Principium Volume II, Book 8, Quote 846 and 848

846. (7-13-2010) In order to put industry into motion, three things are requisite; materials to work upon, tools to work with, and the wages or recompense for the sake of which the work is done. Money is neither a material to work upon, nor a tool to work with; and though the wages of the workman are commonly paid to him in money, his real revenue, like that of all other men, consists, not in money, but in the money’s worth; not in the [paper] or metal pieces, but in what can be got for them.

- Adam Smith – The Wealth of Nations, 1776

848. (7-14-2010) (Think of the next part in terms of the risky, very extravagant house purchasing behavior that banks encouraged, lending easy money to people who largely did not qualify, and qualifying people for mortgages that they definitely could not afford in the long run. This risky behavior was even mandated by the government, in which it was believed that everyone should and could own a home regardless. As we know from the current crisis we are in “The Mortgage Meltdown,” this has introduced billions of toxic dollars into the world economies and the world is suffering greatly for it. This type of behavior, easy lending, backed by the encouragement of the government as opposed to cautious private investment, is the cause of the severe depression/recession that we have been in since 2008. Observe the two types of groups of borrowers that were created in the past.)ATJ …[A] new bank was established in Scotland for the express purpose of relieving the distress of the country….This bank was more liberal than any other had ever been….The debtors of such a bank as that whose conduct I have been giving some account of were likely, the greater part of them, to be chimeral projectors, the drawers and re-drawers of circulating bills of exchange, who would employ the money in extravagant undertakings, which, with all the assistance that could be given them, they would probably never be able to complete, and which, if they should be completed, would never repay the expense which they had really cost, would never afford a fund capable of maintaining a quantity of labour [sic] equal to that which had been employed about them. The sober and frugal debtors of private persons, on the contrary, would be more likely to employ the money borrowed in sober undertakings which were proportioned to their capitals, and which, though they might have less of the grand and the marvelous, would have the more solid and the profitable, which would repay with a large profit whatever had been laid out upon them, and which would thus afford a fund capable of maintaining a much greater quantity of labour than that which had been employed about them. (Note in the next line, where the risk and money is transferred with a loose fiscal policy)ATJ The success of this operation, therefore, without increasing in the smallest degree the capital of the country would only have transferred a great part of it from a prudent and profitable to imprudent and unprofitable undertakings. (Consider all of the money wasted on all of the businesses and schemes with money granted or loaned to “Green Energy” and other businesses over the last six years (2008 – 2014) that have since failed or the money was wasted and never repaid. The only ones that benefited were the politicians that received campaign donations from the same companies to which government money was funneled.)ATJ

- Adam Smith – The Wealth of Nations, 1776

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