. What's wrong with having an entire story set in an area the size of slovenia? It's not like people moved around much back then.

[Stark]

Why would anyone in a world with replication/duplication/etc magic use precious metals as currency? They'd almost end up using 'wizards' as currency, since they're sources of wealth. In some settings such magic is absurdly trivial, so nobody with contact with these guys would be able to base their economy in this way, if a single magic user can create rooms full of gold per week.

[mr friendly guy]

With the ability to transmute matter at the atomic level, you'd think it would be easy to craft small, lightweight, inexpensive widgets with properties that make them easy to authenticate yet difficult to imitate. Your counterfeiting problem is related to wizards of exceptional talent now or those who are actually involved in the minting. Just like IRL.

That was sort of my idea. Only one nation at the beginning has this ability on a grand scale, and not every wizard can transmute substance x into substance y. They might be able to transmute substance x into substrance z though, and not in big amounts.

[Simon_Jester]

Not to rain on your parade, but gold-based money is a fantasy anachronism. Most ancient currencies were silver, or copper, or tin, or reallly any bloody metal but gold, which was too expensive to be used as anything but an accounting measure. And even the silver currencies they had were highly debased, not solid silver. If you really really must, gold currency would be itself massively debased, probably alloyed with copper (rose gold, as I understand) or silver (electrum?) to make a cheaper metal in casting the coins. And if the price of gold collapsed, since there's no real financial market, the empire using it would merely switch to another coin as the base, presumably a lower-denomination silver coin, unless a power was so wildly bizarre and bizarre as to be using only variously sized gold coins as its money.

The operative question is then "can a wizard produce silver faster than the Royal Mint's suppliers can dig it out of the ground?" And the answer could easily be "yes."

As Stark observes, the real problem is that transmutation magic kills the only reason to use specie-based currency. After this has been going on very long, you might as well us silver money as anything else... but only because silver is no more expensive than paper because wizards have been transmuting it for centuries.

You can get interesting results at the beginning of the period, though, which is where mr. guy seems to be coming from. So that's still a relevant question. I think that for pseudo-medieval economies, the amount of damage you could cause to a rival's economy by counterfeiting are still limited. But it could seriously mess up the stuff at the high end: creditors would scream, moneychangers would go berserk, tax revenues start falling apart unless the assessors are very clever (and using a tax code that takes a fixed percentage instead of using flat per-capita or per-acre rates).

So the government is in trouble, even if the people are fine.

[The Dark]

I do know that Spain's economy suffered from huge inflation after conquering their colonial territories. Might want to look into that. I'm assuming the process only works one way? Otherwise the other nation would be able to simply make gold rare again.

It wasn't that significant. Between 1500 and 1600 (100 years), prices quadrupled (increased by 300%). For comparison, from 1913 to 2008 (95 years), prices in the United States have increased by 2,175% - inflation in the US since the beginning of World War I has been more than seven times as high as in Imperial Spain.


Addressing the OP:
Assuming transmuting a base material into a precious material takes some sort of ingredients (i.e. alchemical solutions), as alchemists buy the ingredients, the price of the base material and the ingredients will rise, and the price of the precious material will fall, until they are roughly equal (price of base material + price of ingredients + market value of alchemist's labor = price of precious material). It'll take time, and the initial entrants into the production will make a profit, but in the long run it will inflate the cost of other items and deflate the value of the precious material.

If it's a straight "Create Precious Material X" spell, you'll just have a devaluation of the precious material in question, relative to the amount that can be created by magic. The intrinsic value of any precious metal to a medieval society is essentially nonexistent (silver has some antibacterial qualities, but gold isn't terribly useful to a pre-electronic society). It is their scarcity that gives them value; if they are no longer scarce, they're no longer valuable.

[Eleventh Century Remnant]

The Dark; yes, but what was actual industrial/economic growth doing during that time? From 1913 to 2008, the United States experienced real industrial growth- mostly, with blips. Spain didn't. America's rise in prices was driven by a rise in goods and services available, I don't think Spain experienced comparable growth in anything but the money supply.

To go back to the OP, I have a setting that actually has this problem. Notionally speaking, the price of a small farmhouse in free socage- all obligations paid off- and one acre of land, or three acres without the building, is somewhere between one and two gold coins, weighing about a third of an ounce each.

(Oh, as an aside- the last time I checked, the total amount of gold mined by everyone ever in the history of the world worked out at around a hundred and ten thousand tons. I have no data on how much of this was already out of the ground by the time of the second punic war, but probably a lot less.)

Generating precious metal by wizardry is eminently possible, and certainly does occur- but it is considered counterfeiting, and any monies taken in by any well organised mint or local lord are subjected to antimagic to detect and foil such things.

Of course, that has to be done by a wizard, and who's to say that a well executed fake won't slip past a lazy or half- awake court sorcerer? Or that the thaumaturgical fraud hasn't already bribed the court wizard to look the other way, which had better have been done in real coin.

Personally, I'd go for the solution that allows the maximum possible amount of plot, which is probably to make frauds, scams and dodges possible- but not easy.

[The Dark]

The Dark; yes, but what was actual industrial/economic growth doing during that time? From 1913 to 2008, the United States experienced real industrial growth- mostly, with blips. Spain didn't. America's rise in prices was driven by a rise in goods and services available, I don't think Spain experienced comparable growth in anything but the money supply.

Spain's macroeconomic status from 1492 to 1825 is somewhat unclear due to the lack of centralized banks and extensive economic record-keeping. Most studies have looked only at Castile, which was an agricultural district, ignoring the coastal regions. The best estimates for Spain as a whole (done by Carlos Alvarez Nogal and Leandro Prados de la Escosura at Universidad Carlos III de Madrid) only cover 1530 to 1591, which is 60% of the time period in question. During that time, per capita agricultural output increased by only 4.44%, while per capita industrial output increased 23.4%. Total per capita input increased by 17.8%, and there was an increase in real GDP of around 27% during those 61 years. Imperial Spain actually had a very stable interest rate of around 7 to 8%, which is comparable to modern developing nations. Until the British enterprise, Spain was still economically solid - it was, in a very real sense, the defeat of the Invincible Armada that destroyed Spain's economy.

[Patrick Degan]

It seems to me that a wizard would have a far easier task of collapsing a kingdom's economy by casting a spell which would cause the people to cease believing in the value of their money. The spell might last only for a short time —days, maybe a few weeks— but the chaos it would cause would be quite tangible. Lot less work than trying to magickally generate kilotons of gold or silver.

[Patrick Degan]

To expand on this, I could see an unscrupulous wizard doing this as his own means of personal enrichment: He goes to a village, casts his spell on the local population, who suddenly don't believe their gold or silver ducats have any value. He tells the villagers while under the spell that he'll be happy to haul away the "trash" for them in exchange for a leg of venison and some ale for his troubles, and he goes away not only well-fed but with enough lucre to buy himself fine lodgings, fine food, fine ale and some rather fine whores in the city over the hills.

[Eleventh Century Remnant]

Hm. Spain was doing better than I thought, then, although I have to wonder how much of that was, to use the anachronism, military- industrial?

To explain that, how much of the industrial growth would have been in the support industries of the military, and essentially driven by the foreign policy the spanish armed forces were intended to support?

Spain was supporting an extensive empire in Europe at the time, and militarily active doing so, and it was a strain as witness the state of preparation of the Armada, that it was put into the hands of one of the richest men in Spain so that he could use his personal capital to support it- rather than a naval commander likely to succeed on the operation itself, the logistics came first.

The changes in policy, and the loss of confidence, following the defeat of the Armada would have damaged that engine of growth directly, then. I think I'll go and see if I can find more numbers on that, see if there's anything in the idea.

If this is relevant to the OP at all, it's that economics is a damnably complicated subject and there's always another wrinkle, always an unforeseen consequence somewhere. And that they're so much going on, it's easy to forget or not know bits like I did.


I like the idea of the thaumaturgical con, tricking people into thinking their money is of no value, but it depends a lot on how, and how well, the magic works, and also how well news and rumours travel. A small community that got taken in like that would be a laughing stock for miles around in most settings, but that in itself would carry the idea and it might not be quite as easy a second time.

If they're that capable of screwing with your head I can see most people not trusting wizards as far as they could spit them, really.

[Samuel]

If they're that capable of screwing with your head I can see most people not trusting wizards as far as they could spit them, really.

I won't touch the Spain issue (this needs a professional), but this depends on the setting. If you have more than one magic user per community than it is less of a problem because they will probably protect their local community. Communities to small to have any probably don't have much money anyways.

[Eleventh Century Remnant]

Juggling multiple different versions of reality in the head causes that, really; in Fantasyland, a small village out in the backwoods almost certainly would have enough to make a scam like that worthwhile. In the real world, as you say, not so much.

Although there certainly are things worth stealing; if we're talking pure or bastard feudalism here, in the UK at least, there are so many one man or family businesses, including farms, that the relative proportion of small businessmen who have to be aware of their rights and dues is far higher.

Local deals, local concessions, a thick and highly idiosyncratic web of individual deals and obligations-and they will have a value attached or at least attachable to them. Tricking someone out of their income or out of their home could happen, with that kind of mind affecting magic. This would be as much long term blackmail as extortion, of course.

Just to mention in passing that if that can be done, then you can wave goodbye to venture capital and merchant banking, unless the bankers can afford to have a foolproof level of protection around them- and isn't that a protection racket in it's own right? That could also extend back down to the village scale... I think we've just accidentally reinvented the mafia. With pointy hats.

None of us being there, it's hard to say how the average village wise woman was regarded, whose shoes the local wizard- if any- would largely be stepping into, but (largely from historical fiction I admit) I get the general impression of; not well.

If the archetype flows out of any cultural memory at all, if hasn't been hollywooded beyond recognition and is no more than two orders removed from actual reality, then we're looking at people who were feared and mistrusted almost as much as they were valued.

As an aside, I'm of the opinion that the european witch hunts of the sixteenth and seventeenth centuries had quite a lot to do with centralisation. Authority not so much seeking, but taking the opportunity, to eliminate sources of folk wisdom and old traditions in the interests of curbing localism.

The initial motives may have been religious, and they became self- sustaining on the perverse incentive provided by siezing the property of the guilty- and that is a scary thought when combined with the aforementioned protection racket.

The witch hunts probably skewed the latterday cultural perception to being more hostile than it actually was at the time, but with that kind of incentive, well.

Which is veering again. Mind affecting magic, that can sabotage deals and treaties, opens up gargantuan opportuinities for personal profit and social destruction- I'd be even more scared of that than I would of transmutation. How would society react to that?

[Simon_Jester]

To expand on this, I could see an unscrupulous wizard doing this as his own means of personal enrichment: He goes to a village, casts his spell on the local population, who suddenly don't believe their gold or silver ducats have any value. He tells the villagers while under the spell that he'll be happy to haul away the "trash" for them in exchange for a leg of venison and some ale for his troubles, and he goes away not only well-fed but with enough lucre to buy himself fine lodgings, fine food, fine ale and some rather fine whores in the city over the hills.

True, but as the Remnant notes, that kind of mass mind-control could wreck a country in so many ways. If you can brainwash large numbers of people into giving you all their money, you've got a lot of other ways to screw people, too.

[Patrick Degan]

To expand on this, I could see an unscrupulous wizard doing this as his own means of personal enrichment: He goes to a village, casts his spell on the local population, who suddenly don't believe their gold or silver ducats have any value. He tells the villagers while under the spell that he'll be happy to haul away the "trash" for them in exchange for a leg of venison and some ale for his troubles, and he goes away not only well-fed but with enough lucre to buy himself fine lodgings, fine food, fine ale and some rather fine whores in the city over the hills.

True, but as the Remnant notes, that kind of mass mind-control could wreck a country in so many ways. If you can brainwash large numbers of people into giving you all their money, you've got a lot of other ways to screw people, too.

That also is another expansion on the idea. Imagine a kingdom which employs wizards to perform exactly this sort of manipulation against the people of an enemy kingdom as a war strategy.