In every fantasy setting, dragons are famous for their massive hoards of treasure. But the economic consequences of money suddenly disappearing from circulation are never really addressed. Smaug, for instance, took all the treasure of a small-but-wealthy nation. This would surely have farther-reaching repercussions than the nearby city of Dale going broke.

(This isn't necessarily just about dragons, or a fantasy setting.)

My question has two parts:

  1. What would the effects on the global economy be if a large amount of wealth were suddenly and completely inaccessible? How would this be different if the wealth were accumulated slowly instead of all at once?
  2. What would happen when the dragon is slain and all that wealth is suddenly in circulation again?
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    $\begingroup$ Which global economy doesn't use fiat money? They'd just print more money. What kind of wealth are you talking about? $\endgroup$ – Samuel May 15 '15 at 22:28
  • $\begingroup$ @Samuel makes a good point. Global currencies didn't/don't exist in the medieval era or high fantasy settings so its tough to compare...though removing currency would certainly have some sort of impact even today where the currency is worth more than the components from which it is made. I still think this can be answered... just print more isn't a solution that has no consequences. $\endgroup$ – James May 15 '15 at 22:35
  • $\begingroup$ @Samuel Maybe "global economy" is the wrong phrase. I meant impact on other countries or states farther away than right next door. $\endgroup$ – evankh May 15 '15 at 22:41
  • $\begingroup$ I think theres a misunderstanding. A dragon will live for a very long time and I think he accumulates treasures over time. It is never specified how he gained it or why he would bother to do so. $\endgroup$ – Vincent May 15 '15 at 23:15
  • $\begingroup$ @Vincent That depends on the type of dragon and the specific setting. Like I said in the question, Smaug from The Hobbit conquered the entire nation of Erebor overnight. $\endgroup$ – evankh May 15 '15 at 23:32

An interesting real life example of this is the influx of silver from the New World during the 1500's. While this initially helped the Spanish Empire by allowing them to hire mercenary soldiers and pay for a plethora of projects ranging from diplomatic to artistic, the end result was an inflationary spiral which swept the European world from West to East.

An interesting example is the changes in war galleys. Galleys were rowed by free crews in the 1400's, and the Venetians, in particular, used their free rowers as extra manpower when they rammed or grappled an Ottoman ship to board it.

As the 1500's progressed, the cost of hiring rowing crews began to rise due to inflation, and first the Spanish, and eventually all the others (moving from West to East) were forced to replace free rowers with condemmed criminals or slaves. During the battle of Lepanto, Spanish galleys were generally larger, slower and heavier since they had to be sized to carry a contingent of soldiers in addition to everyone else in order to carry out boarding actions. The Venetians had managed to continue using free crews as oarsmen, and their ships were able to carry out complex evolutions including backing water in line (with almost 50 ships!) to prevent the Ottomans from outflanking the line. Slave powered galleys would not be able to do this since the crews were neither skilled or motivated to do so.

So a sudden influx of Dragon's gold could have some very unexpected consequences as inflation distorts the economy (and especially the cost of labour). Some detailed world building and modelling would be needed to see exactly what the consequences would be.


In economics, the sudden change in the supply of a good is known as a supply shock. If the treasure the dragon has stolen is in active circulation, we can expect the change in the supply of treasure to affect the price of treasure in the following ways:

If the dragon steals all of the treasure, this will lead to a negative supply shock, with the quantity of money available suddenly decreasing. This will lead to a sudden increase in the 'price' of money, effectively causing rapid deflation of the prices of all goods in the affected area. This will also reduce the purchasing power of the nation as a whole, which will be a major problem if the nation is largely an import economy. Deflation will also reduce the costs of operating in the area, which could attract more businesses.

When the money re-enters the economy, the opposite will happen, with inflation due to the increased monetary supply making local costs higher. If the repatriated treasure remains in the hands of the wealthy, this could lead to increased economic disparity and a reduction in the buying power of the lower class.

If the treasure is not in circulation, perhaps being stored in a bank to back a paper currency, the same thing will happen if the currency is left pegged to treasure. However, in this case, the government has the option of switching to a fiat currency, in which case the 'supply' of money could remain effectively the same, at least locally. Foreign markets may be less willing to accept a fiat currency, though if draconic raids are a common occurrence, they may also welcome the opportunity to trade for a currency with a more stable value.


In my earlier answer, I speculated as to how a large quantity of treasure wound up in a dragon's lair. The dragon doesn't just rob everyone and every institution in a provence in a short period of time, right? One anwer is that someone put it there in a large organized effort, and that has a profound meaning as to the question.

Another way is that it was gathered slowly over time. That makes the question vacuous, as it did not vanish all at once.

The talk about soldiers and rowers made me think of another answer. It wasn't taken from circulation but is a fresh resource. Soldiers were famously paid in salt, and that is the basis of the word salary. What if the dragon lives in an exposed salt dome? Maybe dragons seek them out and excavate them, so the cave isn't filled with treasure but carved into it: a salt mine. That is why dragons are associated with caves of treasure.

As a plot device that would be quite a twist for someone to finally discover, after salt is no longer valuable in his society, or the legends have crossed into a region that supplies salt and it's common place there.

The dragons find a salt cave to be great shelter from preditors because nothing else can live there. The need to eat salt to produce metalic sodium via enzimatic pathways, which is what makes them spit fire. A venom gland produces alkili metal nanoparticles surrounded by an oily membrane, suspended like milk. That is mixed with modified saliva which contains an enzime that destroys the membrane, so he shoots boiling steam that's also extremely caustic to flesh and releases hydrogen and methane gas which burns too!

Enzymes also concentrate all sorts of metals from the dragon's diet. Some are essential for catylists. Others are poop. Local ores of copper, gold, or silver cause concentrations to build in in the lair as a side effect of the dragon's need for platnum and and rare earths, and the eating of ore-bearing rocks to obtain it.

Metals are concentrated by symbiotic bacteria— decendent from the kind that helped make geological veins of metal— in a modified auxilary stomach chamber.

So even without the association with salt, you could have a lair build up concentrations of precious metal flakes over a long history of occupation.

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    $\begingroup$ Not really an answer to the question as it does not refer to economics, but great thoughts! +1 $\endgroup$ – jwsc May 16 '15 at 8:39
  • $\begingroup$ You wrote, "In my earlier answer, I speculated as to how a large quantity of treasure wound up in a dragon's lair." As in my comment to that answer, this situation could arise if the previous owners had accumulated the hoard in that same place and the dragon merely took over the premises, treasure and all. This could work for salt too. The "supply shock" effect of the dragon taking over / being killed would be more dramatic than for gold because salt, though long lasting, does not last indefinitely as gold does. $\endgroup$ – Lostinfrance May 16 '15 at 9:51

Maybe the people still consider the gold to be owned by them. It's just well guarded, and they don't carry it around with them to trade: they just use numbers in accounts or printed certificates.

It's like Fort Knox. It's there, it's never touched.

The hoard could be a Ft. Knox repository from a fallen civilization. The stuff was never taken out of circulation except when the people recognizing the currency and banking authority got Pompeii'ed, and everyone assumed their banks were buried too, until the real safe is found, with the biological security system still armed and no access tokens in existence.

  • $\begingroup$ The dwarfs very definitely did consider Smaug's gold to still be owned by them, in the sense of rightfully owned $\endgroup$ – Lostinfrance May 16 '15 at 9:31
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    $\begingroup$ ..and it's true that they do not seem to have done much with it other than hoarding it themselves. (I can't imagine making a few beautiful objects significantly decreased the supply.) However the key difference was that once Smaug took over the hoard they could no longer take any out even if they wanted to, and everyone knew this. So storage-by-dragon it differs from Fort Knox in that respect. Wasn't the plot of the James Bond movie Goldfinger that by making the gold in Fort Knox radioactive, hence untouchable, the bad guy would increase the value of his own gold? $\endgroup$ – Lostinfrance May 16 '15 at 9:40
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    $\begingroup$ @Lostinfrance: One of the few examples of a movie adaptation improving on the book. The original plot was to rob Fort Knox, which, as Bond points out in the movie, is impractical because gold is very, very heavy. $\endgroup$ – Mason Wheeler May 16 '15 at 10:47

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