In An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith discussed the dangers of governments using debt monetization, the process of paying off debts by currency debasement. Smith warned that debt monetization amounted to a “soft” default. He wrote,
The honour of a state is surely very poorly provided for, when, in order to cover the disgrace of a real bankruptcy, it has recourse to a juggling trick of this kind, so easily seen through, and at the same time so extremely pernicious.
March 2026 marked the 250th anniversary of the publication of Smith’s Wealth of Nations and his warnings against debt monetization. March also marked the 75th anniversary of the Treasury-Fed Accord, an agreement…