… is from page 438 of Book IV, Chapter 1 of the 1981 Liberty Fund edition of Adam Smith’s magnificent 1776 treatise, An Inquiry Into the Nature and Causes of the Wealth of Nations:
It would be too ridiculous to go about seriously to prove that wealth does not consist in money, or in gold and silver; but in what money purchases, and is valuable only for purchasing.
DBx: It’s a startling simple truth. Yet despite its simplicity it cannot be repeated too often. Nearly all of the hysterical fears of, and furious fulminations against, trade deficits are rooted in the mercantilist fallacy challenged here by Smith – namely, that money is wealth and that wealth is money.