The reception of Adam Smith on bank notes and the balance of payments

Adam Smith advanced a radically different analysis of the dynamics of international monetary flows than his good friend David Hume, and placed it at the heart of his analysis of banks and money. Smith’s analysis of banks and international flows of money and credit was an important element in his intellectual assault on the British commercial conceptions and colonial policies of his day. It let him argue that an outflow of specie would boost British economic growth. Exactly the opposite of the stimulating inflows of money emphasised by his contemporaries. Did Smith’s argument gain adherents? We systematic searched for references to Smith’s discussion of bank notes and a growth boosting outflow of specie from 1776 to Britain’s departure from the gold standard in 1797. We find that those authors who clearly recognised and reproduced Smith’s argument thought that it did not apply to their time and place. They accepted the logic of his analysis but they thought that the economy they inhabited had already displaced far too much specie to support the volume of paper money in circulation.