On Adam Smith's theory of monetary thought

[Abstract] Adam Smith is the representative of the British classical political economy, in his masterpiece, <<The Wealth of Nations>> a book described a lot of Economic theory, in which ideological and theoretical aspects of the currency has also made many contributions. This article will explain the purchasing power of currencies Smith and his theory of monetary and financial thinking.

[Keywords] Smith, monetary and financial thinking purchasing power of money

Smith published in 1776 <<The Wealth of Nations>> book a systematic analysis of the nature of national wealth and its sources of growth, it's come out of Western Europe and the world of capitalism have had a significant impact on his money ideology and theory for future research in this area provides a valuable theoretical sources.

I. Analysis of Smith on the purchasing power of money
Smith believes that the real national wealth depends on the size of net income rather than the size of the total income of fixed capital in machinery and tools are not social net income or gross income, it's just the capital part of the machine and tools The maintenance fee is not a social net income as part of the currency as well. constitute the social income is produced products, rather than as a medium of exchange currency. money is not the social part of their income, money is the goods to the circulation of the wheels, and instead its very different flow of goods in here Adam Smith made a significant monetary theory that the purchasing power of money. Smith that the value of money refers to two; 1 is the monetary amount of gold contained within 2 Refers to the currency can buy into the value of the goods, but the wealth represented by money must not be simultaneously equal to both values, but it can only mean that either, but not so much mean the former, rather, is equal to the latter, with its that is equal to money, rather, equal to the monetary value for his money that is not represented in the currency or monetary amount of gold contained in itself, but represents a certain amount of purchasing power of people's access to money is not the ultimate goal, but only a means, money just a tool for exchange of the medium used, while the real purpose is to represent the purchasing power of money that is how much money to exchange for the necessities of life, convenience and entertainment products and other goods, as Smith said: "If even a few Nepalese What can not exchange items, then its value is like putting a bankrupt bill, also has no value. aside money represents purchasing power, money is nothing. the famous 20th century British economist John Maynard Keynes also suggested that people Money is not to hold the currency itself but to its purchasing power, that is, to what it can buy, so he will not need a number of units of currency itself, but rather a number of units of purchasing power, while Smith also believes that income on behalf of the personal consumption or purchasing power, so the community is the purchasing power of income, each person who was removed in the hands of another gold purchased goods.

Second, monetary and financial Analysis of Smith's ideas
Smith in "Wealth of Nations>> second chapter describes in detail his monetary and financial ideas, he thought to reduce the cost of maintaining the currency, the real income of society is bound to increase, the cost savings will increase the fund industry, which increase investment capital to increase the produce of the community that the social net income. So instead of gold and silver coins with paper money is good, it can not only reduce the cost of maintaining the currency, but also to replace gold and silver coins circulating in the market play a role with the notes, distribution sector is no different with a new wheel, it's establishment and maintenance costs, the older wheels, slightly more explicit. However, the domestic distribution channels can only be just enough to accommodate the flow of domestic product of all the years the amount of money, the issue of banknotes in circulation is bound to full circles, out of the gold and silver coins, so that will be
Have a spillover effect, the excess gold and silver coins will overflow, people will spill the excess gold and silver coins to export abroad, but this huge amount of gold sent abroad, by no means doing nothing, by no means be given to foreign gift and it's outflow, would certainly have to change into some foreign goods, for domestic human consumption, or sold to other countries, people's consumption. Smith said that people used to buy needed commodities has included the raw materials used to increase production and tools, so that we can increase domestic production and investment, thus increasing a country's annual product, increase its net income for the community, which is also to some extent reflects the increase in money supply on Smith can promote Economic development in monetary and financial thinking of bank to a certain extent and scope to increase the money supply will serve to expand productive investment and consumption purposes, thereby expanding domestic production, additional net income of the community, making the commercial development accelerated. The idea is that the first country from the British economist John Maynard Keynes's monetary theory of Economic intervention, but Smith did not realize it, but only that the notes are inexpensive business tool, it can reduce maintenance costs, gold and silver coins, the savings into production, in order to increase the total income or social net income.

Smith notes that the bank instead of gold and silver coins issued by the traffic can not exceed the value they represent, if issued too much, the issuance of paper money will flow back into the bank to exchange some gold and silver coins, will inevitably lead to a run of trouble, increasing banks risk, but Smith emphasized that money is only an overflow effect, and did not realize the issuance of more money will lead to price increases. Links to free download http://www.hi138.com
Smith accepted the bank's financing role that the bank's main function is to make an inventory of those who temporarily do not have the capital to make these idle money can be invested into capital management into national wealth and income will help to increase the available capital, bringing considerable Economic benefits, so banks must find their own position, to play its due role, rather than junk notes, to lend money to people who lack certain ability to repay or business, for some speculation on the cause of this fully reflects his concept of stable monetary and financial development, but in our country's financial development among today's society, but just ignore this caution, sound financial development concept.

Third, the conclusion
In summary, Smith's theory in spite of the influence of the times has its shortcomings, but his doctrine of classical political economy that for the later development of Economics have played a huge impact until the 1980s , the most popular topics of economics can be found in the source of Smith's works his theory on the purchasing power of money revealed in detail the nature of money, while his stable monetary and financial concepts are preliminary to reveal bank financial owners The purpose and role, although Smith has been two hundred years ago that era of history, but he's thinking on monetary theory of today's social and economic development still has a very important reference reference.

References:
[L] Adam • Smith: The Wealth of Nations [M]. Guo vigorously, Wang Yanan translation Beijing: Commercial Press, 1972.

[2] [English] John Maynard Keynes: A Treatise on Money [M]. Beijing: Commercial Press, 1986.

[3] Su Dongbin Zhongruo Yu: I am talking about The Wealth of Nations [M]. Beijing: China Economic Publishing House, 2007 Links to free download http://www.hi138.com