Debt Where Credit is Due

Abstract

The real Adam Smith, like his contemporary copy, wrote during a period of long economic crisis. He made the two above cited observations, which afford us important historical perspective on the contemporary debt crisis.

All European nations have given such extraordinary privileges to bills of exchange, that money is more readily advanced upon them, than upon any other species of obligation.… Many vast and extensive projects, however, were undertaken, and for several years carried on without any other fund to support them besides what was raised at this enormous expense. The projectors, no doubt, had in their golden dreams the awakening however.… they very seldom, I believe, had the good fortune to find it.… Each endorser becomes in turn liable to the owner of the bill for those contents, and, if he fails to pay, he becomes too from that moment bankrupt.

Adam Smith, The Wealth of Nations, 1776

The discovery of America, and that of the passage to the East Indies by the Cape of Good Hope, are the two greatest events recorded in the history of mankind.… To the natives, however, both of the East and West Indies, all the commercial benefits which can have resulted from those events have been sunk and lost in the dreadful misfortunes which they have occasioned.… It is impossible that the whole extent of their consequences can have been seen.… What benefits, or what misfortunes to mankind may hereafter result from those great events, no human wisdom can forsee.…