Principium Volume II, Book 9, Quote 909 and 911

909. (9-10-2010) (The reason we should stay out of debt and save as individuals and as a nation.)ATJ There is another balance, indeed, which has already been explained, very different from the balance of trade, and which, according as it happens to be either favourable [sic] or unfavourable [sic] necessarily occasions the prosperity or decay of every nation. This is the balance of the annual produce (capital availability)ATJ and consumption (debt)ATJ. If the exchangeable value of the annual produce,…exceeds that of the annual consumption (if we live below our means)ATJ, the capital of the society must annually increase in proportion to this excess. The society in this case lives within its revenue, and what is annually saved out of its revenue is naturally added to its capital, and employed so as to increase still further the annual produce. If the exchangeable value of the annual produce, on the contrary, fall short of the annual consumption, the capital of the society must annually decay in proportion to this deficiency. The expense of the society in this case exceeds its revenue, and necessarily encroaches upon its capital. Its capital, therefore, must necessarily decay, and together with it the exchangeable value of the annual produce of its industry.

- Adam Smith – The Wealth of Nations, 1776

(As I understand it, if there is an extra supply of money {capital} to be invested or product or service to be sold, then revenue can increase – supply-side economics – wholly different from demand-side economics where you get people to spend or the government tries to spend a nation into prosperity.)ATJ

911. (9-24-2010) Plenty of good land, and liberty to manage their own affairs their own way, seem to be the two great causes of the prosperity of all new colonies.

- Adam Smith – The Wealth of Nations, 1776

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