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Set in the modern day, only a small portion of the population is aware of magic and some of them has unlocked their innate magic potential at a young age. There is a governing body that ensure fair usage and treatment of magic and a law enforcement unit to prosecute those who abuse magic, enough said there is only 1 magic currency system in this world and it is cap at a specific amount so that the combined currency is alway constant. The form of magic currency itself is ethereal, intangible, nign indestructible and can only be materialised by synchronisation of 2 or more willing parties so theft and robbery are rare. If a certain individual who is believed to show an affinity to magic will see the council elders to unlock their innate ability to command magic as well as opening a magic currency account during the session, the individual can then transact magic currency with others. Despite there are some gifted who can topple mountains and overturn the sea, why are they still limited by this currency cap?

E.g. A person opens a magic account with zero balance so everyone involves in the synchronisation can see each other body glowing in different colours but the outside observer would see a rich purple pulsating at very high frequency which tally with their combined net worth. To the elder the person is emitting a faint red glow indicating no balance in magic account.

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    $\begingroup$ What exactly is the the purpose of this currency? As I understand it, it is meant as a mostly secure alternate currency used by mages. Is that correct? It can't be used as fuel or has any other purpose than, let's say, a dollar bill, right? $\endgroup$
    – hajef
    Commented Jan 14, 2020 at 10:30
  • $\begingroup$ @hajef: did you immediately thought of cryptocurrency! $\endgroup$
    – user6760
    Commented Jan 14, 2020 at 10:32
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    $\begingroup$ Kind of. The currency of currencies is trust. Hard to come by without a nation to back the currency up but there are excamples of currencies with only their users backing them up. $\endgroup$
    – hajef
    Commented Jan 14, 2020 at 10:38
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    $\begingroup$ Is this question about how can such a cap be maintained? Or are you asking about why is there a natural/magical cap on currency? To put it differently - is the cap a desired and deliberate feature of magical currency, and you are looking for a mechanism to enforce it - or is the cap simply an in-world, natural phenomen and you are interested in suggestions for something that'll cause that? $\endgroup$
    – G0BLiN
    Commented Jan 14, 2020 at 13:46
  • $\begingroup$ Also, any reason why a magical variant of cryptocurrency is not an option? $\endgroup$
    – G0BLiN
    Commented Jan 14, 2020 at 13:49

8 Answers 8

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Inflation

How this currency cap is enforced is going to be a problem, though I suspect rigorous use of guidelines and trace magic would be helpful. But the reason to keep the production of magical money at a flat rate of zero and prevent any from being introduced is a very simple one - inflation. Allowing anyone to print fiat currency is a one-way trip to currency devaluation to the point where if rampant magical currency creation occurred, it would be completely derail the magical economy to a standstill and wizards would be unable to render services because you can't pay them. Wizards don't like not getting paid.

In addition, they printing new money at a constant rate would also marginally increase inflation, and the wizards didn't necessarily agree on how much new money should be made and who got to be in charge, because remember, the people in charge of making money possess an inordinate amount of power. So, honestly, the safest thing to do is declare all the money currently in the system 'legal' and then band together to stop any new money from coming into the system so the system could work.

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    $\begingroup$ This explains why one want to keep the currency caped, not how. A poor mage would create new money if he needs to and is able to, not if global economy sais it's a smart idea. If the money is magicly created, potentionally any mage can do so and if ppl. can do so, some will. $\endgroup$
    – hajef
    Commented Jan 15, 2020 at 9:22
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    $\begingroup$ @hajef The question was why, not how. As for how, I'd suspect that the mage association would fling thunderbolts at the hapless fool who dared to break the rules. $\endgroup$
    – Halfthawed
    Commented Jan 15, 2020 at 18:27
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    $\begingroup$ Yes. Why is* there a cap, not why should there be a cap. In other word, how is it there is a cap. At least that's the wa I understand the question. ... but since your answer got accepted, I might possibly be wrong ;) $\endgroup$
    – hajef
    Commented Jan 16, 2020 at 10:15
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The Currency is Time

Either literally or figuratively, the currency is time itself.

Figuratively

In this situation, the mages are exchanging favors. Basically, each unit of currency as an IOU, stating that it would be worth 1 hour of work at a later point in time. This IOU could be traded to others, who could come in to redeem it. The value of the currency would depend on the power of the one who coined it.

People would usually like to trade other's coins, rather than generate new ones, as even the most powerful arch-mage wouldn't want to spend every waking hour dealing with other people's problems. They would instead elect to pay for things with the coins of their apprentices, (who are probably paying with the coins of their own apprentices).

This would also create an interesting speculative market where people traded coins, based on if they thought a mage would become more powerful, would die soon, or if they thought the person wouldn't be able or willing to honor all the time commitments they traded favors for.

Literally

There are a few ways to do this, simplest is to have them trading the memories of the Earth, which gives a finite amount of currency which relatively speaking will not increase.

For a more crypto-currency type of scenario, the mages are trading the ethereal manifestations of the past. In 1 day, each mage would generate 1 day of past. The most powerful arch-mage or newest apprentice would generate this at the same rate, but with thousands of years of magic users, the total contributions from newly generated currency would be only a slight increase to the overall supply of past generated by long dead mages.

This gives you an intrinsically valueless resource, being slowly increased by all living mages, preventing inflation.

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Time and labor is still limited Sure you can topple a mountain in a second, but making a magical frog the croak a unique poem based on your name and birthday before jumping into your mouth takes much longer, and is a specialized skill that most people don't have outside of the Anura chocolatier guild. So to make sure that people can still make things and get paid you have magic money. The money doesn't have real value, similar to a fiat currency, but it has value based off of what you can buy with it on the market. This can lead to John Wick like situations where the currency has vastly different exchange rates at times, but people will eventually agree on prices so long as the amount of money in the system is stable.

If there is no limit to the amount of money a person is willing to spend on items in the market, then there is no amount of money that it is worth selling items in the market for.Any amount of money would not guarantee that the seller could buy equivalent goods in the market, so it is better to hold on to the items of value or labor, than to sell them and get less back.

This money system has artificial scarcity to ensure that markets still work.

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Modern currency appears to be quite magical themselfs. Everyone accepts it and gives you basicly anything for enought of it. It hasn't been this way and it might change in the future. In theorie money is either a representative of e.g. gold or the promise of future work. This of course only work if enought people belive in the currency or the entity that backs it up.

An easy way to make your magic currency limited is linking it to an entity that is interested in the fact that the currency is limited. The easiest way is giving all magic some kind of signature unique to the caster. This way anyone can cast the Mcoin spell but only a small ammount of trusted mages issue Mcoins that are generally accepted. Again, everyone can "print" their own money but most people won't take just anyone's money since there is nothing to back it up. This way, there can be different currencies with different scopes backed up by individuals or groups of mages if the magical world is decentralised and one trusted magical bank that issues all money if your magic world is highly centralised. So basicly every mage can issue Mcoins but only the Mcoins that are issued by a (or the one) trusted authority are likely to be accepted.

But the real question is why anyone should take these coins for their labor or posession. Maybe there are mages that are known to rarely issue Mcoins that represent special favors they owe the owner. In this case, people would only value the Mcoins because they can exchange them for the work or knowledge of the mage that issued them and if you don't need the kind of magic this particular issuer practices, the Mcoin does not mean too much for you. This might also be the case for entire associations of mages with a larger scope and likely a more narrowly defined value of one Mcoin. On the other hand there might be an association of mages that promise to exchange physical currency for their Mcoins and vice versa. That would be your magic equivalent of a traditional bank that backs up the currency and there would be a pretty stable and concrete value.

There will be some instability at the start but after some decades, there will be a small set of accepted Mcoin-issuers. Their Mcoins have mostly stable values and are genrally accepted within their scope.

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The currency is actually the favor or attention of a magical entity. It can only remember or focus on so many things at once so there is a hard limit on the amount. The entity is from another plane of existence much different than ours and creating or finding more is impossible, it has been tried for eons with no success.

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The Method of Currency Creation is lost

The initial creation of the currency was made by the combined lost knowledge of the Magic Users of the ancient times. The unique and complex magical signature that comes off from the currency is not able to be replicated by today's means. No more can be created and it is impossible to fully replicate the complex signature.

What does this mean for our new mage?

It is time to become an apprentice. Learn the trade of the mage AND get paid for it. The mage gets some magical grunt work taken care of. The new mage starts amassing spending money. No different than not having money in the real world.

What about Mages hoarding currency?

Mages are in constant need of helpers, supplies, and other necessities. As they spend, so too shall others get spending money.

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The currency is limited simply because it, however ethereal, is still a finite resource not unlike everything else in the material world.

A magic user can only access so much of it before there is none left unpossessed, or more must be created.

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Magical technology

Magical currency is a cryptocurrency. In another question I proposed a form of magic cryptocurrency called Manacoin, so all the fleshy details are there.

I based that on a very notorious cryptocurrency of real life, which as a feature has a limited amount of currency that cannot be increased. Inflation is controlled because new amounts are added to the ecossystem slowly via mining. The currency also supports enough decimal places that it might be useful for decades to come.

If magical currency is a cryptocurrency, then it may have a limited total amount built in as a feature too.

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