THE YELLOW BRICK ROAD ...
hyperinflation, something that fiat currencies have had a tendency to do. So what does the Wizard of Oz tell
us about reserve banking? Firstly it is refreshingly accessible as a window on political and economic life. It follows the same genre as the Brothers Grimm in Germany who wrote fairytales that very much reflected popular political themes of the time with many easily recognisable characters. Arguably so to Lewis Carroll. The Wizard of Oz was first published
as a book in 1900 by L Frank Baum (a keen political writer and Populist) and released as a film in 1939. In the original book Dorothy’s shoes were actually silver but changed to ruby because Hollywood was going Technicolor. The Populist Movement of 1894
were keen on monetary reform by significantly expanding the money supply to liberate debt- enslaved workers; Populists wanted silver (at a fixed ratio of 16:1) to be added to gold coinage, thereby creating additional dollars, thus devaluing those dollars and thereby reducing the debt burdens that workers (and especially farmers) were labouring under. As such, there simply was not enough gold to finance the needs of an expanding economy. A form of Quantitative Easing if you like. Silver was thus seen as a way of overcoming the limitations of gold. There is no solid evidence to support the view that the book was
intended as a political satire or even a monetary allegory, but it does nevertheless serve a didactic purpose. The interpretation of the film is clear. Dorothy (Everyman
American) is lost in a (financial) storm. She is joined in her efforts to get home by the Scarecrow (no brain – farmers trapped in debt to bankers and the railroad cartel while unsure how to go about resolving their financial burdens), Tin Man (no heart – industrial workers, rusted up and disillusioned). Tin Man reflects the 1890’s largely inactive and dehumanising factories where unemployment was running at 20% – exactly twice the levels currently blighting the USA). The spell by the Wicked Witch of the East (bankers) leads to him chopping off his own limbs (downsizing!). The Lion (cowardly) – represents pro-silver politician William Jennings Bryan – a putative Presidential candidate who has a great roar (orator) and power, but lacks courage. The Yellow Brick Road (gold standard) takes her to the Emerald City (the dollar or ‘greenback’ and Washington) with its false tricks and delusions. In Emerald City people wear green-coloured glasses attached
to a gold buckle suggesting greenbacks or dollars backed by gold. The film is full of symbolism – Dorothy has to go along 7 passages and 3 floors to meet the Wizard thought to allude to the “73” congressional act that changed money from a gold and silver basis to just gold. Finally, the answer to financial salvation lies in her ruby (silver) shoes. Of course the Wizard (President) turns out to be a small man who is a fraud, his gifts are shallow,
he was much manipulated behind the scenes and much of what he said was fantasy. Once exposed the Wizard loses his influence and is replaced by a Scarecrow (farmer) who would “be another Lincoln”. In many ways the Dorothy in
the Wizard of Oz encapsulates the American dream and national spirit of the time – that you can realise your potential. The message is also clear at a different level – step off the yellow brick road, click your silver heels three times and you can go wherever you want to. In short, Baum urges a move beyond the constraints of a gold standard to make the economic changes necessary for growth. It is too limiting. In this particular case, silver. It is a charter in support of QE. In 1900 it may have made good
sense to have expanded the monetary base but by 2011 we see manifest the cumulative and deleterious effect of an over-reliance on this particular financial medicine. The point is that Baum doubted the ability of gold to play the role of “sound money” by itself. More importantly, it demonstrates the dangers in heading down the road to monetary easing – in this case to ease the debt-burdened populace. But as we see today it does eventually lead to another Emerald City where financing lifestyles on borrowings becomes a way of life.
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