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In the continent there are 2 main powers that mint coins.

Both of them use a tiny bit of magic on coins that resonates with a small rod when the coin is true and does nothing when it is false. For simplicity's sake the system is foolproof, has no side effects, and does not add or take away from the coins. It's called sealing.

The exact nature of the coins, mostly metal with increasing levels of silver and gold as you go up, is irrelevant.

It is a crime to use "unsealed" coins. Severely punished.

The whistling rod, the thing that detects the coins, is readily available everywhere.

Also, people are forced to use coins instead of barter to trade in most cases. That is, it is illegal to go into a town and barter grain for meat or whatever. People have to use coins everywhere except between family members or very small villages where trading coins is meaningless. But other than that, you can't sell or buy without coins.

The amounts of gold and silver in the coins are stable and don't change. That's a part of the deal between the wizards and the aforementioned powers. Any debasing would cause the deal to fall apart and that's big trouble.

Now my question is how would that affect trade?

And by trade, I mean whether it's between nations or guilds or just small transactions.

Obviously that would have more than just a small effect on one aspect of life, but I'm breaking down that concept into smaller questions.

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  • $\begingroup$ What happens to a sealed coin if its edges are clipped? Would it break the magic "seal"? People clipping the edges was a common practice/problem when the coins were made of valuable metal but had a fixed value. $\endgroup$ – Qami Jun 18 at 23:47
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    $\begingroup$ I would have no effect whatsoever. The impact of counterfeiters upon trade is a rounding error. And, moreover, they already had excellent and expeditious means of detecting counterfeit coins: it's not some dark unknown art. P.S. "Debasing" is a modern word; what they actually did was issue a law changing the definition of the sou or denier or whatever. (And anyway, arbitrage had a much stronger impact on trade. In the days of coins with intrinsic value, enterprising men took it upon themselves to exploit the relative difference between the price of silver and gold in different countries.) $\endgroup$ – AlexP Jun 18 at 23:54
  • $\begingroup$ @Qami, The magic insures that any increase or decrease of the coin or any such manipulations would make "quiet" That is unsealed which is illegal to use. They are also high "tech" with results similar to our current day coins rather than actual historical coins. $\endgroup$ – Seallussus Jun 19 at 0:09
  • $\begingroup$ @AlexP, Like I said they can't change the amount of gold and/or silver in the coins and still have it used. I'm not just talking about absolute fakes. I'm talking about both X amount of silver and/or gold as well as only using them for trading. So they use it much like how we use modern money. Anyway again It's standard and has to remain the exact same amount. If that means that even then it won't make anything different, then thanks. $\endgroup$ – Seallussus Jun 19 at 0:14
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    $\begingroup$ Some coins were stable for very long periods of time. For example, the (Joachims)thaler and the various derivatives (including the Spanish piece of eight and the American dollar) stayed at about 25 to 30 grams of silver from the 16th to the 20th century. The biggg problem with keeping the amount of gold and silver unchanged is that both the absolute and the relative price of gold and silver were very far from constant; consider for example the effects of massive influx of gold & silver from the Americas. $\endgroup$ – AlexP Jun 19 at 0:25
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It would have incredibly detrimental effect on trade by a strict reading of the laws

Let's take a look at the rules, shall we?

Also, people are forced to use coins instead of barter to trade in most cases. That is, it is illegal to go into a town and barter grain for meat or whatever. People have to use coins everywhere except between family members or very small villages where trading coins is meaningless. But other than that, you can't sell or buy without coins.

Ah, very interesting. Bartering is illegal, and furthermore, you can't buy or sell without coins. Now, there are two ways to read this. The first, and boring, way to read this is 'You must transact using coins as a measurement to determine the value of the goods.' The second way of reading it, the fun way and the way that will cause immense amounts of problems is 'You cannot perform a transaction unless one side is giving actual physical coins'. Now, why is this a problem?

Letters of credit, that's why. You see, trade is very risky and dangerous pre-industrial revolution, not to mention that carrying a fortune of heavy metals made you a horrifying target for bandits, pirates, highwaymen, robbers, etc. etc. Not to mention that they were heavy and therefore inefficient to transport. Thus, when trading, in was standard practice to use various forms of letters of credit in order to conduct trade as a method of convenience. Except, you know, it's not only a method of convenience - it's pretty much how large scale trade can work. That's part of the reason why banks existed back then, after all - a means of using these letters of credit wherever you brought them.

If you forced every exchange to require the physical presence of coins, than that will slow down trade by an enormous factor, not to mention tie down capitol that could otherwise be used. (Because if a ship full of gold is being transported across the ocean for four months, the owner of that gold can't use it, even if he knows he's going to get it. In real life trade, this wasn't a problem per se - if people knew you had money coming in, they'd be fine lending you credit or accepting an IOU. Basically, trade will still happen, it'll just be greatly reduced.

So, let's say you want to go with the first way to read the law - that letters of credit and IOUs are fine. That's fine - until you run into money. Modern fiat currency is loosely based of letters of credit, and it's a lot easier to transport around. If you're fine allowing things to stand in place of the coins during a transaction, than it's only a matter of time before your citizens decide that gold and silver is too inconvenient and heavy, and decide to start using paper money. (Well, actually it'll start with the rich people who gain the most because they're actually using that much gold. Poor peasants won't have a problem. But the system will eventually trickle down to them - case in point: the history of money.)

Also, having money is great because it means that the supply isn't limited to the number of gold coins anymore and the nations don't have to practice mercantilism. (Yay!) On the downside, that kind of make the wizards sealing of the coin worthless, but it won't be worthless until the system for money kicks in, and that'll take a few hundred years, start to finish.

tl;dr - strict reading of the rules stilts trade, loose reading of the rules means that eventually they switch to paper money.

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  • $\begingroup$ I hadn't even tough of this close reading of the rules. Indeed, requiring the physical transmission of coins would stop dead just about all large scale trade. $\endgroup$ – AlexP Jun 19 at 1:03

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