[HPforGrownups] Wealth in the Potterverse (was FWIW: Potter's Cash)

[Bart Lidofsky]

No: HPFGUIDX 161951

Steve wrote:
> Just my opinion, but I've always gotten the impression 
> that the Potters, and now Harry, are 'comfortably well 
> off' but they don't quite make it into 'Rich'. Certainly, 
> they were comfortably upper middle class or low end rich,
> whereas the Malfoys are pleasantly rich, probably middle
> to upper rich.

Bart:
OK, let's just put a few operative definitions in here. First of all, 
just by the basic rules of economics, if you put your money into near 
100% safe investments (where something like a national collapse would be 
required before you lost your money), your investments will generally 
not quite keep pace with inflation. In general, better investments can 
be found by increasing risk; working it properly (diversifying your 
investments so that some going down will lead to others going up) will 
allow strong growth outpacing inflation (as with mutual funds), but 
requires that one spend some time actually paying attention to one's 
investments. Given that, I propose the following definitions:

1) Truly wealthy: The interest on the interest on the capital is enough 
to pay all current expenses, plus generous growth. This means that the 
capital will continue to increase at a rate outpacing inflation, while 
all current expenditures are covered. This also means that several 
future generations will not have to pay much attention to the capital, 
and can live a life of total leisure. Of course, having a good business 
manager in each generation can ensure that the wealth stays put. The 
Blacks and the Malfoys certainly count for this.

2) Currently wealthy: The interest on the interest will pay current 
expenses, but does not allow for growth. The wealth can last without too 
much effort as long as nobody has too many children. I suspect that this 
is the level of wealth that the Potters have (remember, coins do NOT 
keep apace with inflation; if one has a great fortune in coins, then if 
it is not backed up by a much greater fortune in investments, then it 
shows foolishness on the part of the owners). Because of this, I suspect 
that the Potters belong to this category. Note that Harry has already 
made one good investment: Fred & George's. Now, it looks like F&G 
consider the money to have either been a start-up loan, or that Harry is 
a minor and silent partner in the business; Harry probably considered 
the money to be a gift, but certainly would rather accept repayment of 
the loan, or at least free merchandise, rather than make F&G feel 
beholden to him.

3) Wealthy: Can live on the interest from current investments, but if 
one does not keep adding to the capital, real income will shrink with 
inflation.

4) Rich: Has enough money to live well, and probably some investments, 
but needs to work to keep the money coming in, even if the work is just 
managing investments. Fred and George seem to be heading into this 
territory, if they haven't already reached it.

5) Middle Class: Can live comfortably and pay basic expenses. Has to 
work to pay the bills; may have some savings and/or investments, but 
that is more for retirement than current income. Most of the Ministry is 
probably at this level, as well as the Hogwarts teaching staff, as are 
the older Weasley boys (which would explain why they don't kick in money 
to the family).

6) Lower Middle Class: Cannot afford to be out of work for more than a 
short period of time. Not starving, but not much money to pay more than 
basic expenses. Any unexpected expenditure means sacrificing needs. The 
Weasleys, due to their number of children, are between 5&6. One would 
expect Fred & George to start kicking back money to the family, and they 
have, to some extent. However, one can assume that much of their extra 
cash is being converted into investment capital. Certainly, if the 
Weasleys have an emergency, F&G would not hesitate to cover it, as JKR 
has gone out of her way to show that F&G have very strong moral 
principles, albeit not quite the same as society at large. Most squibs 
who can't rely on their families for support probably live at this 
level, too. Filch & Figg come to mind, immediately. Hagrid lives at this 
level, but, now that he's a Professor, is probably socking away money, 
not being quite sure what to do with it (in HPB, it was certainly 
established that he could have a LOT more money if he wanted it; he just 
has no need for it).

7) Poor: Do not have enough money for basic needs. Generally have to 
redefine basic needs in order to survive (such as defining "suitable 
clothing"). Voldemort's family certainly qualifies, as does, probably, 
Dung Fletcher. Squibs who can't find work in the WW and do not have 
experience in the non-WW, as well as low performers in magic probably 
end up here. It is implied that Prof. Trelawny would be here if it 
weren't for Dumbledore.

	Bart