The Magic of Money and Banking

Document Type

Book Chapter

Publication Date



This chapter analyzes the banking system in the wizarding world of Harry Potter and compares it to the salient features of the banking system in the Muggle world. The chapter begins with a brief history of money. Although the economies in both the wizarding world and the Muggle world use money, there are striking differences between those worlds on this point. We can only speculate on why these differences exist, but it appears that the wizard concept of money stopped evolving in the Middle Ages, when bankers were really just trusted keepers of valuables. The chapter concludes that although Muggle banking and wizard banking are not the same things, but they share some important characteristics. Apparently, wizards do not manage their money supply the way Muggles do by using the slight of hand of fractional reserve banking to create money out of thin air. Instead, the money supply in the wizard world seems stagnant, creating social problems that emphasize disparities in wealth. Even so, the money that does exist is subject to security measures in both worlds that are designed to instill confidence in the banking system. Perhaps the most interesting aspect of banking in both the magical and the Muggle worlds is the crucial place in the balance of power occupied by those who control the money supply be they the goblins who run Gringotts or the MBAs who run the Federal Reserve. Political power and economic power often go hand in hand. The United States took a long time to adopt a system of central banking and when the Federal Reserve Act was finally passed the structure of the system was intentionally diffuse so that it would be difficult for the central bankers to exercise too much power over the economy. Policymakers know that economic power and political power are closely related and that economic turmoil can lead to political unrest. That dynamic is likely true in the magical world as well.

Recommended Citation

The Magic of Money and Banking, in The Law and Harry Potter (Jeffrey E. Thomas and Franklin G. Snyder, eds., Carolina Academic Press 2010)