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Paul Krugman, in making his argument about gold, bitcoins, and paper money, 'quotes' Adam Smith, although somewhat circuitously, as seemingly to deride gold and silver in favor of paper money.
I discuss that column of his here. Here is Mr. Krugman's quote of Adam Smith.
"I suspect, however, that Adam Smith would have been dismayed. Smith is often treated as a conservative patron saint, and he did indeed make the original case for free markets. It’s less often mentioned, however, that he also argued strongly for bank regulation — and that he offered a classic paean to the virtues of paper currency.
Money, he understood, was a way to facilitate commerce, not a source of national prosperity — and paper money, he argued, allowed commerce to proceed without tying up much of a nation’s wealth in a “dead stock” of silver and gold."
I looked up all the references to 'dead stock' in Adam Smith's Wealth of Nations just for grins, and found plenty of references to 'money' as 'dead stock,' but nothing in particular to gold and silver per se.
Smith goes to great pains to show that 'money' is a medium of exchange, and the wealth of a nation is properly increased by its employment. Duh. I could also say that he recognizes gold and silver are a store of wealth that could be needed at certain times, and should be increased during good periods, but he is adamant that 'money' is not the means of increasing wealth.
But this in no way implies that he views gold and silver themselves as inherently 'dead stock' and that paper money is to be preferred. He does not specifically condemn paper money either except in passing, but he views paper money as those notes of the banking system that are all a part of commerce, and not a fiat currency as he would have been so familiar in the case of John Law and his assignats for example.
Smith is talking about those domestic instruments that energize a monetary system in transactions. In other words, commercial notes and so forth. Smith argues that money is best used as it is being employed, and not hoarded.
Here is what I would daresay is the 'money quote' from Adam Smith on paper, gold and silver.
"The gold and silver money which circulates in any country may very properly be compared to a highway, which, while it circulates and carries to market all the grass and corn of the country, produces itself not a single pile of either.
The judicious operations of banking, by providing, if I may be allowed so violent a metaphor, a sort of waggon-way through the air, enable the country to convert, as it were, a great part of its highways into good pastures, and corn fields, and thereby to increase, very considerably, the annual produce of its land and labour.
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.
Over and above the accidents to which they are exposed from the unskilfulness of the conductors of this paper money, they are liable to several others, from which no prudence or skill of those conductors can guard them."
Adam Smith, Wealth of Nations, p. 262
As you may recall Daedalus was the father of Icarus. He fashioned the wings of wax and feathers on which Icarus soared, but in his hubris too close to the sun alas, and plummeted back to earth.
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