Draghi’s Real Goal in the Eurozone

Imagine if your banker offered to lend you a $150,000 to make up for the money that you’d lost on your home since the housing bubble burst in 2006. And, let’s say, he agreed to lend you this money for 3 years at rock-bottom rates of 1 percent provided that you post the contents of your garage  (ie. rusty bikes, a bent basketball hoop, an old dollhouse, and rodent-infested luggage) as collateral on the loan.
Would that seem like a good deal to you?
On Wednesday, the European Central Bank (ECB) made this very same offer to over a hundred underwater banks in Europe, awarding them $640 billion (489 euros) in dirt-cheap 3-year loans in exchange for all manner of dodgy collateral for which there is currently no market. Now you, dear reader, know that when you try to sell something on Craig’s List and there’s very little interest; you have to drop the price in order to attract a buyer. That’s just how supply-demand dynamics work in a free market, right?
Au contraire. In fact, this rule never applies to bankers. When the junk assets on a bank’s balance sheet begin to fall in value, the banks just ring-up their big brother at the ECB or the Fed and demand a bailout, er, I mean, “swap liquidity for collateral that is temporarily impaired.” But the truth is, the garbage that the banks have accumulated–particularly the sovereign bonds from Italy, Spain, Greece, etc–is not merely “impaired”. These bonds will never regain their original value because the loans were made at the peak of a bubble.  So, there’s as much chance that Greek bonds will bounce back in three years as there is that that tacky $650,000 McMansion you bought in Encinito in 2005 will claw its way back to par.
That’s not going to happen.
So, the $640 billion that the ECB forked out on Tuesday, is basically a whopping-big gift to the banksters that will probably never be repaid. And if you have any doubt about this, then just take look at the Fed’s balance sheet which has exploded to nearly $3 trillion. You’ll notice that the $1.45 trillion in mortgage-backed securities (MBS) that Bernanke bought from the banks two years ago has not gone down at all, mainly because no one in their right-mind would buy these turkeys. And, if the Fed were to put their stash of MBS up for auction; the sale would further depress the assets on the banks balance sheets triggering another financial crisis. (In fact, this actually happened about a year ago when the government experimented with bonds from the AIG fund. Not only did the auction fail, but it also sent the equities markets into a nosedive) So, just as the Fed will eventually have to account for the losses on their pile of MBS,  so too will EU banks have to writedown the losses their sovereign bonds. That will push many of the banks into bankruptcy, which will undoubtedly trigger another round of loans. When financial institutions are insolvent, their only choice is to extend and pretend. Obviously, the ECB sees its job as helping with this fakery.
This is a familiar pattern with central banks. They create the easy money and loose regulatory environment where bubbles emerge, and then they provide “limitless” liquidity so their friends don’t lose money on the inflated value of their assets. That’s what Tuesday’s  $640 billion boondoggle was really all about, propping up toxic bonds that are worth a mere fraction of their original value.
So far, though, Draghi’s Long-Term Refinancing Operation (LTRO) has been a spectacular flop. While interbank lending rates have dropped ever-so-slightly (3-month Euribor fell from 1.404 to 1.410 percent), the banks have not been using the loans to buy more sovereign bonds (which would push down bond yields for struggling sovereigns) or to increase their lending.   Instead, they’ve parked a good portion of the money in overnight deposits at the ECB. Here’s the scoop from the Wall Street Journal:

“Use of the European Central Bank’s overnight deposit facility reached a new record high for the year Thursday, suggesting recent measures by central banks and policy makers still aren’t enough to restore confidence in inter-bank lending markets.
Banks deposited €346.99 billion ($453.38 billion) in the overnight deposit facility, up from €264.97 billion a day earlier and a previous high for the year of €346.36 billion, reached earlier this month.
The high level reflects ongoing distrust in inter-bank lending markets, where banks prefer using the ECB facility as a safe haven for excess funds rather than lending them to other banks.
The high deposit level also suggests markets aren’t fully convinced that the ECB’s massive long-term loan allotment is enough to fortify the currency bloc’s banking sector. The central bank extended nearly half a trillion euros in long-term loans to euro-zone banks Wednesday, hoping to ease fears of a new credit crunch as banks struggle to borrow from markets.” (“ECB Overnight Deposits Reach New 2011 High”, Wall Street Journal)

Can you believe it? So, while most of the loans were used to roll over existing debt, $453.38 billion was stuck back in the vaults of the ECB for safekeeping.  In other words, the banks are just as distrustful of each other as they were before the lending facility was launched. And the same is true of the yields on Spanish and Italian debt which Draghi thought would drop after he pumped a half a trillion euros into the banking system. Here’s the story from Reuters:

“Spanish and Italian bond yields crept higher on Thursday and underperformed German debt as markets grew sceptical that banks would use funds borrowed from the European Central Bank to buy lower-rated government bonds.
Banks borrowed a huge 489 billion euros from the ECB at an unprecedented offer of three-year loans on Wednesday, which some had expected to be reinvested in Spanish and Italian debt and help ease borrowing costs.
But, those looking for an immediate boost to Italy and Spain were likely to be disappointed. Traders said the preference was to reinvest some of the funds into safe-haven paper rather than pick up the higher yields on offer from some of Europe’s more troubled states.
“What happened yesterday is not a silver bullet to the crisis… but it is too soon to see the impact yet,” said Niels From, strategist at Nordea in Copenhagen.” (“EURO GOVT-Spain, Italy yields rise; hope of ECB relief wanes”, Reuters)

Unbelievably, the benchmark Italian 10-year BTP rose above the 7 percent mark again on Friday morning signalling renewed stress in the bond market. So while Draghi’s program may have breathed new life into a few teetering banks, it has failed miserably of all its main objectives.
So why has Draghi handled the crisis the way he has?  Why did he sit on his hands for so long while interbank lending slowed,  overnight deposits climbed to new records,  sovereign bond yields skyrocketed, and all the gauges of market stress got so much worse?
The obvious answer to this question is that Draghi’s been using the crisis to pursue his own agenda.  He wants to push through his so called  ”fiscal compact” that enshrines harsh budget discipline and  labor-battering austerity measures into law so that national budgets will come under the control of financial elites (aka–ECB-designated “technocrats”) Naturally, nations aren’t going to surrender that kind of authority without a fight, so Draghi let the crisis get out-of-hand so there would be less resistance. Here’s how economist Dean Baker sums it up:

“The people who gave us the eurozone crisis are working around the clock to redefine it in order to profit politically. Their editorials – run as news stories in media outlets everywhere – claim that the euro crisis is a story of profligate governments being reined in by the bond market. This is what is known in economics as a “lie”.
The eurozone crisis is most definitely not a story of countries with out of control spending getting their comeuppance in the bond market…It is a story of countries victimized by the mismanagement of the ECB….People should recognize this process for what it is: class war. The wealthy are using their control of the ECB to dismantle welfare state protections that enjoy enormous public support”.

Draghi’s real goal is to implement the labor reforms and “adjustments” that big finance demands. He’s already succeeded in deposing two democratically elected leaders in Greece and Italy and replacing them with bank-friendly stooges that will carry out his diktats. Now, he’s on to bigger things, like slashing the social safety net, crushing the unions, and reducing the eurozone to third world poverty.

Christine Lagarde: dangerous situation for world economy

US Cities Struggle to Control Sewer Overflows

Twice in recent summers, visitors to parts of Michigan's western coast were greeted by mounds of garbage strewn along miles of sandy beach: plastic bottles, eating utensils, food wrappers, even hypodermic syringes.
At least some of the rubbish had drifted across Lake Michigan from Milwaukee, a vivid reminder that many cities still flush nasty stuff into streams and lakes during heavy storms, fouling the waters with bacteria and viruses that can make people seriously ill.
Thousands of overflows from sewage systems that collect storm water and wastewater are believed to occur each year. Regulators and environmentalists want them stopped, and since the late 1990s the Environmental Protection Agency or state officials have reached legal agreements with more than 40 cities or counties — Atlanta, Los Angeles, Baltimore, St. Louis and Indianapolis among them — to improve wastewater systems that in some cases are a century old. Costs are reaching hundreds of millions or even billions of dollars.
But the price of progress is becoming too high for local governments, with the bad economy cutting into tax revenues and residents rebelling against higher water and sewer rates. Responding to pleas for leniency, the Obama administration is promising more flexibility as hard-pressed cities look for less conventional and cheaper ways to reduce overflows.


"The current economic times make the need for sensible and effective approaches even more pressing," said an October memo to EPA regional offices from Nancy Stoner, who runs the agency's water policy office, and Cynthia Giles, chief of enforcement. They said EPA staffers would work out details of the new policy.
It won't be easy, considering the costs and inflamed emotions involved.
Carol Rodwell and neighbors carted away 18 bags of garbage from a 400-foot stretch of Lake Michigan frontage near Ludington after last year's trash flotilla. She was shocked to learn that federal law lets cities discharge untreated sewage when their plants and storage facilities are flooded.
"It was maddening that they had permission to do this and we had to live with the consequences," Rodwell said.
Kevin Shafer, executive director of the Milwaukee sewage system, insisted it was only partly to blame, saying some of the rubbish probably came from trash cans or dumpsters swamped when the area got about 9 inches of rain in a single day.
Milwaukee has spent $4 billion since the 1980s improving its sewer system, Shafer said. It now has 521 million gallons of storage capacity in underground tunnels. Since the mid-1990s, less than 2 percent of the water entering the system each year has been released without treatment.
The ultimate goal is zero overflows, but officials don't expect to get there until about 2035 because it will require being able to handle the kind of flooding that previously happened rarely but is becoming more common.
"It gets a lot more expensive to get that last drop," Shafer said. "The way the economy is today, you have to balance that cost with all the other needs we have. You don't want to bankrupt a community."

Yuan hits all-time high

By Lu Jianxin and Kazunori Takada

SHANGHAI | Mon Dec 26, 2011 7:46am EST

(Reuters) - The yuan closed up against the dollar on Monday after hitting an all-time high in intraday trading, guided by a stronger mid-point by the People's Bank of China, and looks set for an over-4-percent appreciation for 2011, traders said.
The yuan is expected to remain stable or rise slightly in the last week of the year to close 2011 near 6.30 versus the dollar, in line with market expectations.
The currency is likely to continue to appreciate next year as China continues to post big trade surpluses despite a slowdown in exports and amid pressure from the United States to let the yuan rise to balance bilateral trade, traders said.
But the yuan's appreciation is likely to slow to around 3 percent in 2012, with much of the rise seen in the second half of next year as China may keep the yuan relatively stable in the first half to assess the impact of the euro zone crisis, they said.
"The PBOC has recently set a slew of strong mid-points and pumped dollars into the market via state banks, giving the market a clear signal that the government won't let the yuan depreciate," said a trader at a major Chinese bank in Shanghai.
"But the central bank appears not in a hurry to let the yuan appreciate amid global economic uncertainties resulting from the euro zone debt crisis. So the yuan is likely to move largely sideways in coming months."
Spot yuan closed at 6.3198 against the dollar, up from Friday's close of 6.3364, after hitting an all-time high of 6.3160. Its previous peak was 6.3294 hit on December 16.
The PBOC set the dollar/yuan mid-point at 6.3167 on Monday, stronger than Friday's 6.3209 and near the record-high fixing of 6.3165 on November 4.
FIGHTING SPECULATORS
The yuan has appreciated 4.27 percent so far this year, with most of the gain being recorded in the first 10 months of the year as China tries to rebalance trade and use the currency to help fight high inflation.
While the government has recently halted yuan appreciation amid slowing exports, it also seems to be wary of a weaker yuan that may lead to capital outflows.
Some overseas investors appear to have been shorting the yuan in recent months amid signs that China's growth is slowing under the double weight of a global slowdown and the country's monetary tightening policy in place since October last year.
The PBOC, in addition to using strong mid-points to signal government intentions to keep the yuan stable, has also acted to inject dollars into the market via state-owned banks whenever there are signs that the yuan is set to weaken sharply.
The yuan has thus been effectively kept in a range of 6.3 to 6.4 against the dollar since early November -- a trend traders say they believe to continue well into 2012.
In contrast, offshore benchmark one-year non-deliverable forwards (NDFs) have largely been forecasting a yuan depreciation in a year's time since late September, reversing a general trend of predicting an appreciation since the yuan's revaluation in July 2005.
One-year NDFs fell slightly to 6.3790 on Monday against 6.3810 at the close on Friday, implying that the yuan will depreciate 0.97 percent in 12 months from Modnay's PBOC mid-point, compared with a 1.01 percent fall implied on Friday.

Brazilian economy overtakes UK's, says CEBR

Brazil has overtaken the UK as the world's sixth largest economy, an economic research group has said.

The Centre for Economics and Business Research (CEBR) said its latest World Economic League Table showed Asian countries moving up and European countries falling back.
The CEBR also predicted that the UK economy would overtake France by 2016.
It also said the eurozone economy would shrink 0.6% in 2012 "if the euro problem is solved", or 2% if it is not.
CEBR chief executive Douglas McWilliams told BBC Radio 4's Today programme that Brazil overtaking the UK was part of a growing trend.
"I think it's part of the big economic change, where not only are we seeing a shift from the west to the east, but we're also seeing that countries that produce vital commodities - food and energy and things like that - are doing very well and they're gradually climbing up the economic league table," he said.

A report based on International Monetary Fund data published earlier this year also said the Brazilian economy would overtake the UK in 2011.

Brazil has a population of about 200 million, more than three times the population of the UK.
Brazil's economy grew by 7.5% last year, but the government has cut its growth forecast for 2011 to 3.5% after the economy ground to a halt in the third quarter, with analysts blaming the country's high interest rates and the worsening situation in the eurozone.
And although Brazil currently sells more to China than it imports, Brazilian manufacturers have complained that their industries are being affected by cheap mass-produced goods from the Asian giant.
The CEBR also said that Russia moved up one spot in its league table to ninth in 2011, and predicted that it would rise to fourth spot by 2020.
It predicted that India, the world's 10th biggest economy in 2011, would become the fifth largest by 2020.
And it said European countries would drop down the table, with Germany falling from fourth in 2011 to seventh in 2020, the UK from seventh to eighth, and France from fifth to ninth.

CEBR World Economic League Table
Rank	2011	2020 (forecast)
1	US	US
2	China	China
3	Japan	Japan
4	Germany	Russia
5	France	India
6	Brazil	Brazil
7	UK	Germany
8	Italy	UK
9	Russia	France
10	India	Italy

A CHRISTMAS MESSAGE FROM THE 1%

The following is both thought provoking and revolting at the same time. It demonstrates the contempt that the 1% has for the rest of us….

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Capitalists “are not the scourge that they are too often made out to be” and the wealthy aren’t “a monolithic, selfish and unfeeling lot,” Cooperman wrote. They make products that “fill store shelves at Christmas…”

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Tokyo and Beijing Agree on Currency Pact

BEIJING—A wide-ranging currency agreement between China and Japan is expected to give the Chinese yuan a more powerful role in international trade, but Beijing still must make substantial changes in how it manages its economy before the yuan becomes a currency powerhouse on the scale of the dollar or euro.


Economic woes in Europe and U.S. have undermined market confidence in the dollar and euro, but investors looking for a safe place to store their money have few other currency options. China, among other nations, has objected to the primacy of the dollar in international trade, and has suggested other ways to run the international monetary system, including giving a bigger role to the International Monetary Fund and a wider role for the yuan.
Those discussions have largely been theoretical. But during a visit to China by Japanese Prime Minister Yoshihiko Noda, which ended on Monday, China and Japan announced a series of deals that promote the use of the yuan in trade and investment between the world's second- and third-largest economies, which would limit somewhat the use of the dollar in Asia, the world's fastest growing region. Specifically, the two countries agreed to promote direct yuan-yen trade, rather than converting their currencies first to dollars, and also for Japan to hold yuan in its foreign-exchange reserves, which are now largely denominated in dollars.
Japan "seems to be acknowledging implicitly that there will be a single dominant Asian currency in the future and it won't be the yen," said Barry Eichengreen, a University of California at Berkeley economic historian. Harvard University economist Jeffrey Frankel said that "this hastens a multicurrency world, but this is just one of 100 steps along the way."
A Japanese government official said that in the future, Asian currencies "may become more important than they currently are". But Japan hasn't necessarily decided to buy Chinese government debt based on the view that the yuan is likely to become more popular and dominant than the yen. "The yen's role will rather become more important to other countries if we deepen our relationships with them," the official said.
The pact comes at a time when the yuan has faced downward pressure as investors and businesses have lowered their expectations for a continued rise in the currency. The accords suggest that China is looking to speed up its efforts to raise the yuan's profile overseas. That's especially evident in Tokyo's decision to buy up to $10 billion worth of Chinese government debt for its reserves. Though that represents only about 1% of Japan's $1.3 trillion foreign-exchange reserves—the world's second-largest after China— it's important symbolically as a sign that Japan will diversity away from the dollar in the future.

Enlarge Image

Associated Press

A bank clerk counts yuan notes in Suining city in China's Sichuan province. A pact with Japan is seen giving the yuan a greater role in trade

Even so, the move is likely to be quietly welcomed by the U.S. government, which has encouraged China to seek a bigger role for the yuan. That's because U.S. government officials realize—as do Chinese reformers—that for the yuan to play a much bigger role, China needs to broadly revamp its financial-sector policies. Morris Goldstein, an economist at the Peterson Institute of International Economics in Washington D.C. said those policies would include sharply reducing its exchange-rate intervention, liberalizing interest rates, reducing restrictions on capital flows and putting its banking system "on a more market-oriented basis," so the yuan can trade freely.
Such policies are likely to put upward pressure on the yuan versus the dollar, which has long been U.S. policy. According to Chinese state television, Japanese officials notified Washington of the agreement ahead of the announcement and reiterated Japan's confidence in the long-term prospects for the dollar. A U.S. Treasury spokesman didn't comment.
The deals with Japan also are in line with the goal of the Group of 20 industrial and developing nations to make the Chinese yuan more flexible.
But the agreements are unlikely to have any significant effect on the yuan's global role anytime soon. Neither China nor Japan has announced any timetable for implementing the plans. Authorities in both countries have agreed to set up a working group to discuss how to put the measures to work.
So far, China has taken some incremental steps toward setting the yuan free. Hong Kong, the only place outside mainland China where the yuan can trade freely, has become the world's fastest-growing currency market in the world.
The new agreements with Japan include measures aimed at making it easier for companies to convert the Chinese and Japanese currencies directly into the other, without requiring an intermediate conversion into dollars, the current common practice. The change should reduce costs for the companies involved. About 60% of all Japan-China trade is currently settled in the dollars.
The package also includes "pilot program" to allow the government-affiliated Japan Bank of International Cooperation to sell yuan-denominated bonds on the mainland market. No detail on the size or timing of any JBIC offering has been disclosed.

JBIC, a lender charged with helping Japanese firms doing business abroad, would be the first foreign-government entity to take such a step, as China's domestic bond market—totaling more than 20.1 trillion yuan in debt outstanding ($3.2 trillion), has largely been off-limits to foreign issuers.
Thus far, the Asian Development Bank and the International Finance Corp., the financing arm of the World Bank, so far have been the only foreign issuers of yuan bonds in China. Neither is affiliated with any foreign government.
Choosing mainland China to issue bonds, rather than Hong Kong, where interest rates on yuan bonds are generally lower, "shows the commitment from the Japanese side to promote the yuan," said Woon Khien Chia, an Asian analysts at the Royal Bank of Scotland.
In recent weeks, Beijing has unveiled a number of steps to promote the use of the yuan overseas, including starting to allow foreign firms to invest yuan accumulated overseas in mainland China.
The People's Bank of China, the country's central bank, has also been using so-called currency swap deals with other central banks so that foreign banks could supply more yuan to their customers. Currently, the PBOC has such deals with a dozen foreign central banks including Thailand, South Korea and New Zealand, totaling 1.2 trillion yuan.
The most significant measure China has taken so far is allowing cross-border trade to be invoiced and paid in its currency. Yuan-settled trade now accounts for about 10% of China's total trade, compared with less than 1% a year ago. Analysts at Deutsche Bank AG predict that yuan-settled trade would amount to 3.7 trillion yuan next year, or 15% of China's total trade.

One Hundred Million Dollar Penny

The Four Companies That Control the 147 Companies That Own Everything

Brendan Coffey, Contributor forbes.com

There may be 147 companies in the world that own everything, as colleague Bruce Upbin points out and they are dominated by investment companies as Eric Savitz rightly points out. But it’s not you and I who really control those companies, even though much of our money is in them. Given the nature of how money is invested, there are four companies in the shadows that really control those companies that own everything.

Before I reveal them, some light math:

According to the 2011 annual factbook from the Investment Company Institute, there is $24.7 trillion in all the mutual funds in the world (a little less than half from the US). Based on data from the ICI, $1.24 trillion of this is directly invested in index funds, plus another $992 billion in assets beyond that $24.7 trillion in Exchange Traded Funds, which aren’t mutual funds but are index funds. That means the bulk of that money is in “active” managed funds or fund of funds.

But then consider this: the chief of hedge funds at a very large asset manager told me last week (alas, I cannot identify either) that an internal study his firm recently performed found that the vast majority of mutual funds defined as actively managed see 95% of the assets they hold determined by an index.That means just 5% of actively managed funds really are driven by the active manager’s judgment.

This less-than-active management is for two reasons: one is to maintain the fund in a style box (i.e. large value stock, medium value stocks) and comply with the reality all mutual funds are required to have a benchmark index they compare their relative performance to. The other reason is to adhere to risk metrics to which most of the fund industry is beholden. This second point is partly due to Modern Portfolio Theory (a complex topic we won’t debate here) and to the human nature that active managers tend to build portfolios close to the indexes they benchmark against to avoid really awful downward relative performance years that ends up costing them their jobs.

So of the $25.69 trillion in worldwide assets we’ve identified, $2.23 trillion are directly in indexes (ETFs and index mutual funds) with another $22.3 trillion indirectly beholden to indexes (that 95% of actively managed fund holdings said to be determined by an index).

You can see where I’m headed here. That means the real power to control the world lies with four companies: McGraw-Hill, which owns Standard & Poor’s, Northwestern Mutual, which owns Russell Investments, the index arm of which runs the benchmark Russell 1,000 and Russell 3,000, CME Group which owns 90% of Dow Jones Indexes, and Barclay’s, which took over Lehman Brothers and its Lehman Aggregate Bond Index, the dominant world bond fund index. Together, these four firms dominate the world of indexing. And in turn, that means they hold real sway over the world’s money.

While that may seem benign – they are indexers after all you may say –  a financial index isn’t cut and dried like the index of a book. It’s a misperception indexers merely do some simple math like identifying the 500 largest US companies and voila! you have the S&P 500. Every indexer has a fudge factor that allows them to say one company is more “economically significant” for the index at hand than another company. To again take the S&P 500 as an example, the 502-largest company by market cap could get the nod over number 500 by size if S&P decides it wants to.

The power is even more obvious in bonds. The now-Barclays Aggregate Bond Index attempts to mirror volume of bond issuance in a region or the world, but it can’t include even a sizable percentage of all the bonds issued. Essentially, there’s  a big judgment call in there in what bonds it adds to its index. A judgment that influences bond fund flows worldwide.

What does all this mean? Researchers at a desk in midtown Manhattan are the butterflies that cause the hurricanes in the markets. For instance, 37% of all index funds in stocks are in a S&P 500 index fund. That’s $370 billion directly buying and selling stocks based on when the S&P analysts decide to drop ITT from the S&P500 and replace it with just one of three ITT spin-off, Xylem, as announced on Monday. Then add on top of that all of the so-called active mutual funds aiming to beat the S&P 500 (but still reflect 95% of the S&P in their funds) who react to the change and then all of the hedge funds who trade ahead of time trying to guess what S&P may drop or add.

I don’t have a grudge against any indexer (and full disclosure, I’ve done work for some of them). And the folks at McGraw-HIll don’t seem to spook people the way George Soros manages to. But when you discuss power in the world markets, the answer isn’t what you think it is.

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H/T http://revolutionradio.org

Money and Politics in the Land of Oz

by Quentin Taylor

Editor's Note: Here is the extraordinary story behind the extraordinary story of 'TheWonderfulWizard of Oz'.  Most of us have seen the movie version of this allegorical tale, but few of us are aware of what the various characters, places and things represented in the mind of Frank Baum, the tale's author. Professor Quentin Taylor of Rogers State University invitingly titles the piece presented below 'Money and Politics in the Land of Oz'.  Though 'The Wonderful Wizard of Oz' was written over 100 years ago, the themes will be recongizable to those with an interest in golden matters. While many today consider gold an instrument of financial and personal freedom, in Baum's tale, it is painted as a villain -- the tool of oppression. So, as you are about to see, we have come full circle, and gold has travelled a yellow brick road of its own. Happy reading. - Michael Kosares

Abstract: L. Frank Baum claimed to have written The Wonderful Wizard of Oz "solely to pleasure the children" of his day, but scholars have found enough parallels between Dorothy's yellow-brick odyssey and the politics of 1890s Populism to suggest otherwise. Did Baum intend to pen a subtle political satire on monetary reform or merely an entertaining fantasy?

"The story of 'The Wonderful Wizard of Oz' was written solely to pleasure children of today" (Dighe 2002, 42). So wrote L. Frank Baum in the introduction to his popular children's story published in 1900. As fertile as his imagination was, Baum could hardly have conceived that his "modernized fairly tale" would attain immortality when it was adapted to the silver screen forty years later. Though not a smash hit at the time of its release, The Wizard of Oz soon captured the hearts of the movie-going public, and it has retained its grip ever since. With its stirring effects, colorful characters, and memorable music (not to mention Judy Garland's dazzling performance), the film has delighted young and old alike for three generations. Yet, as everyone knows, The Wizard of Oz is more than just another celluloid classic; it has become a permanent part of American popular culture.

Oz as Allegory

Is Oz, however, merely a children's story, as its author claimed? For a quarter of a century after its film debut, no one seemed to think otherwise. This view would change completely when an obscure high school teacher published an essay in American Quarterly claiming that Baum's charming tale concealed a clever allegory on the Populist movement, the agrarian revolt that swept across the Midwest in the 1890s. In an ingenuous act of imaginative scholarship, Henry M. Littlefield linked the characters and the story line of the Oz tale to the political landscape of the Mauve Decade. The discovery was little less than astonishing: Baum's children's story was in fact a full-blown "parable on populism," a "vibrant and ironic portrait" of America on the eve of the new century (Littlefield 1964, 50).

In supporting this thesis, Littlefield drew on Baum's experience as a journalist before he wrote Oz. As editor of a small newspaper in Aberdeen, South Dakota, Baum had written on politics and current events in the late 1880s and early 1890s, a period that coincided with the formation of the Populist Party. Littlefield also indicated that Baum was sympathetic to the Populist movement, supported William Jennings Bryan in the election of 1896, and, though not an activist, consistently voted for Democratic candidates. (In 1896, the Populists joined the Democrats in backing Bryan's bid for the presidency.) Finally, Littlefield noted Baum's penchant for political satire as evidenced by his second Oz tale, which lampoons feminism and the suffragette movement.

In coupling Baum's political and literary proclivities, Littlefield built on the work of Martin Gardner and Russel B. Nye, who were among the first to take a serious interest in "The Royal Historian of Oz." According to Nye, Baum all but admitted that his writings contained a veiled subtext, confessing his desire to pen stories that would "bear the stamp of our times and depict the progressive fairies of the day" (Gardiner and Nye 1957, 1). For Littlefield, Baum's revelation appeared decisive. Yet even without it, the numerous parallels and analogies between the Oz story and contemporary politics were "far too consistent to be coincidental" (1964, 58). And although the parable remains in a "minor key" and is not allowed to interfere with the fantasy, "the author's allegorical intent seems clear"-that is, to produce "a gentle and friendly Midwestern critique of the Populist rationale" (50, 58, 57).

The reaction to Littlefield was, predictably, mixed. Scholars and teachers, who saw the allegorical reading (as Littlefield himself had) as a useful "teaching mechanism," tended to be enthusiastic. Many among the Oz faithful, however, were not impressed, including Baum's great-grandson, who curtly dismissed the parable thesis as "insane" (Moyer 1998, 46). Although neither side produced much evidence, Littlefield's interpretation gained widespread currency in academic circles, and by the 1980s it had assumed the proportions of an "urban legend," as history textbooks and scholarly works on Populism paid homage to the Oz allegory.

The contention that Oz is a cleverly crafted political parable reached its apogee in the erudite pages of the Journal of Political Economy. In an article entitled "The 'Wizard of Oz' as a Monetary Allegory" (1990), Hugh Rockoff examined the analogies between Baum's use of imagery and the monetary politics of the Populist era. In the book version of Oz, Dorothy treads the Yellow Brick Road in silver shoes, not in ruby slippers. Silver shoes on a golden road? A key plank in the Populist platform was a demand for "free silver" -- that is, the "free and unlimited coinage of silver and gold" at a fixed ratio of sixteen to one.

Populists and other free-silver proponents advocated unlimited coinage of the white metal in order to inflate the money supply, thus making it easer for cash-strapped farmers and small businessmen to borrow money and pay off debts. At the Democratic National Convention in 1896, the assembled delegates nominated William Jennings Bryan, an avid supporter of free silver, for president. The Bryan nomination created a split in the Democratic Party, as gold-standard delegates bolted the convention. When the Populists convened two weeks later, they decided to endorse Bryan, putting all their reformist eggs in the free-silver basket. When Bryan was roundly defeated by the "sound money" Republican William McKinley, the Populist Party, which had considerable strength in the Midwest and South, fell into rapid decline. By 1900, when Bryan was again defeated by McKinley, Populism already had one foot in the political grave.

According to Rockoff, the monetary politics of the 1896 campaign, which divided the electorate into "silverites" and "goldbugs," supplied the central backdrop for Baum's allegorical adaptation. Incorporating the analogies developed by Littlefield and others, and adding a few of his own, Rockoff provided a detailed and sustained analysis of the political and economic issues symbolically refracted in The Wonderful Wizard of Oz.

With Rockoff, the allegorical interpretation reached a peak of sophistication, yet its subsequent decline was no less precipitous than that of the Populist Party itself. In 1991, Michael Hearn, a leading Baum scholar, published a letter in the New York Times that demolished Gardner and Nye's claim (based on interviews with Baum's son and biographer) that Baum was a Democrat and a Bryan supporter. Indeed, the record shows that Baum was neither. His editorials for the Aberdeen Saturday Pioneer expressed support for Republican candidates and criticized the nascent Populist movement. Later, during the 1896 campaign, Baum published a poem championing McKinley and his economic policies: "Our merchants won't be trembling / At the silverites' dissembling / When McKinley gets the chair!" Further evidence, from Baum's later books and activities, indicates that he was, if not a regular Republican, then certainly no Democrat or Populist.

On the basis of these revelations, Hearn found "no evidence that Baum's story is in any way a Populist allegory," and he concluded that the Littlefield reading "has no basis in fact" (1992). In response, Littlefield conceded that "there is no basis in fact to consider Baum a supporter of turn-of-the-century Populist ideology," adding that whatever Baum's intentions were in writing Oz, he kept them to himself (1992). The Oz purists could only rejoice.

The postmortem on the symbolic reading of Baum soon followed. In "The Rise and Fall of The Wonderful Wizard of Oz as a 'Parable on Populism,'" David Parker recounted the curious interpretive history of the first Oz book. Although bowing to the evidence, Parker attempted to salvage the allegorical interpretation as "a useful pedagogical device . . . [for] illustrating a number of Gilded Age issues" (1994, 58), but he suggested that other interpretations might be "just as compelling" (59). Given its rich imagery and suggestive plot, Baum's story, Parker concluded, can be "anything we want it to be-including, if we wish, a parable on Populism" (59).

This judgment would seem to be the final word on what is certainly one of the most fascinating literary puzzles of the twentieth century. On the surface, this verdict is confirmed by Ranjit S. Dighe in a recent edition of Baum's immortal tale. In The Historian's Wizard of Oz: Reading L. Frank Baum's Classic as a Political and Monetary Allegory, Dighe concludes that the story "is almost certainly not a conscious Populist allegory," but, like Parker, he believes "the book works" as one (2002, 8).

Really the Last Word?

This "solution" to the riddle may have been intended to pull the curtain on a wellworn debate, but it only begs the question: If Oz "works" so well as an allegory, why discount the likelihood that it was meant as an allegory? Ironically, Dighe provides ample circumstantial evidence that it was. First, Baum was, if not politically active, then undoubtedly well informed. As a journalist and editor, he was familiar with the political events and controversies of the day, and he commented liberally on a number of them. Second, all agree that Baum injected political satire into some of his later works, including the 1902 stage production of Oz, which parodied the Populists, among others. A final and perhaps more telling sign is found in Baum's enigmatic personality. Friends and family members have attested to his penchant for jesting and playful dissimulation. "Everything he said had to be taken with at least a half-pound of salt," recalled one acquaintance (qtd. in Dighe 2002, 8). Similarly, a nephew noted Baum's habit of "tell[ing] wild tales, with a perfectly straight face, and earnestly, as though he really believed them himself" (qtd. in Dighe 2002, 8). There is also an anecdote that Baum spoke on behalf of a Republican candidate on one day, then gave the same speech in favor of a Democrat on another day (Hearn 1992).

Taken together, these facts suggest that if anyone was likely to create a political satire out of an innocent children's story, it was L. Frank Baum (Koupal 2001). But Baum was a sophisticated satirist, who most likely understood that the most effective satire is guileless and keeps the reader guessing as to the author's true intent (Koupal 1989). This sophistication explains the disclaimer in the introduction to Oz: the claim that the book was "written solely to pleasure children of today." Dighe suggests that this "odd disclaimer" may have been a "hint" that Baum intended to conceal a message in the text (2002, 42). Indeed, to do so was fully consistent with Baum's personality and later writings. Why else claim that a children's book's was "written solely" for children unless the author wished to imply just the opposite? In light of the obvious parallels and correspondences in Oz, the disclaimer stands revealed for what it truly is: the preliminary staging of an elaborate jest. That most readers did not "get it" only added to its success, for Baum, a connoisseur of the preposterous, nourished the pleasures of the private joke (see William Leach's introduction to Baum [1900] 1991).

With these considerations in mind, the alleged "triumph" of the revisionist view is not merely a qualified and tentative victory, but no victory at all. First, Littlefield and his supporters never claimed to have proved that Baum wrote a deliberate, conscious parable. True, Littlefield did propose to "demonstrate" the presence of "a symbolic allegory" in Oz, but he conceded that his specific findings were "theoretical" (50, 58). Second, he can hardly be blamed for the erroneous details regarding Baum's political proclivities. More important, Baum's politics, which were highly eclectic, have little bearing on the question of whether or not Oz contains a symbolic allegory. Littlefield's critics often present Baum's quasi-Republican and anti-Populist credentials as "proof" that he could not have intended to write a Populist parable. The assumption rests on the claim that he interpreted Oz in a pro-Populist vein, yet Littlefield read Baum's allegory as a "critique of the Populist rationale," not as a defense. Finally, Littlefield recognized that the principal value of the allegorical interpretation was pedagogical; the author's intent was only a secondary consideration.

The revisionists clearly have overstated their case, and observers such as Parker and Dighe have conceded too much. Even Michael Gessel, the skeptical editor of the Baum newsletter, admits that "The Wizard can be viewed as a political tale" (1992). Gessel's admission underscores the difficulty of simply dismissing the allegorical interpretation or ascribing it to Baum's "subconscious." Despite Dighe's own skepticism, his recent edition, which lists virtually every alleged political-cum-monetary analogy in Oz, only adds further weight to the contention that Littlefield was essentially right. Although some of the parallels are more tenuous than others, many are so obvious and palpable as to defy coincidence. Their cumulative effect-not only in number, but in coherence-warrants a strong presumption that Baum's fairy tale contains a conscious political subtext. In conjunction with what is known about Baum and his oeuvre, it is reasonable to conclude that The Wonderful Wizard of Oz was in large part intended along the lines Littlefield laid down forty years ago. The "riddle" of Oz is not such a riddle after all; it is "solved" in much the manner one identifies a duck, on the basis of its attributes.

The question of Baum's intention in writing Oz, though of interest to the literary sleuth, is clearly secondary to the allegory itself. Now that the numerous elements of Baum's parable have been gathered and set down, it may appear that little remains to be said. Perhaps nothing original or groundbreaking remains undiscovered, yet because Dighe presents these elements as annotations to Baum's text, we still lack an integrated, expository account that incorporates all the relevant metaphors and analogies. Acknowledging in advance my debt to Littlefield, Rockoff, and Dighe, I attempt to give such an account here. For purposes of coherence and clarity, I take the allegorical reading for granted and generally avoid qualifying language. A number of analogies are admittedly subject to more than one interpretation, and I make no claim that Baum himself intended each one. Rather, I have adopted (and occasionally embellished) those that fit the Populist parable best.

Dorothy (and Toto) of Kansas

Dorothy, the protagonist of the story, represents an individualized ideal of the American people. She is each of us at our best-kind but self-respecting, guileless but levelheaded, wholesome but plucky. She is akin to Everyman, or, in modern parlance, "the girl next door." Dorothy lives in Kansas, where virtually everything-the treeless prairie, the sun-beaten grass, the paint-stripped house -- even Aunt Em and Uncle Henry -- is a dull, drab, lifeless gray. This grim depiction reflects the forlorn condition of Kansas in the late 1880s and early 1890s, when a combination of scorching droughts, severe winters, and an invasion of grasshoppers reduced the prairie to an uninhabitable wasteland. The result for farmers and all who depended on agriculture for their livelihood was devastating. Many ascribed their misfortune to the natural elements, called it quits, and moved on. Others blamed the hard times on bankers, the railroads, and various middlemen who seemed to profit at the farmers' expense. Angry victims of the Kansas calamity also took aim at the politicians, who often appeared indifferent to their plight. Around these economic and political grievances, the Populist movement coalesced.

In the late 1880s and early 1890s, Populism spread rapidly throughout the Midwest and into the South, but Kansas was always the site of its most popular and radical elements. In 1890, Populist candidates began winning seats in state legislatures and Congress, and two years later Populists in Kansas gained control of the lower house of the state assembly, elected a Populist governor, and sent a Populist to the U.S. Senate. The twister that carries Dorothy to Oz symbolizes the Populist cyclone that swept across Kansas in the early 1890s. Baum was not the first to use the metaphor. Mary E. Lease, a fire-breathing Populist orator, was often referred to as the "Kansas Cyclone," and the free-silver movement was often likened to a political whirlwind that had taken the nation by storm. Although Dorothy does not stand for Lease, Baum did give her (in the stage version) the last name "Gale"-a further pun on the cyclone metaphor.

The name of Dorothy's canine companion, Toto, is also a pun, a play on teetotaler. Prohibitionists were among the Populists' most faithful allies, and the Populist hope William Jennings Bryan was himself a "dry." As Dorothy embarks on the Yellow Brick Road, Toto trots "soberly" behind her, just as the Prohibitionists soberly followed the Populists.

The Baum Witch Project

When Dorothy's twister-tossed house comes to rest in Oz, it lands squarely on the wicked Witch of the East, killing her instantly. The startled girl emerges from the abode to find herself in a strange land of remarkable beauty, whose inhabitants, the diminutive Munchkins, rejoice at the death of the Witch. The Witch represents eastern financial-industrial interests and their gold-standard political allies, the main targets of Populist venom. Midwestern farmers often blamed their woes on the nefarious practices of Wall Street bankers and the captains of industry, whom they believed were engaged in a conspiracy to "enslave" the "little people," just as the Witch of the East had enslaved the Munchkins. Populists viewed establishment politicians, including presidents, as helpless pawns or willing accomplices. Had not President Cleveland bowed to eastern bankers by repealing the Silver Purchase Act in 1893, thus further restricting much-needed credit? Had not McKinley (prompted by the wealthy industrialist Mark Hanna) made the gold standard the centerpiece of his campaign against Bryan and free silver?

It is apt, then, that Dorothy acquires the Witch of the East's silver shoes at the behest of the good Witch of the North, who stands for the electorate of the upper Midwest, where Populism gained considerable support. (Later in the story, good witches are identified with the color white; silver is known as "the white metal.") Still, for all her goodness, the Witch of the North, like the voters of the upper Midwest, is no match for the malign forces of the East, her tender "kiss" on Dorothy's forehead (electoral support) notwithstanding. The death of the wicked Witch, however, is cause for rejoicing-the "little people" (owing to the destruction of eastern power) are now free. All along, the Munchkins were vaguely aware that their bondage was somehow linked to the silver shoes, but the shoes' precise power was never known. Similarly, although Wall Street and the eastern establishment understood silver's power, common farmers knew little of monetary matters, and bimetalism failed to resonate with eastern workers, who voted against Bryan in droves.

After Dorothy and her companions reach Emerald City, the Wizard sends them to kill the wicked Witch of the West. This Witch is also a cruel enslaver, and she appears to represent a composite of the malign forces of nature that plagued farmers in the Midwest and the power brokers of that region. The former menace is mirrored in the Witch's dominion, which recalls the parched plains of western Kansas, and by the ferocious wolves, ravenous crows, and venomous bees that she sends to destroy Dorothy and her friends. Each predator is summoned by blowing on a silver whistle, another example of a malicious use of the white metal. When the Witch's minions are themselves destroyed, she calls on the Winged Monkeys through the magic of a golden cap. The cap had already been used twice, once to enslave the Winkies and again to drive the Wizard out of the West, patent injustices committed through the power of gold. Yet in summoning the Monkeys, the Witch exhausts the cap's charm, and the flying simians (who had been forced to assist in her evil deeds) are liberated. The power of gold proves finite and illusory, and it requires the coexistence of silver (bimetalism) to sustain its power. No wonder the wicked Witch is so keen to possess Dorothy's silver shoes.

The malign manipulation of gold and silver by the wicked Witch represents the other half of the western menace: the self-interested juggling of metal currency by the western nabobs. McKinley of Ohio, for example, supported the Sherman Silver Purchase Act of 1890, voted for its repeal in 1893, and made the gold standard the cornerstone of his 1896 presidential bid. Mark Hanna, also of Ohio, served as McKinley's campaign manager and close advisor, and he was widely viewed as the Richelieu behind the throne. (Vilified by the Populists, Hanna had William Allen White's scathing attack on the Populists-"What's the Matter with Kansas?"-circulated throughout the country during the campaign.) Not surprisingly, the Wizard requires the death of the wicked Witch of the West before he will grant Dorothy's "party" its wishes. The Witch's demise by water ends her evil reign, liberates her slaves, and restores the silver shoe she had stolen from Dorothy. In one fell swoop, the parched lands are watered, the farmers are freed, and silver is returned to its rightful owner, the people.

The fourth witch, Glinda of the South, is a good witch who, unlike her northern counterpart, understands the power of Dorothy's silver shoes. In 1896, Bryan's Democratic-Populist ticket carried the South, and some of the strongest silverites in Congress were from the South, whereas northern support for Bryan and free silver was more moderate. In Oz, the denizens of the South, the Quadlings, are described as an odd race who never travel to Emerald City and dislike strangers traveling across their land. Not since the 1860s had a southerner served as president, and immigrants and northerners were generally unwelcome in the South. Moreover, the road to the land of the Quadlings is perilous and rife with dangers. For those who were "different" (including resident blacks), the South could be a dangerous place indeed.

The Three Amigos

In the hope that the Wizard will help her return to Kansas, Dorothy embarks on the Yellow Brick Road to Emerald City. After traveling several miles, she encounters the Scarecrow, who does not "know anything" because he has "no brains at all." The brainless Scarecrow represents the midwestern farmers, whose years of hardship and subjection to ridicule had created a sense of inferiority and self-doubt. Populist leaders such as William Peffer and "Sockless" Jerry Simpson were often portrayed as deluded simpletons who failed to understand the true causes of their economic plight. The Populists' "stupidity" was also attested to by their apocalyptic rhetoric, conspiracy theories, and radical agenda, which included nationalization of the railroads, a graduated income tax, and the unlimited coinage of silver. Critics scoffed at their overblown rants, mocked their paranoid style, and dismissed their simplistic nostrums as the distempered ravings of "socialist hayseeds."

The picture of the Scarecrow is not so one-sided. His conduct on the journey through Oz is marked by common sense, resilience, and rectitude. He is not so dumb after all. As we learn near the end of the story, the Scarecrow-cum-farmer had brains all along-perhaps brains enough to grasp the true causes of his misery and the basics of monetary policy.

On the trek through the forest, where the road is in disrepair, the Scarecrow stumbles and falls on the "hard [yellow] bricks," a reference to the Populist claim that the gold standard had a damaging impact on farmers and the people at large. Still, the Scarecrow is "never hurt" by his falls, which suggests that the yellow metal was not the real culprit of the farmer's woes.

Proceeding down the road, the duo encounter the Tin Woodman. Once healthy and productive, the Woodman was cursed by the wicked Witch of the East, lost his dexterity, and accidentally hacked off his limbs. Each lost appendage was replaced with tin until the Woodman was made entirely of metal. In essence, the Witch of the East (big business) reduced the Woodman to a machine, a dehumanized worker who no longer feels, who has no heart. As such, the Tin Man represents the nation's workers, in particular the industrial workers with whom the Populists hoped to make common cause. His rusted condition parallels the prostrated condition of labor during the depression of 1890s; like many workers of that period, the Tin Man is unemployed. Yet, with a few drops of oil, he is able to resume his customary labors-a remedy akin to the "pump-priming" measures that Populists advocated.

Having liberated the Tin Man, the trio proceeds through the forest, only to be accosted by a roaring lion. He is none other than William Jennings Bryan, the Nebraska representative in Congress and later the Democratic presidential candidate in 1896 and 1900. Bryan (which rhymes with "lion," a near homonym of "lying") was known for his "roaring" rhetoric and was occasionally portrayed in the press as a lion, as was the Populist Party itself. Bryan adopted the free-silver mantra and won the Populists' support in his first race against McKinley. Like the Lion of Oz, Bryan was the last to "join" the party. His defeat in the general election was largely owing to his failure to win the support of eastern workers, just as the Lion's claws "could make no impression" on the Tin Man.

Although Bryan's supporters considered him courageous, his critics thought him "cowardly" for opposing war with Spain in 1898 and the subsequent annexation of the Philippines. Yet, for anti-imperialists, who counted many Populists among their ranks, Bryan's unpopular stand was courageous indeed. Less courageous, however, were his final decision to vote for annexation (albeit as a tactical move) and his failure to fight vigorously for free silver in the election of 1900, both of which disappointed Populists.

Still, the Lion, without knowing that he possesses courage, really does. Near the end of the story, he slays a spiderlike monster that is terrorizing the animals of the forest. The predatory beast symbolizes the great trusts and corporations that were thought to dominate economic life at the turn of the century. Cast as the chief villains in the Populist drama, the trusts were often portrayed as "monsters" of one kind or another. "Sockless" Jerry Simpson called the railroads a "giant spider that controlled our commerce and transportation" (qtd. in Clanton 1991, 51), and the author of Coin's Financial School, the leading free-silver tract of the 1890s, represented the Rothschild money trust as an octopus. Baum himself used the monopoly-as-octopus metaphor in a number of later works, including a specific reference to the Standard Oil Company. Breaking up the trusts and nationalizing the railroads were key components of the Populist agenda, and Bryan favored trust busting if not outright nationalization. Accordingly, the Lion attacks and kills the great beast by knocking off its head. Freed from the eight-legged monster, the grateful forest dwellers vow fealty to the conquering Lion. Would not the Populists have done likewise if Bryan had defeated McKinley and, presumably, slain the trusts?

Of Mice and Monkeys

Another scrape with a menacing beast recapitulates the metaphor. When a "great yellow Wildcat" lights upon the Queen of the Field Mice, the Tin Man decapitates the feral feline with a single swing of his ax. For delivering the Queen from her "enemy," the mice pledge obedience to the Tin Man. Their first act of service is to rescue the Lion from the "deadly poppy fields," where the powerful scent of the flowers has felled the king of beasts.

The diminutive rodents represent the common people, and the "yellow" cat is yet another reference to the malign power of gold. By killing the Wildcat, the Tin Man symbolically slays a chief "enemy" of the people. The timely support of the mice parallels the importance of the common folk in Bryan's bid for the presidency.

The Winged Monkeys, the unwilling minions of the Witch of the West, add a further dimension to the Oz allegory. These creatures represent the Plains Indians. As the Monkeys' leader relates, "we were a free people, living happily in the great forest flying from tree to tree, eating nuts and fruit, and doing just as we pleased without calling anybody master." The Monkey King admits to having engaged in a degree of "mischief," but nothing to justify the harsh treatment the Monkeys received when "Oz came out of the clouds to rule over this land." The Monkeys were initially sequestered, a reference to the government's reservation policy. Later, they are forced to do the bidding of the Western Witch, who commands them with the golden cap. Yet the Monkeys are not inherently bad; they have become so only through an unnatural and evil force. This scenario parallels the view of reformers who blamed the Indians' condition on the whites' inhumane practices. Under Dorothy's benevolent influence, the Monkeys are kind and helpful-that is to say, "assimulated."

Chinatown and the Yellow Winkies

On the journey to find Glinda, the good Witch of the South, Dorothy and company pass through Dainty China Country, which they enter by climbing over a high white wall. China and its Great Wall are the obvious references. But what does China have to do with Gilded Age politics? First, China was in the process of being divided by the great powers (including the United States) into "spheres of influence" for the purpose of commercial exploitation. In 1899 and 1900, Secretary of State John Hay issued the famous "Open Door" notes in an effort to prevent rival nations from gaining "unfair" economic advantages in China. Second, the Celestial Kingdom was the only major nation still on the silver standard. It is apt, then, that Dainty China Country's wall and floor are white, the color of silver bullion. Third, the Lion's careless destruction of the china church echoes the territorial "breakup" of China by foreign intruders and the active proselytizing by Christian missionaries. Finally, the china Princess, who rejects Dorothy's invitation to visit Kansas, resembles the dowager empress, who strongly opposed the foreign presence in China. The last two parallels recall the antiimperialism that Bryan and others championed.

Another anti-imperialist theme appears in the form of the Winkies, called "yellow" because they reside in the Land of the West. The Winkies, who are forced to work for the Witch of the West, represent the "yellow man" of Asia, especially the Chinese immigrants and the native Filipinos. For decades, the Chinese had immigrated to the Far West to labor in various capacities. Given their "exotic" appearance, clannish habits, and willingness to work for low wages, they were often the targets of abuse, discrimination, and even murder. Under pressure from the authorities in California, Congress passed the Exclusion Act (1882), which banned Chinese immigration for twenty years.

The Winkies also resemble the Filipinos, who, after their country's annexation by the United States, found themselves (once more) subjected to a Western power. Demands for independence were denied on the grounds that the Filipino people were "unfit" for self-government. The assumption that the United States knew what was best for the natives was satirized in Baum's original script of the stage version of Oz, where the Scarecrow remarks, "It isn't the people who live in a country who know the most about it. . . . Look at the Filipinos. Everybody knows more about their country than they do" (qtd. in Dighe 2002, 93).

Oz, Emerald City, and the Wacky Wizard

The Land of Oz, with its varied landscape and diverse inhabitants, is a microcosm of America, and Emerald City, its center and seat of government, represents Washington, D.C. In an effort to be made whole, Dorothy and her band travel to the capital to see the Wizard, who presumably has the power to grant them their wishes. The journey to Emerald City corresponds to the Populist effort to acquire power in Washington, and the travelers recall the "industrial armies" who marched on the capital during the depression of 1893-97. The most famous of these, "Coxey's Army," was led by a successful businessman who urged the government to fund public-works programs (most notably a "good roads bill") to alleviate unemployment. Coxey, who hoped to meet with President Cleveland, was arrested for trespassing, and his proposals were ignored. Dorothy and company also face hazards on the road to Emerald City and are turned away by the Wizard, who shows little sympathy for their plight.

The Wizard, who "can take on any form he wishes," represents the protean politicians of the era, especially the presidents of the Gilded Age. Given the even division of Democrats and Republicans, and the razor-thin majorities of most presidential elections, candidates rarely took clear stands on the issues. As a result, voters often had difficulty in determining what the candidates stood for. The Wizard fits this description, for "who the real Oz is," Dorothy is informed, "no living person can tell." Indeed, when the foursome enter the throne room, the Wizard appears to each in a different form. Like many politicians, he is unwillingly to help them without a quid pro quo: "I never grant favors without some return."

Politicians are also infamous for failing to keep promises, and the great Oz is no different. When Dorothy's party returns after killing the Witch of the West, the Wizard keeps them waiting, then puts them off. By accident, the all-powerful Wizard is exposed and his true identify revealed. Far from a mighty magician, "Oz, the Terrible" is merely a "humbug," a wizened old man whose "power" is achieved through elaborate acts of deception. The Wizard is simply a manipulative politician who appears to the people in one form, but works behind the scenes to achieve his true ends. Such figures are terrified at being exposed; the Wizard cautions Dorothy to lower her voice lest he be discovered and "ruined."

As it turns out, the Wizard hails from Omaha, where he became a talented ventriloquist and later a circus balloonist. Bryan was from Nebraska, was famous for his "hot-air" oratory, and in the minds of his critics was something like a circus ringmaster. Nebraska was also a bastion of Populism, and Omaha the site of the 1892 Populist National Convention, where the party adopted the "Omaha platform," the movement's leading manifesto. Following the party's convention of the previous year, Judge, a popular magazine, parodied the Populists on its cover, which depicted a hotair balloon made of patches that bear the names of the groups and parties that had rallied to the Populist standard: Knights of Labor, Prohibition Party, Socialists, Farmers Alliance, and so forth. In the balloon's basket are caricatures of Populist leaders, preaching the "Platform of Lunacy."

Identification of the Wizard with Bryan would seem to raise an obvious problem. Is he represented by the Lion and the Wizard? Bryan was never president, but he was a masterful politician and an aspirant to the White House. In conjunction with references to Omaha, ventriloquism, and the balloon, the link between Bryan and the Wizard is a reasonable inference. Just as some of Baum's metaphors serve as a composite, the Lion and the Wizard represent different aspects of Bryan.

The Colors of Money

The Land of Oz is colorful, to say the least, and The Wonderful Wizard of Oz is replete with references to gold, silver, and green. A number of these references have been noted already, but the story makes several others. The references to gold and silver echo the prominence of monetary politics in the 1890s, especially the bimetallic crusade led by Bryan and the Populists. Moreover, gold and silver are often portrayed as working in combination. The Witch of the West conjures her minions with a silver whistle and a golden cap, and the Tin Man receives a new ax made of gold and silver, as well as a new oil can that contains both metals. Of course, there is Dorothy on her sojourn through Oz, "her silver shoes tinkling merrily on the hard, yellow, roadbed." The word oz itself is the abbreviation for an ounce of gold or silver. There are additional references to gold and silver, but the ones given here amply illustrate Baum's use of the monetary metaphor.

Green, often in combination with gold, is also a recurrent image. Then as now, green was the color of paper money. The Greenback Party, a precursor of the Populists, advocated the expansion of the money supply via the increased circulation of "greenbacks." Jacob Coxey was a greenbacker, as was James B. Weaver, the Populist presidential nominee in 1892. Most of the green imagery in Oz is general in nature and does not appear to indicate specific parallels. Toto wears a green collar that fades to white (silver), and later he receives a gold collar, as does the Lion. In Emerald City, everyone is required to wear green glasses with golden bands, so that nearly everything appears in a resplendent green. The Lion's liquid "courage" is poured from a green bottle into a gold-green dish, and the Wizard's balloon is patched with green silk of various shades. As the spectacles create an illusion, the liquid courage is only a placebo, and the balloon is a mere patchwork, so the demand for paper money is exposed as a panacea for the farmers' woes.

At the end of the story, the Scarecrow supplants the Wizard as the ruler of Emerald City, the Tin Woodman is made master of the West, and the Lion is placed over the animals of the forest. Dorothy transports herself back to Kansas by clicking her silver shoes together three times. All this is achieved with the help of Glinda, the good Witch of the South. The message? Populism is triumphant, the goal of gaining political power is achieved. Or is it? Neither the Scarecrow nor the Tin Man nor the Lion truly lacked what each believed he was missing; the great Wizard's powers proved illusory; and Dorothy had the power to transform her condition all along. These features of the story point to a more ambivalent result. Indeed, Populism's outright failure is suggested when Dorothy's silver shoes fall off in the desert and are "lost forever." After Bryan's defeat in 1896, the free-silver movement went into rapid decline. McKinley's reelection and the statutory adoption of the gold standard in 1900 spelled political oblivion for the Populists.

Conclusion

Critics of the allegorical reading of The Wonderful Wizard of Oz have made much of the discovery that L. Frank Baum was not a Democrat or a Bryan supporter. In itself, however, this discovery proves nothing. At most, it suggests that Oz is not a pro-Populist parable, something quite different from the claim that there is "no evidence that Baum's story is in any way a Populist allegory," as Hearn (1992) argued. The originator of the allegorical interpretation characterized Oz as a "critique" of Populism, not a defense. The assertion that there is "no evidence" of an allegorical subtext is simply myopic in the extreme. As the foregoing reconstruction shows, the evidence from the text is overwhelming, and, in light of Baum's political background, trickster personality, and subsequent work, it is all but conclusive: The Wonderful Wizard of Oz is a deliberate work of political symbolism.

Again, this conclusion does not require that each correspondence I have cited was intended allegorically or represents Baum's precise intention. Nor does it imply that each symbolic reference has a specific correlate; often the metaphors and analogies are merely suggestive. Conversely, the presence of "inconsistencies" and the absence of an obvious moral in no way diminish the reality of the symbolism.

The Wonderful Wizard of Oz is clearly neither a pro-Populist parable nor an anti-Populist parable. Strictly speaking, it is not a parable at all if parable is defined as a story with a didactic purpose. Baum aimed not to teach but to entertain, not to lecture but to amuse. Therefore, the Oz tale is best viewed as a symbolic and satirical representation of the Populist movement and the politics of the age, as well as a children's story. Quite simply, Oz operates on two levels, one literal and puerile, the other symbolic and political. Its capacity to fascinate on both levels testifies to its remarkable author's wit and ingenuity.

Baum, L. Frank. [1900] 1991. The Wonderful Wizard of Oz. Edited by William Leach. Belmont, Calif.: Wadsworth.
Clanton, Gene. 1991. Populism: The Humane Preference in America. Boston: Twayne.
Dighe, Ranjit, ed. 2002. The Historian's Wizard of Oz: Reading L. Frank Baum's Classic as a Political and Monetary Allegory. Westport, Conn.: Praeger.
Gardner, Martin, and Russel B. Nye. 1957. The Wizard of Oz and Who He Was. East Lansing: Michigan State University Press.
Gessel, Michael. 1992. Tale of a Parable. Baum Bugle (spring): 19-23.
Hearn, Michael Patrick. 1992. "Oz" Author Never Championed Populism. New York Times, January 10.
Koupal, Nancy Tystad. 1989. The Wonderful Wizard of the West: L. Frank Baum in South Dakota, 1888-91. Great Plains Quarterly 9: 203-15.
---. 2001. Add a Pinch of Biography and Mix Well: Seasoning the Allegory Theory with History. South Dakota History 31: 153-62.
Littlefield, Henry M. 1964. The Wizard of Oz: Parable of Populism. American Quarterly 16: 47-58.
---. 1992. "Oz" Author Kept Intentions to Himself. New York Times, February 7.
Moyer, David. 1998. Oz in the News. Baum Bugle (winter): 46.
Parker, David B. 1994. The Rise and Fall of the Wonderful Wizard of Oz as a "Parable on Populism." Journal of the Georgia Association of Historians 15: 49-63.
Rockoff, Hugh. 1990. The "Wizard of Oz" as a Monetary Allegory. Journal of Political Economy 98: 739-60.

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Quentin P. Tayloris an assistant professor of history and political science at Rogers State University, Claremore, Oklahoma.

Source:
http://www.independent.org/publications/tir/article.asp?issueID=40&articleID=504

Reprinted with permission.

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Rick Perry’s Security Costs Texas Taxpayers up to $400,000 a Month

(Charlie Neibergall/AP Photo)

Rick Perry’s security costs have risen since he entered the presidential campaign in August, costing Texas taxpayers as much as $400,000 a month, according to a report by the Texas Tribune.
An examination of Texas public safety department records found that the agency spent more than $1.4 million on out-of-state trips between September to mid-December, including more than $397,000 between Sept. 5 and Sept. 28 this year.
According to the Texas Tribune, this amount included “$161,786 for airfare, $8,140 for baggage fees, $50,648.84 for food, $6,442.24 for fuel, $112,111.81 for lodging, $54,356.65 for rentals, $2,990.26 for parking and $1,238.57 in an unspecified “other” category.”
In 2011, the Texas public safety department spent $1.1 million for the entire fiscal year on out-of-state security costs.
The Texas Tribune noted George W. Bush amassed a hefty tab for Texas taxpayers when he ran for president in 2000 while he sat as the governor of Texas. The state spent at least $400,000 per month in the first quarter of the year when he ran for president in 2000, and Texas taxpayers paid $3.9 million for his security costs between January 1999 and March 2000 when Secret Service took over security detail.
Perry is the only candidate, other than President Obama, whose security is funded by taxpayers.

SHOWS: World News

China, Japan to Back Direct Trade of Currencies

Japan and China will promote direct trading of the yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.
Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct yen- yuan settlement should reduce currency risks and trading costs, the Japanese and Chinese governments said.
China is Japan’s biggest trading partner with 26.5 trillion yen ($340 billion) in two-way transactions last year, from 9.2 trillion yen a decade earlier. The pacts between the world’s second- and third-largest economies mirror attempts by fund managers to diversify as the two-year-old European debt crisis keeps global financial markets volatile.
“Given the huge size of the trade volume between Asia’s two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations,” said Ren Xianfang, a Beijing-based economist with IHS Global Insight Ltd.

Currency Swap

China also announced a 70 billion yuan ($11 billion) currency swap agreement with Thailand last week as part of a plan outlined in October to promote the use of the yuan in the Association of Southeast Asian Nations and establish free trade zones.
Central banks from Thailand to Nigeria plan to start buying yuan assets as slowing global growth has capped interest rates in the U.S. and Europe.
The move by China and Japan to strengthen market cooperation “benefits the ease of trade and investments between the two countries,” Chinese Foreign Ministry spokesman Hong Lei said today in Beijing. “It strengthens the region’s ability to protect against risks and deal with challenges.”
The yuan traded in Hong Kong’s offshore market gained 0.5 percent offshore last week and touched 6.3324 per dollar, the strongest level since trading started in July 2010. Its discount to the exchange rate in Shanghai narrowed to 0.1 percent, from a record 1.9 percent on Sept. 23.

Yuan Gains

The yuan gained 0.05 percent in Shanghai to 6.3330 per dollar today and was little changed at 6.3450 in Hong Kong. It strengthened 4.3 percent this year, the best-performing Asian currency excluding the yen. The currency is allowed to trade 0.5 percent on either side of that rate. The yuan is a denomination of the renminbi.
Japan exported 10.8 trillion yen to China in the year through November, and imported 12 trillion yen, according to Ministry of Finance data. The deficit with China widened to 1.2 trillion yen, from 418 billion yen in January-to-November 2010. About 60 percent of the trade transactions are settled in dollars, according to Japan’s Finance Ministry.
Finance Minister Jun Azumi said Dec. 20 buying of Chinese bonds would help reveal more information about financial markets in China. Noda said in September 2010, when he was finance minister, that Japan should be able to invest in China given that its neighbor buys Japanese debt. Japan holds $1.3 trillion of foreign-currency reserves, the world’s second largest after China’s $3.2 trillion.

Chinese Debt

Investing in Chinese debt has become easier for central banks as issuance of yuan-denominated bonds in Hong Kong more than tripled to 112 billion yuan ($18 billion) this year and institutions were granted quotas to invest onshore. Japan will start to buy “a small amount” of China’s bonds, a Japanese government official said on condition of anonymity because of the ministry’s policy, without elaborating.
China sold the second-biggest net amount of Japanese debt on record in October as the yen headed for a postwar high against the dollar and benchmark yields approached their lowest levels in a year. It cut Japanese debt by 853 billion yen, Japan’s Ministry of Finance said on Dec. 8.
Separately, the Japan Bank for International Cooperation, JGC Corp., Mizuho Corporate Bank Ltd., the Export-Import Bank of China and other Chinese companies will establish a $154 million fund to invest in environment-related businesses such as recycling and energy, the Japanese government said.