Forum: Economics in Middle-earth

Discussing: Dwarves - dragon gold and mithril

Dwarves - dragon gold and mithril

The Dwarves have to be a major engine of trade and commerce in Middle-earth, given that they are the primary producers of portable wealth - precious metals and gems, as well as finely crafted tools and weapons.

I've speculated elsewhere that killing Smaug unleashed a torrent of gold in the northern lands, and that the Dwarves would have been playing the primary role in seeing it distributed.

What kinds of things might have been happening because of this? I've posited an significant increase in prosperity on the Shire because of their position on the East-West Road and the relatively rich growing lands they command. How would it affect Bree? Thranduil's realm? Trade into the east? Did it go down Anduin to Gondor?

On another tangent - what about mithril and the loss of Khazad-dûm? The elves were ga-ga over it and it sounds like the Númenóreans might have liked it, too. Did Númenor trade with Khazad-dûm? The Elves certainly did. What about Arnor and Gondor before 1981, when the Balrog forces the Dwarves to flee?

Ang

 

 

Re: Dwarves - dragon gold and mithril

I have been wondering if the Dwarves would have set up a system of money transfer that didn't invlolve shipping gold, which is dangerous and unreliable. Here is an example of how it would work.

First, it's a family operation because Dwarves had relatives everywhere and trust is needed to make this work.

You have two money exchangers, one in Erebor the other in Kazad-dûm. It could be anywhere, I just picked these because they are known locations. An Elf queen wants to buy mail haubereks from Erebor for her troops. She gives 5,000 gold coins to the Dwarf in Kazad-dûm, plus a service charge which he splits with his cousin in Erebor. He writes her a note saying she gave him the money, who it is to be paid to and she includes it with her order. He enters in his books that he owes his cousin 5000 gold coins plus half the service charge. Meanwhile, a weapon maker in Erebor wants bars of mithril from Kazar-dûm. He gives the money exchanger there his 5000 plus service charge who also enters it in his books and writes him a note saying he paid the 5000 and it is included in the order for mithril. Now all that has to travel are non negotiable notes between cousins. If you steal the note, they are not going to give you 5000 gold coins for it, the note just authorizes payment of the coins to the mail maker or the mithril dealer. The two exchangers than take the 5000 coins they have and pay off the local merchants and everyone is happy. As long as there was balanced trade over large periods of time and both ends had adequate cash reserves to cover temporary imbalances, they would never have to ship gold. Considering the expense and risks of shipping gold payments, the service charges could be hefty and still be a good deal.

 

 

Re: Dwarves - dragon gold and mithril

What kinds of things might have been happening because of this? I've posited an significant increase in prosperity on the Shire because of their position on the East-West Road and the relatively rich growing lands they command. How would it affect Bree? Thranduil's realm? Trade into the east? Did it go down Anduin to Gondor?

Well, I've been working on this. I can actually see a significant role for the human community at Laketown in acting as negotiators between the dwarves and elves. After all, dwarves don't trust elves, elves don't trust dwarves, but each has something (or access to something) that the other wants - always the core of trade. I can see the Men originally fitting into the whole business after a few too many trade negotiations broke down into open brawls.

There's strong probability that the news of the dwarven find would have filtered down the Anduin (probably via Bree and traders there) to Gondor and Rohan, however due to the state of matters in both of these countries, neither would have been able to make much of a gain out of the whole situation. Constant, ongoing warfare plays merry hell with a largely pastoral economy, as well as with land-based trade. Any trade between Esgaroth and Minas Tirith, for example, would probably involve a *very* long side trip, around the other side of the Misty Mountains, to avoid orc bands and Easterlings outside Mordor. There's a strong implication that most of the regular trade in Minas Tirith comes from Dol Amroth, or from Edoras.

It's worth noting that by the time of the Ringwar, there's a strong implication that the last of the effects of the find at Esgaroth have subsided. Certainly Bree, while having a large and substantial inn, doesn't have as much traffic through as it used to - it was Frodo's bad luck to find himself arriving at Bree on a busy night when strangers had come up the Greenway from the south.

My own essay (nearly complete - phew) posits about four main trading blocs involving dwarves, Men and hobbits, with the elven trade network running as a parallel to that.

(Note to self: finish that bloody essay).

Meg
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Re: Dwarves - dragon gold and mithril

What would be the effect of all that newly released dragon gold? Inflation. Basic monetarist theory:

price = (money * velocity)/goods available

FYI Velocity is the rate at which money changes hands. While Smaug slept on the pile of gold, the money was there, but had no velocity and therefore played no part in the economy.

Of course increased prices will spur production and imports stimulating the economies in the area.

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In OMY, Ang has a coin that is 3 inches across. If it is 8 cm across and 3mm thick, that is a half a pound of gold, about $2000. They would be handy for exchanging large amounts of money because od low counting costs. There would have to be smaller denominations for daily trade. Consider the difficulty you'd have where the $2000 US note was the smallest denomination of currency. A gold coin the size of a US quarter, 25mm x 1.5 mm, is worth around $100 US. There would also have to be silver and copper coins for small denominations of currency.

 

 

Re: Dwarves - dragon gold and mithril

Just over 2 inches across, not quite three, about 2.25.

Ang

 

 

Re: Dwarves - dragon gold and mithril

Then, that is about 4 oz Troy, maybe $1200 US.

 

 

Re: Dwarves - dragon gold and mithril

Antoher important thing to remember is that precious metals currency doesn't depend on the regime that produces it. Coins in the old days were marked with sigils of the realms and cities that produced them, but the important thing was how much did they weigh? (For one thing, production wasn't the precise thing it is now, with milled edges and all - one ancient type of coin is called a "splat" for a good reason, and it looks it, just like a peanut-butter cookie around the edges.)

And they could be cut up, to make smaller ones, too, though a particularly beautiful one might not be, simply for the collectors' value of it as a work of art (I've seen a few of these in the Gardner and other museums). "Hacksilver" is another term which means exactly what it sounds like. And "quarter" used to be that (the cross mark on the reverse face of a dubloon was a good cutting guide.)

Also, gold didn't have to be in coins at all. There was a photo in the Geographic of a huge mass of soft gold chains from a Spanish 16th c wreck, where the links were designed to be twisted off and used as cash. This made it easy to carry, in necklace form, harder to steal than a purse, and universally accepted for its material.

So a mixed hoard of ancient, modern, and bits of jewelry being used as currency is completely plausible.

 

 

Re: Dwarves - dragon gold and mithril

You have two money exchangers, one in Erebor the other in Kazad-dûm....[snip] Now all that has to travel are non negotiable notes between cousins. If you steal the note, they are not going to give you 5000 gold coins for it, the note just authorizes payment of the coins to the mail maker or the mithril dealer. The two exchangers than take the 5000 coins they have and pay off the local merchants and everyone is happy.

Sounds plausible - in fact isn't this how the traditional Hawala system of money exchange still operates in many Muslim societies around the world today?

I am plundering this thread madly for a conversation between Gloin and Bilbo in Rivendell after the Council of Elrond, by the way. Ang tells me I need more Dwarves, and you can still write what I know about Dwarven society on the back of a small postcard, Appendix A to LoTR and the Hobbit notwithstanding...

 

 

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