Adam Smith on tax-driven paper money

econoblog101

I am teaching Origins of Political Economy this fall which allows me to (re)read some classical books starting with Adam Smith. Having read Ricardo, students were wondering whether the metalist view still holds today and if not, what replaced it. I found this paper by Stephanie Bell very enlightening, which contains a quote from Adam Smith. Here is the full paragraph (source) from ‘Chapter II (continuation): On Money considered as a particular Branch of the general Stock of the Society, or of the Expense of maintaining the National Capital‘:

A prince who should enact that a certain proportion of his taxes should be paid in a paper money of a certain kind might thereby give a certain value to this paper money, even though the term of its final discharge and redemption should depend altogether upon the will of the prince. If the bank which issued…

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