Deficits Don’t Matter, or Do They? Let’s Ask the Wizard of Oz!

The other night I was attending a seminar on “The Conspiracy For Your Money” and one of the topics discussed was fiat currency and the debasing or devaluing of the currency that is causing the value of the US Dollar to shrink.

In a previous article titled “Decades of Debt and Dollar Doubts”, the challenges being experienced at all levels of the economy related to King Dollar and the large government debt that is being generated beyond any reasonable understanding, were introduced.  Due to the growing debt and the resulting decrease in the value of the US Dollar, many are having Dollar Doubts which is related to the ability of the USD to be the world’s reserve currency.

Now that we are watching the meltdown of the US Dollar before our eyes, I was reminded of the meltdown of the Wicked Witch of the West in the movie “the Wizard of OZ” and how similar conditions were at the time the story was written, to conditions we are experiencing today.

Your author grew up in Kansas and as a child could relate to this story, especially the early part of the movie where a tornado picked up a farmhouse with Dorothy inside and deposited them in a field in the Land of Oz.  And now, a few years later, your author can relate to the “rest of the story” (as Paul Harvey used to say).

The book was published in 1900 by Lyman Frank Baum and was a representation about life, political populism in the US, and the gold and silver debate, as it related to the value of the US Dollar currency, in the 1890s.

Baum had a deep interest in the gold-silver debate, and fiat currency, because he was wealthy and heir to serious family money that came from the 19th-century oil fields of Pennsylvania.

The book title, “The Wonderful Wizard of Oz” (where Oz stands for “ounces”) highlights the interest in knowing how many US Dollars were required to purchase an ounce of gold, or an ounce of silver.

In the early part of the 20th century, it took $35 USDs to buy an oz of gold.  Almost 10 years into the 21st century, an oz of gold just had a closing price of $1,100.

In a little over a century, the purchasing power of the Baum family inheritance had been reduced by 30 times due to fiat currency and debasing of the currency.

Due to inflation and the resulting debasing, or devaluing, of the currency, what the Baum family could buy today that cost $30 USD, they could buy at the time that one of their ancestors who wrote “The Wonderful Wizard of Oz” could buy for $1.

Let’s use baseball and the Yankees baseball team as an analogy  …  one general admission ticket purchased for a game today (approx $25 - $30) could be purchased for $1 at the time the Wizard of Oz was written.

Can you buy anything at the baseball park today for $1?

Since wages increase over time, the impact of inflation is less noticeable because we tend to make more money to pay the increased or inflated prices.  Where inflation and currency devaluation take their biggest toll is over a generation or two as the purchasing power, and resulting lifestyle, is significantly decreased.

Now let’s get back to the story to see the parallels between then and now.

In the real story, the “Emerald City” of Oz was a city of gold.  It became emerald when MGM Studios made the famous Depression-era movie in 1939.  The yellow brick road was a metaphor for gold. Dorothy’s slippers were silver in the book and changed to ruby in the movie.

The Tin Woodman (who had become rusted and had his movement restored by Dorothy, using an oilcan … wanted to get a heart from The Wizard in Emerald City) stood for the urban workers of America, who were left out in the cold and rain by the forces of banker capitalism.

The Scarecrow (who was freed from the pole he was hanging on …   wanted to go to the Emerald City to get a brain) stood for the farmers and recall that he had no brain because many East Coast snobs thought farmers were dumb hicks, ripe for the picking.

The Cowardly Lion (who was afraid of everything … was encouraged to go to Emerald City to get courage) was a dead ringer for William Jennings Bryan who made good speeches but could not stand up to the entrenched big guys.

The Wizard was all smoke and mirrors and he reflected a composite of the political classes that came across as a bunch of charlatans who promised much and delivered little.

While The Wizard of Oz is a children’s story and not a cookbook for what ails us today, there are parallels.  While things are not what they may at first appear to be, the common people, the workers, the farmers, and the entire middle class, are smarter and nobler than the elites think …   just remember the “town hall” meetings in August of this year (ie 2009).

Like Dorothy, who is going to stand up to today’s Wizard of Oz, political classes, and elites … and say they are not as smart as they think?

Who will convince them that their policies and the out-of-control spending at the federal level, is beyond any rational understanding?

It most likely will be someone who has so much on the line (ie family wealth and net-worth based in US Dollars, like the Baum family) that will undertake efforts to attempt to arrest the demise of the US Dollar.

Could it be someone like the Oracle of Omaha … with a net-worth of billions?  Or could it be someone like the American business magnate of the software company out in the state of Washington or one of his direct reports … each with a net-worth of billions?  Or could it be one of the co-founders of the world’s largest internet companies out in the Bay Area of Northern California … each with a net-worth of billions?  Or could it be a former governor of a state from a land far away who is “going rogue.”

Like Dorothy, who dreamed of a better place “somewhere over the rainbow,” it will be someone who can create conditions that will rebuild the basic economy and maintain a stable dollar.

As Steve Forbes likes to say, obtaining more financial education and the resulting increased financial literacy and empowerment, will open our eyes to alternative wealth creating strategies and this is the key to resolving our financial crisis.

I trust this article has provided you with some insight regarding the downside of fiat currency.  And, using the story of the Wizard of Oz, you can see that if government officials and elites are left unchecked, the tendency will be to over-spend and cause Decades of Debt that will likely lead to a devaluation of the currency and Dollar Doubts.

You can find out more about fiat currency, King Dollar, central banking and home-based businesses by reading updates that will be posted at Farrell’s blog over the next few weeks which is at http://aspenIbiz.blogspot.com .