Question

Answer all parts!!

The movie The Wizard of Oz was made during the Great Depression of the 1930s, but it describes the financial difficulties of American farmers during the recession of the 1890s. A. Identify and explain the causes of the farmers’ troubles during the 1890s. You should use Irving Fisher’s quantity theory of money with your answer. B. Explain how the movie’s plot and scenery represented the farmers’ financial problems, as listed and explained in part A. (note: Please only describe the parts of the movie relevant to this question.) C. The Federal Reserve Bank was created in 1912, and received full control over the supply of money. How does the Federal Reserve Bank today address the problems in part A?

Answer 1

The crisis of 1890 was an extreme recession. It was both the debt crisis and downfall of US economy.This crisis was so huge that lasted for many years. Though the generation was from Europe ( The Baring Crisis) but because of failure of British Banks, many investors sold their stock against gold.More than 600 banks closed and umemployment was prevailing across the country. The gold reserve fell drastically and down the line, there was tremandous bankruptcy.

Farmers trouble during 1890s- Agriculture was main source of income in US atleast by 19th century which continues to decline and today only 3 to 4% population is engages in agriculture business. There were many reason for a farmer to leave farming and look for something else for living. These were natural disasters like drought, pandemic like plagues and rising cost of production, falling prices of product and rising interest rate on loan.

Fisher's quantity theory - According to economist, Irvin Fisher- As the quantity of money in circulation increases, the price level also increases in the same proporation and value decreases- and vice versa.( other conditons unchanged)

Formula representation of Fisher's quantity theory-  MV=PT where M= Qty of Money, V= transaction velocity, P=Price level and T= total goods and services transacted.

As per above equation total expendure value always equal to total value of transaction of goods and services. Hence, in crisis, total value of transaction of goods and services decreases drasticaly so the value of money.' On the other hand, because the tranactions are less, demand of the money also decreased that couse high interest rate to recover to control cost of money lending.

Relation with The Wizard of Oz - This film is a tale of a girl, who is tranported to a colorful land of witches and muchkins. Confused girl and her dog follows the yellow brick road toward the city to meet the wizard. On the way, she meets few characters who have their specific problem. They made a group and met the Wizard and ask him to help. The Wizard then ask them to bring the broom from witch to help them to cure their problems. This beautiful plot made few scholars think to match with 1890 crisis.How this was done can be written down like this.

1. The scarecrow (who has no brain) represented the farmers.

2. The Tin Man represented the Industrial workers as they are like more of machine and less of human

3. The Cowardly lion represented the northern reformers.

4. The wizard represented the Money and its power who manipulates and shown false dream to achieve his own

5. The Emerald city represented the The Wall Street

6. Yellow brick roads represented the gold and

7. Dorothy's silver slippers compared with call of populist backing the dollar with silver

8. Dorothy represented the average american

9. The tornado represents the crisis and disturbed system.

Above illustration of characters may be differently decsribed the other economists but mostly would be the same.

Federal Bank and It's control over Money: Most commonly called "THE FED" was created on Dec 23, 1913 when Woodrow were the President. The Fed is central bank of US to control the circulation of currency, monetoring the financial health nationwide and provide a more safer and flexible system to support the entire economy. The Fed conducts the monetory policy to manage inflation and employment. It also controls the interest rate.

The movies basic idea reveals the power of people lies within. You only can correct your wrong doings so to control the so many differences in money market like loss of gold, loss of value of money etc, there was a need to control centrally and decide the standards for all and each so that non one can take advantage of other. The creation of central bank was the breath to the dying system of banking and money. It led to stablize the situation across the country.