[This excerpt has been lightly edited for brevity.]
The Wizard of Oz remains one of the most watched American movies of all time. The staple of Christmas viewing back in the days when people sat in front of terrestrial TV, this American children’s story is all about money.
More specifically, it concerns the populist movement that fought to bring the U.S. Off the Gold Standard against the backdrop of late 19th-century deflation. While most Americans see The Wizard of Oz as an innocent children’s fairy tale, the film is a highly political allegory. It is the story of class struggle and a culture war between the financial elite and the workingman, the moneyed East Coast and the rural South and West, and the established political parties and an insurrectionist movement—the Populists—that emerged in the 1890s.
In the film, we can read Oz, the evil Wizard, as the embodiment of the banking elite and also a stand-in for gold, oz being the symbol for an ounce. The Yellow Brick Road represents the Gold Standard itself, a pathway made of gold bars. Dorothy is the farmer’s daughter from Kansas, the state geographically smack in the middle of the country, representing that mythical place, middle America. The Scarecrow is the Midwestern farmer, put upon by falling prices, and the Tin Man is the industrial worker whose wages are also falling, impacted by deflation associated with the Gold Standard. The Cowardly Lion is the merged Democrat-Populist candidate in the 1896 presidential election, William Jennings Bryan.
Before Dorothy and her friends, working Americans, can enter the Emerald City, they are ordered to wear green-colored spectacles. The conservative financiers who run the Emerald City, in other words, force its citizens to look at the world through money-colored lenses. To satisfy the Wizard, the group must travel to the West and destroy his enemy, the Wicked Witch. The West represents the Midwest of America, the farming heartland and the source of the Populist movement.
At every stage, Dorothy is being used by the Wizard to uphold the rules of the Emerald City and the interests of rich Americans who support the Gold Standard. At his behest, she kills the Witch and returns with her friends to the Emerald City confident that the Wizard will grant them their wishes. When they unmask the Wizard, however, they discover he is nothing but a fraud—as is the Gold Standard. Although Dorothy’s shoes are red in the film version, in the novel that the film is based on her shoes are silver. To return to Kansas, Dorothy need only click the heels of her silver shoes together. The power to solve her problems—by adding silver to the money stock—was there all the time.
The political message behind The Wizard of Oz was that the average American, embodied by Dorothy, could be liberated by a move from the straightjacket of the Gold Standard to the looser jersey of a silver-backed currency. While this may seem obscure, the last U.S. Election of the nineteenth century was fought on this very issue: what backs money, silver or gold?
Crucifixion by gold
Yellow Brick Road
Against a late nineteenth-century background of breakthroughs in science and medicine, technological advances across a range of areas and an empirical and rational revolution, you might expect that significant changes would have emerged in the way we organize money.
Instead, we had the era of the Gold Standard, which lasted from approximately 1850 to 1914, a long period of monetary conservatism and small government. The political and financial establishment was wary of the paper money experiments of the revolutionary times, which had caused such tremendous instability. The Gold Standard was regarded as a bulwark against dangerous social and political change. This system, whereby all money was backed by the world’s limited gold supply, became the central plank of global economic and monetary policy. A scheme that ties money to gold means that there will always be a shortage of money because there is always a shortage of gold. Such a system suits those who already have money. But what is the right amount of money for a growing economy?
Those who support the idea that there’s already too much money out there are likely to be those people who already have plenty of money. In contrast, the people who advocate that there’s not enough cash out there are likely to be those who don’t have enough money. To understand the political landscape at the turn of the new century, and the two opposing camps that emerged to clash over the question of whether to tie the US currency to gold or silver, we need to go back and trace a bit of American monetary history and a momentous decision taken by the US after the Civil War.
In 1873, America tied the dollar to gold. The politics of gold in the US had been upended in 1848 by the California gold rush: up to then, America had no known natural sources of the precious metal, but after this discovery it became possible for America to contemplate a monetary future based around gold.
America already had a well-understood currency in Alexander Hamilton’s silver dollar, which remained in circulation. Up until the discovery of Californian gold, financial control and order was achieved with the existing silver standard, and this gave the US more flexibility because it could print more money, silver being cheaper than gold. After the gold rush, however, the price of gold fell against silver and this changed attitudes toward adopting the Gold Standard. In addition, American financiers were worried that international investors, addicted to gold, might regard an American silver standard as second-rate. That the U.S., today’s global superpower, felt the need to hitch its wagon to gold in the late 19th century, and didn’t have the self-confidence to go it alone in the world, indicates where Washington saw itself in the global economic pecking order.
Gold has a fixed supply: if the economy grows, meaning the economy produces more things, the price of those things must fall in gold terms, because the supply of gold doesn’t rise in response to the rise in the economy’s output. Tethering a currency to gold is inherently deflationary. Falling prices sounds good, doesn’t it? We are conditioned to think about prices in this way. It is good if the price of things you buy falls. But this cuts both ways. What if the things you sell, like your labor, also fall against gold? In a period of deflation, whose standard of living rises? The people with gold, of course. That means people in finance, people trading money or speculating on other commodities, those with access to money—the already wealthy. Currencies linked to gold will reward people with savings. Who in the late nineteenth century had savings? The same people who have always had savings: rich people, of course.
There is another dynamic that can reinforce this inequality. If the supply of money per head is declining, the price of goods and wages falls but something else happens to asset prices. When money is tied to gold and in short supply, how does the economy finance investment, building or speculation on the future? It does so via credit. The banking system adjusts accordingly to provide that credit. Now consider this at an economy-wide level. Credit markets expand dramatically, pushing up asset prices, which typically ensnare the economy in a credit cycle. As asset prices rise at a time when everyday prices and wages are stagnant, a speculator class becomes enormously wealthy, driving a wedge between the workers—those who depend on wages for their income—and the wealthy—those who depend on rents, dividends, and asset prices for their income. A similar dynamic played out after 2008 in most Western economies as central banks made very cheap credit available to banks and those banks lent this to “creditworthy” clients—namely the already rich who had invested in assets such as housing— driving up asset prices way above wages.
After the Civil War, the growing U.S. Economy was a magnet for European funds, but the vibrant silver versus gold debate planted doubt in the European mind as it threatened to devalue the currency. If the US wanted to print more dollars to ease financial privations and political tensions, dollar devaluation was a risk. The world was yet to be convinced that the United States had the political stomach to remain on the Gold Standard. This lack of credibility implied that, despite its growth rates, America was risky, and so it had to offer higher inter- est rates to Europeans to encourage them to hold its debts. Expensive borrowing meant more reliance on running large trade surpluses with the rest of the world, which in the late nineteenth century more or less meant Europe.
Acts of nature saved the USA from perennial gold crises. In the late 1870s, a series of European crop failures and unusual weather patterns bailed out America. In May 1879, it snowed in France, and similarly poor weather afflicted central Europe and Russia. For the first time in a decade, the port of Odessa, Europe’s fastest-growing trading center, was not straining at the seams with Russian wheat to ship to Europe. The shortage pushed European wheat prices skyward, while across the Atlantic, a bumper harvest ensured that American wheat fed the world—at high prices. As wheat traveled one way, gold traveled the other. America’s gold stock increased further the following year with the discovery of oil in Pennsylvania. U.S. Oil and wheat were traveling to Europe, helping America maintain the Gold Standard without strangling an economy that at this stage was absorbing thousands of European immigrants per week, first Irish, then Italians and Jews.
Good harvests and good luck for the United States meant that gold flowed in, but so too did these immigrants from Europe driven out by the same process: bad harvests meant emigration. While gold flowed west across the Atlantic, more and more people continued to arrive in America, causing the overall gold per person ratio to deteriorate. Even though the economy was growing, the fruits of this growth were not evenly spread, socially or geographically.
This situation can last for a while, particularly if there is no way for the workers to exhibit their displeasure. But democracies come with a device called the ballot box which has a way of dealing with such dilemmas.
For Americans in the 1880s and 1890s, the Gold Standard would become the totemic issue. The poor wanted the US to move back to a silver system that would allow more money to circulate. The rich wanted the Gold Standard to remain in place, cementing their position at the top. The rallying cry of the 1896 election was “Silver instead of Gold”—it was the workingman versus the elite. As William Jennings Bryan (the Cowardly Lion in our Wizard of Oz allegory) said at the Democratic National Convention in Chicago, taking aim at bankers, financiers, and gold bugs, “You shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.”
Dixieland
In the 1830s, the Bank of Louisiana issued a ten-dollar note. Due to the preponderance of Francophones in the region, the ten-dollar note was known by a French name, dix, meaning “ten.” But the English speakers didn’t pronounce the x in the French way (“deece” with a soft x) and so it became dix with a hard x. Louisiana, home to the wealthy port of New Orleans, was a rich state, and printed the most credible currency in the South. The currency of the Bank of Louisiana, the dix, became widely used in the adjacent Confederate states. The impact of the dix increased dramatically during the gold rush because New Orleans was the first port that Californian gold was deposited in: difficult as it is to understand now, it was cheaper to transport Californian gold by ship all the way down around Cape Horn and up the other side to New Orleans. The more gold in New Orleans, the more banknotes printed. In time, the Confederacy became known as Dixieland.
The legacy of the Civil War remained central to American politics. Both the North and the South had needed money to fight and both resorted to issuing paper money, backed by loans from their own side. For instance, investors would invest in Union government IOUs and with this money in the Treasury, the Union government printed paper money with nothing to back it but the promise of victory. To keep money coming in, the Union government undertook to pay the interest on their bonds to the lender in gold coins, but paid their soldiers in notes, which became known as “greenbacks.”
After the war, there was no Confederate government to pay back Southern bondholders. The Northern side refused to redeem any of the now-worthless IOUs issued by its former enemy. The resentment in the bankrupt South toward Washington and its cozy consensus of Republicans and the business elite is not difficult to comprehend. In contrast, Wall Street boomed. This vast, unstable, violent country offered all sorts of opportunities for speculation. Immigrants made a go-getting society even more frenetic. This was an era when great fortunes were made and lost, the era of magnates like Cornelius Vanderbilt and Jay Gould, which became known as the Gilded Age. In his 1899 bestseller, The Theory of the Leisure Class, economist and sociologist Thorstein Veblen would document the excessive consumption of this new moneyed class, showing that as Wall Street splurged, rural America suffered.
In the Midwest, the combination of the railroads and the Gold Standard had a profoundly negative effect on farmers. The railway boom brought millions of acres of arable land under tillage. This increased the supply of corn and wheat, and pushed their prices downward. Farmers who had borrowed for machinery and to purchase land found themselves increasingly indebted. Their debts were in gold-backed dollars, and the price of gold was rising, but their income was in crops, and as the supply of land expanded, the price of those crops continued to fall. In the country’s agricultural heartland, the balance sheets of these farmers imploded while the wealth of the railroad bosses soared.
In 1870, farmers in Kansas received 43 cents for a bushel of corn; twenty years later, they were receiving 10 cents a bushel, less than it cost to produce.3 An agrarian movement, the Farmers’ Alliance, began as an organization to increase the power of producers by negotiating with bulk buyers as a cooperative. The cooperative extended its role in the countryside by opening libraries and disseminating all sorts of radical (at the time) pamphlets on agrarian reform. Across the Midwest, the Farmers’ Alliance gained members. Its manifesto centered on curtailment of the power of the railroads, federal loans to aid farmers in debt, and currency reform that entailed reintroducing Hamilton’s old silver dollar alongside the gold dollar to ease monetary conditions, which would give debtors a chance to clear their loans. When the wheat and corn farmers of the Midwest and the cotton farmers of the South united, a new political force would emerge. With a speculator urban class in the Northeast becoming wealthy and a rural farming class in the South and the Midwest caught in the monetary brace of the Gold Standard, American democracy was ripe for change.
Enter the Populists
In 1892, a global financial crisis that began with a series of defaults in far-off Argentina and culminated with the bailing out of Barings, one of Britain’s largest banks, had severe repercussions for the American economy. The transmission mechanism was the Gold Standard. To bail out Barings, which had lost tens of millions on its investments in Argentina, the Bank of England needed gold. It raised British interest rates, causing gold to flow into London—and out of the rest of the world, including America. The resulting credit crunch in America pushed unemployment up to 20 percent and, with businesses failing all over the country, a new party, the Populist Party, which was determined to free the US dollar from the shackles of gold, began to mobilize as a third force in US politics.
Obsessed with maintaining confidence in the currency and advised by bankers, Grover Cleveland, the Democratic president, responded to the unemployment crisis not by spending dollars on public works, but by spending dollars buying up gold. He wanted to show the world that America was good for its credit and wouldn’t let its reserves fall to a level that might undermine its commitment to gold. For the average farmer, the global financial crisis and the reaction to it crystalized the idea that an elite financial cabal was putting the interests of bankers above the interests of the workingman.
If Washington would not acknowledge what was happening in the hinterland, then the hinterland would come to Washington. A Populist politician, Jacob Coxey, organized a march on the capital, called the “petition in boots” or “Coxey’s Army.” Unemployed people from all over the country enlisted. In 1894, the first ever mass march in American history called on the government to hire unemployed men to build public infrastructure financed by a public deficit that would be enabled by a move from the restrictive Gold Standard to a looser silver standard. This would be precisely the policy followed by President Franklin Delano Roosevelt 40 years later, but in 1894 the Populist Party’s manifesto was considered impossibly radical by the Republicans and by most Democrats.
At the 1896 Democratic Convention all hell broke loose. The Democrats rejected their own sitting president, choosing a relatively unknown candidate, William Jennings Bryan, as their leader. More radically, they adopted the policy of jettisoning the Gold Standard in favor of a dollar backed by a combination of gold and silver. Bryan and his supporters called for the dollar to be convertible into silver, valuing 16 ounces of silver equivalent to 1 ounce of gold—a ratio far below the ratio then prevailing in the market, which was about 31 to 1. Such a move would have doubled the money supply overnight. Critics denounced the plan as wildly inflationary.
The Populists now faced a dilemma as their signature policy had been stolen by the Democrats. Would they split the radical vote or join forces with the Democrats and go for a dual assault on the White House in the upcoming election? The Populists opted for an alliance, promising a war on the plutocracy. The Populist program of aid for farmers, the vote for women, income tax cuts for ordinary workers, the regulation of railroad barons, and of course public deficits to build infrastructure, would only be workable if the monetary brace of gold was loosened.
Despite his alliance with the Populists and his soaring oratory, Bryan was defeated by the Republican candidate, William McKinley. The American popular revolution against gold was over, for now.
We’re not in Kansas anymore
In the summer of 1896, a few months before the Populist-Democrat defeat, thousands of miles away from Washington, an almost destitute First Nations woman, Shaaw Tláa, who had lost her first husband and child to influenza, was living with her second husband George Carmack. She would change the politics of money in the United States for a generation. In one of the many tributaries of the great Yukon River in Alaska, this couple eked out a precarious living fishing for salmon while hoping to find gold. One August morning, Shaaw Tláa saw something glittering in the water. By next spring, news of the first discovery of Klondike gold had made it to California and, before that year was out, 100,000 hopefuls had descended on this remote region hoping to strike it big. The Klondike, added to the discovery of vast seams of gold in Colorado and South Africa, almost doubled the world’s supply of gold over the following ten years.
The Democrats got their monetary easing not by abandoning the Gold Standard but by the newly increased gold supply that allowed the global monetary brace to relax. Between 1897 and 1914, as more dollars were printed, prices in the US rose by nearly 50%. Deflation was slain by the intrepid prospecting of a First Nations woman, Shaaw Tláa, or Kate Carmack as she was better known, who would die in the great Spanish Flu pandemic of 1920.
If Shaaw Tláa represents one type of American heroine, Dorothy in The Wizard of Oz represents another, the wholesome farming girl from Kansas, the heart of the United States. In the crowd at that rumbustious Democratic Convention in 1896 was a journeyman journalist, L. Frank Baum, who had a number of careers behind him by that time. Like many millions of Americans, Baum was taken by the radical, unifying message of the Populists. Having experienced business failure and the various gold-related credit crunches, Baum was a true believer in bimetallism, a currency backed by a mix of both gold and silver. Bitterly disappointed by the defeat of William Jennings Bryan, Baum turned his hand to writing children’s books and penned an allegory, The Wonderful Wizard of Oz.
In 1937, just a year after Roosevelt had taken a traumatized U.S. Off the Gold Standard, the success of Walt Disney’s first feature film Snow White and the Seven Dwarfs showed that adapting fairy tales and children’s bedtime stories for the cinema could be successful. Depression America needed make-believe and MGM Studios bought the rights to Baum’s children’s fantasy. On the silver screen, the story of gold came alive. The first movie to be shot in Technicolor, it would become one of the most successful films ever produced in the US.
Over the following decades, countless American families watched the film each Christmas Day, singing along with Judy Garland to “Over the Rainbow.” How many knew they were singing about the Gold Standard and the politics of money?
You couldn’t make it up.
Excerpted from The History of Money by David McWilliams. Copyright (c) 2025 by David McWilliams. Reprinted by permission of Henry Holt and Company, an imprint of Macmillan Publishing Group, LLC.