: Hume argued that the price level of a country is directly proportional to its money supply.
: He famously described money as the "oil which renders the motion of the wheels more smooth," but not part of the wheels themselves. In the long run, doubling the money supply only doubles prices without increasing real wealth. Monetary Theory and Policy from Hume and Smith ...
: If a country gains more gold (specie), its prices rise. This makes its exports expensive and imports cheap, causing gold to flow out until equilibrium is restored. : Hume argued that the price level of
: Hume favored a 100% specie-reserve system for banks to prevent the artificial "paper-money" inflation that disrupts the natural flow of gold. 🏦 Adam Smith: Banking and the Real Bills Doctrine : If a country gains more gold (specie), its prices rise
In The Wealth of Nations (1776), Smith focused less on Hume’s international flow mechanism and more on how banking could catalyze economic growth. Monetary Theory and Policy from Hume and Smith to Wicksell