# Grounds of the Suspicion That the Value of Silver Still Continues to Decrease explained — The Wealth of Nations

> Chapter companion for The Wealth of Nations by Adam Smith.

## What happens

This chapter examines the popular belief that the value of silver continues to fall in Europe due to increasing wealth and the growing quantity of precious metals. Smith argues that the rising price of many raw commodities does not indicate a decrease in silver's value, but rather an increase in the real price of those commodities as society advances. He reiterates that gold and silver flow to rich countries because they fetch a higher price there, not because they are cheaper.

## Themes in this chapter

### Wealth and Money

Smith discusses the relationship between the quantity of precious metals, wealth, and the value of silver, arguing that increasing wealth does not necessarily diminish silver's value.

## Key lines

> The increase of the wealth of Europe, and the popular notion that, as the quantity of the precious metals naturally increases with the increase of wealth, so their value diminishes as their quantity increases, may, perhaps, dispose many people to believe that their value still continues to fall in the European market;

Many people think that because Europe is getting richer and the amount of precious metals grows with wealth, the value of those metals must be dropping, leading them to believe silver's value is still declining in Europe.

_Smith introduces the common misconception he aims to refute._

> Gold and silver naturally resort to a rich country, for the same reason that all sorts of luxuries and curiosities resort to it; not because they are cheaper there than in poorer countries, but because they are dearer, or because a better price is given for them.

Gold and silver flow to wealthy nations just like luxury goods do—not because they are cheaper, but because they command a higher price there.

_Smith explains the mechanism driving precious metals to rich countries._

> Though such commodities, therefore, come to exchange for a greater quantity of silver than before, it will not from thence follow that silver has become really cheaper, or will purchase less labour than before, but that such commodities have become really dearer, or will purchase more labour than before.

Even if raw commodities now trade for more silver, that doesn't mean silver is worth less or buys less labor; rather, those commodities have become more valuable in real terms.

_Smith distinguishes between nominal and real price changes._

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