where 

M = the quantity of money in circulation (M1)

V = the velocity of money. This can be assumed to be a constant. It does go up slowly over time as the technology for clearing transactions through the banking system is improved.

P = the average price level

Q = real national output (GNP or GDP)

1861-1864 U.S. Civil War, (northern) U.S. goes off the gold standard, war inflation (prices rose).

1869-1879 Deflation, the money supply increased more slowly than GNP, causing price levels to fall. The government pursued a tight money policy so they could eventually resume gold payments.

1879 Resumption of gold standard.

1880s Fast expanding economy demanded so much money, prices still fell.

1890 Sherman Silver Purchase Act. Provided for increased purchase and coinage of silver. People now feared that the U.S. would switch from a gold to a silver standard and so began to hoard gold, depleting the treasury's supply.

1893 Panic and depression, 20% unemployment.

1896 Chicago Democratic National Convention. William Jennings Bryan lost to Republican William McKinley. "Cross of Gold" speech.

late 1890s Gold discovered in South Africa, increase in money supply caused prices to rise. The Boer War between the U.K. and non-English white settlers in South Africa followed shortly after.

1900 Kansas City Democratic Convention. The populists wanted to go "from Kansas to fairyland," i.e., Washington.

Dorothy = the American people: plucky, good natured, naive.

Toto = the Prohibition (Temperance) party. Favored the bimetallic standard but like any fringe group often pulled in the wrong direction. So they got to be a dog. (Toto is a play on "teetotalers.")

Oz = the almighty ounce (oz) of gold.

The yellowbrick road = paved with gold bricks, but leads nowhere.

Dorothy's silver slippers = originally the property of the Wicked Witch of the East, until Dorothy drops the house on the witch. Walking on the yellowbrick road with the silver slippers represented the bimetallic standard. (MGM changed the silver slippers to the vivid (garish, even) ruby slippers to exploit the fabulous technology of Technicolor.)

The Good Witch of the North = New England, a populist stronghold.

The Good Witch of the South = the South, another populist stronghold.

The Wicked Witch of the East = Eastern banking and industrial interests. She is killed by Dorothy's falling house because the Populists expected that the eastern industrial workers would vote Populist, but this never really happened.

The Wicked Witch of the West = the West was where the Populists were strongest. The only reason why the West gets a wicked witch is a) you need two bad guys to balance the two good guys, and especially, b) William McKinley was from Ohio, then thought of as a western state.  The wicked witch is sometimes identified directly with President McKinley.

The Munchkins = subjects of the eastern banking and industrial interests, i.e., eastern workers who didn't vote for Bryan.

The Scarecrow = western farmers. They were Populists.

The Tin Woodsman = eastern workers. Populist mythology always looked to this group for support, but never found it in reality. Baum realized this (most Populists didn't) and shows the Tinman as a victim of mechanization. He's so dehumanized he doesn't have a heart.

The Cowardly Lion = William Jennings Bryan.

The Emerald City = Washington D.C. The color is suggestive of paper greenbacks.

The Wizard = President McKinley, but sometimes his advisor, Marcus Alonzo Hanna.

L. Frank Baum, The Wonderful Wizard of Oz, New York: Hill, 1900.

Milton Friedman and Anna J. Schwartz, A Monetary History of the United States, 1867-1960, Princeton NJ: Princeton University Press/National Bureau of Economic Research, 1963.

Hugh Rockoff, "The Wizard of Oz as a Monetary Allegory," Journal of Political Economy, (1990) 98:4, pp. 739-761.