"When the people of any particular country have such confidence in the fortune, probity, and prudence of a particular banker, as to believe that he is always ready to pay upon demand such of his promissory notes as are likely to be at any time presented to him; those notes come to have the same currency as gold and silver money, from the confidence that such money can at any time be had for them...The commerce and industry of the country, however, it must be acknowledged, though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended upon the Daedalian wings of paper money, as when they travel about upon the solid ground of gold and silver."Adam Smith, Wealth of Nations
18 June 2014
NAV Premiums of Certain Precious Metal Trusts and Funds - And Ah! Bright Wings
By the way, from what I have been able to determine, Adam Smith never said, "The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money."
It is certainly popular on the internet, and quoted widely. But I have never found even the use of the word 'fiat money' in any of his writings that I have examined closely, much less this particular quote. And his use of the word 'minority' seems to be confined to the context of someone who has not yet 'come of age' or their majority.
If you find an actual citation from his original works I would be glad to have it. I spend quite a bit of time trying to search out the basis for various quotes. I am not always successful, but am continually shocked at how many quotes there are that seem to be just constructed out of thin air.
And this does not include the even more common practice of taking quotes selectively and out of context to support notions that the author could have hardly been expected to support given the body of their work and thought in context.
By the way, some of Krugman's acolytes later admitted the error. If only his more vehement opponents would so willingly show such grace in a misstep, of which we are all capable. But such is the undervalued status of truth at the extremes of the political continuum. God is truly to be found in the ordinary things, and the exceptional, but as He defines such exceptional rarities in His economy.