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A Wizard that grew up poor and resentful of the jewellery of the rich people around him decides he'll end the allure of gold and silver for good. For this purpose, he immediately produces a billion tonnes each of silver and gold, and sets around to selling all of it that he can find. In cases where metallurgy cartels or government agencies try to stop him, he just forges coins and ingots himself and leaves them in the streets.

He spends five whole years distributing the gold and silver across the continent, producing a billion tonnes more of each every year. All attempts to stop him with force fail because he's powerful enough that national armies cannot fight him. He does not actually hurt anyone, but neither can anyone hurt or stop him.

His methods of distribution range from leaving the ingots and coins scattered in busy streets to just selling them to major companies.

The world basically our own, except there's this Wizard distributing as much gold and silver as he can, when he can, and wherever he can.

Will his efforts to crash the global market in these precious metals succeed? And if it succeeds, what are the long term effects this will cause to the world economy? What will replace the noble metals as currencies and status symbols?

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    $\begingroup$ If you could make gold and silver with magic you wouldn’t be using it as money and as a not there is around 244,000 metric tons in the world so a billion tons would be overkill. If this is something only he can do governments around the world would be looking for te source as soon as he started selling large amounts and deal with him. $\endgroup$
    – Joe W
    Apr 14 at 15:37
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    $\begingroup$ Yup, this has already been answered, but to make a point for the future, I’m voting to close this question because it's an off-topic high concept question and because it's asking two questions on a site that allows only one (Needs More Focus). We're great at helping you achieve a goal you've already decided on. Questions asking for help setting the goal are almost always off-topic. $\endgroup$
    – JBH
    Apr 14 at 18:54
  • $\begingroup$ One more thing. Check out what it means to use fiat currency. Your wizard might take a bullet to the head for counterfeiting, but the use of gold would have nothing to do with a collapse in the currency markets or even inflation. I can't speak to other countries, but no coin in the U.S. has been minted using gold since 1933. $\endgroup$
    – JBH
    Apr 14 at 18:58
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    $\begingroup$ "In a world where a wizard creates lots of gold and silver, how would this affect the gold and silver markets in the short run, and world economy in the long run?" No @JBH, this is not a high-concept question, it is definitely sufficiently narrow to warrant keeping it open. You even said it yourself: there is an answer, it is accepted, and it is not a book, this has not failed the book test. I really wish you would stop being so [expletive] eager trying to shut questions down instead of looking for ways to keep them open. $\endgroup$
    – MichaelK
    Apr 15 at 12:35
  • $\begingroup$ Yes, @MichaelK, it's a high concept question. Making a seemingly small change and expecting an explanation of large, ambiguous results is the essence of a HCQ. All I said is that an answer had been accepted - that doesn't magically make the question not a HCQ. And an explanation of how a world economy would be affected is, by definition, a failure of the book test. Unless your accepted answer happens to explain the economic impact in China, Austrailia, Russia and Canada, the four largest gold producing countries in the world (the U.S. is the fifth...)? $\endgroup$
    – JBH
    Apr 15 at 13:50

4 Answers 4

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There would be an upset, but only briefly

Here are the immediate effects...

  1. Gold mining becomes worthless. However... gold mining is rarely the only extractable resource from a mine, so while they lose the gold income, they can still get income from other metals.

  2. The gold commody market crashes.

  3. Manufacturers that rely on gold. They can now drop their prices and start churning out more(!) of the products. You might face an unexpected equivalent of Jevon's Paradox here: that when the cost of production goes down, the sales increase so much more that this entirely offsets the downturn in unit price.

  4. End customers. Now they can easilly get anything and everything they want with gold. Which they probably will.

No, where the real issue lies is in financial markets and national economy. Gold is used for...

  • Inflation and currency devaluation hedging

  • Investment portfolio diversification

  • Gold Exchange-Traded Funds (ETFs) and Bonds:

  • Reserve assets

This means that central banks and other large movers and shakers will have to ditch gold as a liquid asset and find something else to use as that.

...which they probably will do right quick because gold does not have the significance it once did. The transition will be tumultuous, but probably not as catastrophic as for instance the housing mortgage crisis was.

"Did you say this could lead to more jewelry?"

Yeah, because gold and silver are pretty in jewelry. People like pretty things!

What the wizard has done is to democratise gold and silver jewelry. Now it is everywhere!

In the mean time, the rich will find something else to use as precious bling. This would not be the first time, as Berlin Iron Jewelry shows.

So in summary...

  • Gold and silver prices will crash
  • There will be an upset in macro- and national economics, though probably not for long since gold does not have that much of meaning any more.
  • Gold and silver jewelry will probably be churned out at a much more prodigious rate, meaning that the lower and middle income classes will use them more.
  • The upper classes will find somethinge else to flaunt their wealth with.
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    $\begingroup$ Also, the wizard finds that lots of people want to hire him to transport stuff, and to make things that are more useful than gold or silver. $\endgroup$ Apr 14 at 16:09
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    $\begingroup$ Ahem... you mean "reserve assets..." yes? 😝 +1 for pointing out that devaluing the gold would lead to jewelry being bought due to the quality of its artistry and not the value of its raw materials. What a boon for the artists! $\endgroup$
    – JBH
    Apr 14 at 18:55
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    $\begingroup$ What it would lead to is gold being used for a lot more things. Gold is a great conductor and is non corroding so more use in construction and electrical work. $\endgroup$
    – Thorne
    Apr 15 at 1:51
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    $\begingroup$ @JBH Oh man, I laughed out so loud when I scrolled up and saw that. Great catch, thanks! :D $\endgroup$
    – MichaelK
    Apr 15 at 9:55
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    $\begingroup$ It's worth noting that in addition to looking pretty, gold is also really convenient for jewelry; it's relatively easy to work with and doesn't react badly with the body's heat or oil. $\endgroup$ Apr 16 at 20:50
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After a brief struggle, the economy would skyrocket.

We would be able to coat just about everything in gold or silver, which means:

  • we can make all the steel stuff completely rust-proof, from cars to bridges by surface-gilding it.
  • we can coat all the medical and sanitary stuff in silver, which is strongly antimicrobial, saving many lives.
  • we could use the gold in electronics, where it has countless uses
  • gilding medical implants significantly reduces the chances of them being rejected.
  • if we have enough gold, use it as a replacement for plastic when we can.
  • combine the extra gold with titanium to create β-Ti3Au, which is 4 times stronger than regular titanium!
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Something will replace silver and gold

Silver and gold are valuable partly because they are scarce (gold is also valuable because it has useful applications, I don't know much about silver).

So once gold becomes cheaper than water, the rich will choose something else to become a sign of status. During some periods in ancient China, Jade was the actual most valuable material. And even in Europe, there were times when in order to show you were rich, you would walk around with a little bag of sugar. In other times you would simply wear red or purple, because the dyes were expensive to an extreme.

So depending on where your mage lives, he may crash the gold market, but then the rich just switch to rubies and stuff.

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    $\begingroup$ If a wizard can suddenly appear and crash the Gold market, why should any rich person feel safe investing in rubies? $\endgroup$ Apr 14 at 21:16
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    $\begingroup$ @SurpriseDog, it's only a secondary asset anyway, people with real money hedge with land and properties because it's the only thing you can't suddenly find more of $\endgroup$
    – Separatrix
    Apr 15 at 12:10
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The rich would have real gold and the poor would have fake gold.

Since he is just magically making gold you can probably tell which gold is which by examining radioisotopes and purity. They would send armies to wander around with him and forbid anyone from buying from him, seize any fake gold, and work to minimize the supply.

Just as artificial diamonds tend to have a lower price than diamonds made with the blood and sweat of slaves in Angola, the fake transmuted gold would have a lower price. Some would no doubt escape and be used for computers and such but the jewelry industry would be fine as they would just check to see if it was real gold or not.

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    $\begingroup$ If you need a lab analysis to tell the difference, there's no meaningful difference. Yes I am a millenial, and I have no qualms whatsoever about killing the diamond industry along with anything else of its ilk. $\endgroup$
    – Separatrix
    Apr 15 at 12:12
  • $\begingroup$ I imagine you could tell with a geiger counter, since normal gold should be a bit radioactive. Also, think of the slaves in wars being used to mine gold to fund destructive civil conflicts. Do you really not want to support their blood gold? $\endgroup$
    – Nepene Nep
    Apr 15 at 12:15

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