What Will The Dwarves Do With All This Gold?


Dear Peter Jackson,

I recently finished watching your most recent film, The Hobbit: The Battle of Five Armies. While I was impressed with the special effects used in the battle segments, I was disappointed by how ignorant all of the film’s characters, and presumably the film’s creators, were of basic economics. As an engineering student, I have only taken first year economics, but even with this most basic knowledge, the fundamental premise of the film made little sense, which prevented me from enjoying the film.

Gold is used as a medium of exchange. It has little intrinsic value beyond its use in jewelry and decorations. Without any commodities to exchange it for, the medium of exchange has little value. In your film, everyone was fighting over gold, but nobody seemed to have anything for sale. Then what is this gold useful for? Is it really worth the bloodshed? Additionally, Smaug was guarding such an immense amount of gold, that its introduction to the market would surely cause massive inflation, rendering the gold useless and unvaluable. Have we learned nothing from Zimbabwe or post-WWI Gemany? Printing money causes hyperinflation, and Smaug’s gold would have the same effect in Middle Earth. Your film did nothing to explain how the dwarves planned to use this gold without crashing the market, which really killed my suspension of disbelief.

I assume that your decision to not focus on the economics behind the film was merely an oversight. I trust that your next film will focus almost entirely on the economic impact of a large influx of gold on Middle Earth. What will the dwarves do with the gold? Will they find more constructive uses for it than for decorative purposes? I look forward to learning the answer to these and many more important economic questions in your next Hobbit film next Christmas.

Thank you for your time.


A Concerned Amateur Economist