Griphook looked across the desk at the human boy, who seemed unhappy with the way his transaction was going. This was not an unusual situation at Gringotts. The boy, on the other hand, was not ordinary by any description, so it would perhaps be important that his concerns be completely assuaged. Although Griphook's own time was valuable, management was well aware that assisting powerful wizards – or those with powerful friends – was a generally profitable endeavor, often out of proportion to the effort invested. There were accounts onto which time such as this could be charged, if necessary.

The boy was clearly trying to avoid the appearance of insult, so the goblin helped him along. "Is there a problem?"

The famously scarred forehead was furrowed before the reply. "I…It seems – light."

And of course, some situations could be foreseen, without the need for Divination. "Four hundred Galleons, premium packaging, charms to keep them easily concealed and carried, but none that affect weight – those dealing in gold want to know the full weight of what they have."

"I brought in a metric ton of silver! It should be three times this amount."

"I see." Griphook considered what would yield the most effective response. "If I might ask, where did you get a metric ton of silver bars?"

The boy hesitated, so Griphook continued. "There are limited options for such a purchase, and it matters little where, assuming it was via one of the more reputable bullion dealers – and who else would have such an amount, after all."

"A broker with the London Commodities Exchange."

Griphook nodded. "The other options – what would they have had in common?" A puzzled look, so "You surely checked several other sources – what were your criteria?"

"Low transaction costs, firms that were known but not too well-known, willing to work with someone who didn't always show his face…"

"Very good. There is another important quality all would have, of course. "

"Headquarters in Britain?"

"They are Muggle institutions, are they not?"

"Of course."

"In London?"

"Yes."

"You realize that we at Gringotts are technically in London as well? And that it's a rather easy journey to the financial district, once you depart here and can catch the Underground?"

A moment's hesitation…"Wouldn't you be seen?"

"You might be surprised at how easily Muggles ignore us. Goblins are simply another magical property in their midst, one they file under events-I-do-not-understand. Nonetheless, we rarely go there. It is not worth the effort. "

Another pause.

"As you see, here."

Intelligence did not imply stubbornness, but it could appear that way, sometimes. Removing a well-defined understanding of the world and replacing it with a new model took time. And, clearly, the boy was quite intelligent, even if he didn't always apply his comprehension at a larger level.

In any case, he still didn't quite get the point, so Griphook tried a new angle. "Do you believe I, on my own or as an agent of Gringotts, am attempting to cheat you?"

A sigh. "I don't actually believe that you are cheating me. Still, I am not receiving what I expected and want an explanation. It seems likely that we perceive this situation differently. "

"Very good. The reputation of a bank in a small society has to be above reproach. Cheating any person would be a serious problem. If The-Boy-Who-Lived was cheated, or even believed himself to be cheated, it would be devastating! Under no circumstances would such behavior be tolerated, by anyone."

"I thought you are the only bank that wizards had. What would your customers do instead?"

"I'm sure a few minutes thought would make that clear. Perhaps we can discuss that another time. Today, though, I will explain to you what has happened, in particular what you do not yet perceive. Starting with what we, do."

A stern look, as only a goblin could pull off, for emphasis: "You were attempting to take advantage of what you perceived as an inefficient market. Correct?"

The boy hesitated before nodding. "There's no way you can exchange gold Galleons for silver Sickles at sixteen-to-one if the market is efficient."

"…when the current Muggle silver/gold ratio is fifty-to-one, that is?"

The boy's expression had moved from puzzled to … suspicious, was how the goblin interpreted it. Which was, of course, quite fair.

"You expected that you could trade back and forth between the Muggle and magical worlds and make excess returns, based on exploiting this inefficiency. If I might be allowed, young wizard, in both worlds, 'exploiting an obvious inefficiency' is often referred to using simpler terms, such as 'theft' or 'fraud.' "

"You have laws against arbitrage!?" The boy sounded as shocked as if there were laws against gravity. And while technically there was not, gravity was certainly more of a guideline, here.

"There are obscure laws which may be enforced upon a variety of economic actions – although not necessarily this one. You should be more careful about engaging in novel activities until you are confident in their legality. I would caution you that there are Aurors particularly assigned to these activities. Further, if you find yourself pursued by such, may I recommend surrender to them, as that may be safer than detention by Gringotts' more significant security measures."

Eyes widened at that - no doubt he was also remembering the standard warning that his Transfiguration professor would have used regarding goblin anti-counterfeiting … investments. Which would make the next part that much easier. "It is, however, not a problem in this case. There is no inefficiency, and, as you see, it is not exploitable. Because, as you clearly did not perceive, this market's efficiency is quite adequate."

"The efficient market hypothesis does not require Muggle science to infer. There have been goblin equivalents for centuries. One measure of an efficient market is how well it can transfer information. Remind me how, in the Muggle world, information is transferred."

"There are telephones, fax machines, pagers, telex – some of my father's friends have email where they work."

"And wizards?"

"Owls, mostly – although they require someone to write the message down, using quill and parchment. That takes more time than most of the Muggle options. The patronus spell can be used to communicate as well – near-instantly, so I wonder why it isn't used more often."

"That spell does require a certain attitude. And a wand." The thought was bitter enough to stop Griphook for a moment. "So, where is the efficient market more likely to be found – Magical or Muggle Britain?"

"More information transfer and lower costs imply higher efficiency, so it should be Muggle Britain."

"A reasonable inference, yet you ignore an important piece of information yourself." The boy would realize shortly, and allowing him to make some of these discoveries would be helpful. "How long have you known of this … " Long thin fingers waved at the room around them, and by extension at the rest of Gringotts, at Diagon Ally, Hogwart's, Godric's Hollow…"of this world, here?"

Now it was the boy's turn for a bitter look – it was making sense to him, clearly. "Not yet a year."

"Not close to a year, I suspect. So here is an important piece of information, available to all wizards, that is not transferred freely in the Muggle world – not transferred at all, in fact. And this is only one of the items they are missing that would affect their economy greatly, down to the value of the gold and silver that they use. And that is only the first piece - there are others."

"It might be helpful to consider, for a moment, the different forms of the Efficient Market Hypothesis, as you would understand it. Surely you can explain it simply enough for a goblin to understand?"

The boy nodded. "The weak form implies that all historical prices are available to everyone, and that information is included in prices of securities."

"And why does this matter?"

"Because it means nobody can make excess returns only from knowing historical pricing. Some people think they can detect patterns if they chart changes in pricing, and so know when to buy or sell."

"Divination without wand or even magic. Surely you know, already, how difficult the future is to read even for seers?"

"I suppose. In any case, the weak form appears true in the Muggle financial system, but here there aren't any real securities…"

"However, we do set the prices of Galleons, Sickles and Knuts, and by extension those of gold, silver, and bronze. And as they rarely change, one cannot make excess returns there. It is perhaps too simple an example, if still one that works as expected. Next?"

"The semi-strong form implies that public information is quickly included in securities prices, and again you cannot make excess returns based only on that. This is believed valid but has been more difficult to prove."

"As you are seeing, however, it is true enough here: You cannot use public information about the spread between these different gold/silver ratios to make excess returns. While many human wizards ignore the Muggle world, that is not a mistake that goblins will make, certainly not where gold is involved.

"Evidently."

"And we still need to discuss the strong form, yes?"

"Well, yes, but hardly anyone accepts that version of the Efficient Market Hypothesis."

"Do tell me why not."

"It says that the prices of securities can change based on private information. Even if I'm the only person that knows something about a stock or a bond, that information is supposedly included in the price, immediately. And there's no way that…" The boy's eyes widened at the implication.

Making it a good time to complete this part of the lesson. "In the Muggle financial system, there is no way that private information could easily be incorporated into securities prices. If you are the only person who knows about an acquisition, or a failure, how can that information possibly be included? "

Ah, good – the boy was not stubborn, after all. "Whereas here, there might as well not be any private information. There's Legilimency, Imperius, false-memory charms, invisibility in all its forms…"

"Plus some minor time enchantments that can move information in unexpected directions." The boy didn't need additional hints about other novel activities, or the Aurors who watched for them. "You will find that the strong form holds here surprisingly often. Any other obvious areas where there might be issues?"

Now that he was actually thinking about it, the possibilities dawned on the boy quickly: "Flamel?"

"Very good, young wizard. Not the main issue, as you will see, but that is at least part of the situation. The Philosopher's Stone is a source of great wealth, in part because it can generate gold. We can often trace gold or silver bullion to a source, and it's not at all unusual for the source to be Flamel. He does seem to recognize the possibility for inflation, although he may have other reasons for keeping the quantity of gold created to a minimum. Creating gold at this current rate, though, isn't particularly different from mining it and including that in the money supply. That a holder of the Stone might, at some point, greatly increase the amount of gold created is one reason for keeping the gold-silver ratio somewhat lower in our world. "

Harry finished this thought for the goblin: "Because nobody is going to create large quantities of silver if they have a generic method of creating wealth. Gold is more valuable, and," he gestured to the packet before him, "easier to carry for the same value."

Griphook nodded. And waited. The more the boy realized on his own…

"But, if this world has more gold, it shouldn't matter that I exchanged it for silver. The ratio should still work in my favor. If too much gold drains out of the wizarding economy, Flamel would make more. Failing that, the ratio would change."

The boy had a confused look on his face, soon replaced – perhaps not by understanding, but…

"There must be too much silver…in the rest of the world?"

"Yes, there is that. We presume Flamel caught his anti-inflationary sentiments after seeing what happened in Spain in the 16th century. Shipping massive amounts of gold and silver from the Americas had unfortunate effects on the Spanish economy. Effects that we goblins were actually quite in favor of. "

"Free riders?" said the boy with a smile – a smile that quickly became suspicious again. "Or did you….?"

"We did help it along, yes. There are charms that replicate transfiguration, and are, shall we say, more permanent than might be expected. One of these allows creation of silver that is long-lasting, but which is not suitable for minting into Sickles. And so we do not."

The boy sighed at this explanation, but didn't seem quite ready to go. "So there is silver in circulation in the Muggle world that isn't really silver. And any that comes into Wizarding Britain has that part stripped out before being made into Sickles. "

"A fair proportion, yes, of silver brought into circulation five hundred years ago. This sort of economic impact was judged at odds with the Statute of Secrecy, however, so it hasn't really been repeated since. "

Griphook considered for a moment, then decided not to say "At least here in Europe." Instead he gave a shrug. "There are good reasons, as you see, to only trust goblin coin. "

An eyebrow raised at this. "A useful side effect?"

A goblin's calculating look in return. "Albeit an unintended one, yes. In any case, this is what you see before you. There are reference materials that can be passed along, if further examples of the strong form are needed, or if my word as your banker is not sufficient." As it should be, of course. Trust was a difficult resource to build in the wizarding world, it turned out. A reputation built up over hundreds of years was not to be taken lightly.

This was perhaps less obvious to those raised among Muggles, Griphook realized. "Will you accept this trade of gold, then? Or would you prefer your…silver…returned?"

The young wizard considered the time required, the effective return, and the lessons learned before answering, "No, the Galleons will be acceptable."

"If there is nothing else, then, Gringotts appreciates your business and looks forward to serving you in the future. "

Author's Note: The Philosopher's Stone is probably reason enough on its own to keep the gold/silver ratio where it is, but (as Harry implies here) that didn't turn out to be a very interesting story.

XKCD 1494 (Insurance) came out after most of this was written, but it had some influence on Griphook's caution to Harry.

For some amusing ideas on how law enforcement might keep track of folks using time travel for fun and profit, look up the Project Greenlight script "Does Anybody Here Remember When Hanz Gubenstein Invented Time Travel."

This is a standalone story that won't have any other chapters as such. (I left the status as "in-progress" in case I wanted to make changes, which I see could be confusing.) I do have ideas for some followups with Griphook and Harry that, similarly, are short standalone stories. Not sure yet whether to make them completely separate stories here or to put them into a single "story" with each one as a new "chapter." If there's a reason to prefer one or the other, let me know.