The Treasure Trove and Inflation

I've seen, occasionally, the notion floated that heroes discovering a large amount of gold (say, the traditional dragon horde) would cause massive inflation and would send the prices rising.

I think... that's a dubious proposition. 

Let's say that in a typical fantasy D&D world (and we'll use the 5e price list), and your party defeats some large dragon.  You come back into town with a quarter million gold pieces, along with a lot of gems and magical items.   What would happen?

First of all, a part of the treasure isn't going to be injected in the local economy.  The gems will probably be kept for emergency/easily portable treasure. The magical items will be kept/used or traded (probably for other items). Only the gold/silver will be injected in the local economy.

Second, although it *sounds* like a lot, a quarter of a million gp is not that much wealth in D&D. I've done math calculating the average GDP per inhabitant (see my previous post). The average income is about 220 gp/citizen. So a small town of 2000 people will have a yearly income of 440 000 gp.  A kingdom of 5 million people has a GDP of over a billion gp! The extra gold will be good for the local economy yes, but it will not lead to ridiculous inflation. 

(I'll note that this doesn't really seem to jive with historical data, but that's because a single gold piece is worth less in D&D than in the medieval era.  Why?  I don't know, all those dwarves mining gold?)

Lastly, it probably won't all be spent at once anyway. The PCs will probably be more generous and free wheeling with their money (and some villagers will take advantage of this) but... 

so.... the notion that adventurers and their gold lead to massive inflation is misleading. It should be noted it will be good for the local economy as there often was a shortage of currency. Could this lead to light inflation? Sure. A spike in the price of one or two items because the party suddenly bought all the supply (say, healing potions?)? Sure.  The villagers charging the heroes more since they are flush with cash and probably feeling a bit generous?  Quite possibly.

Overall inflation that the GM should bother about (for "realism" reasons), or use as a tool to reign in the extreme wealth? No.

(And if I didn't manage to convince you... what happens in the real world? You live in a small village. You win the lottery, an immense amount (say 100 million dollars). Is there an inflation boom in the village? No.)

How to reign in extreme wealth?  Well that's an entirely different blog post isn't it :D