The Money Trap: Why Nations Chase Gold — The Wealth of Nations

Smith opens Book Four by attacking a common mistake: thinking wealth means gold and silver. People say a rich man is worth a lot of money, so nations try to pile up bullion. After America was found, Spaniards asked first whether a coast had gold. Tartars asked whether France had sheep and cattle. Smith thinks the Tartars were closer to the truth.

European kings banned exporting coin and watched the balance of trade instead. Merchants told parliaments that sending gold abroad to buy goods could return even more gold, like planting seed and harvesting later. Lawmakers believed them and shifted from blocking coin to obsessing over trade balances. Home trade, which supports the most jobs, was treated as less important because it did not visibly move metal across borders. Smith calls this the mercantile or commercial system: a whole policy built on a mistake about what wealth is. Treasury clerks count coin; farmers and artisans count meals, cloth, and tools.