Baring’s and Thornton’s replies; King’s and Wheatley’s developments (1801-03)

Baring, a private banker in London, answered Boyd’s pamphlet by publishing Observations on the publication of Walter Boyd (1801). He agreed that the suspension of payments could permit the Bank to over-issue, but denied that this had yet been the case.

Above all, Baring contested Boyd’s theory of the effect of the exchange rate on prices and emphasized the absence of any premium on guineas. First, he contrasted the rela­tively small deterioration in the exchange with Hamburg with the sharp rise in commod­ity prices. According to him, Boyd’s argument could not explain this contrast. Although he agreed that a fall in the exchange rate “produces a good effect, by furnishing the means of exporting a larger quantity of goods and merchandise”, he believed it to have “no influence or effect upon the price of corn grown in this country [England]” (Baring 1801: 20). Second, he pointed out that the prices of goods in paper money were no higher than the prices in gold, and that this was proof of “perfect and entire” confidence in the Bank.

In April 1802, there was a parliamentary debate on a bill aiming to extend the restric­tion until 1803. The same year, Thornton, a Member of Parliament allied with the Tories, and also a private banker in London and supporter of the Bank of England’s policy, published his Inquiry into the Nature and Effect of the Paper Credit of Great Britain. Thornton began to write the book after the suspension of payments, in order to justify it, but before the market prices of bullion began to rise. The publication of Boyd’s pamphlet convinced him to complete his inquiry by dealing with the subject of exchange and pre­cious metal prices. In reply to Boyd, Thornton explained that a high price of bullion can occur even when there is no over-issue of notes pushing up the prices of goods; that the high price of bullion is the effect of falling exchange rates, and that exchange rates may fall as a consequence of financial outflows or bad harvests. His conclusion was that the high price of bullion was linked to the foreign war expenditures.

However, when the book was published, the debate about Boyd’s pamphlet was over. In fact, Thornton participated in the controversy about the Irish currency exchange rate, when in 1803 it became unfavourable to the unprecedented degree of over 10 per cent, abandoning the old parity of 108.33 Dublin pounds to 100 English pounds. These fluc­tuations provoked a new discussion both in Parliament and in pamphlets about the relation between prices and exchange rates. In March 1804, the House of Commons appointed a committee to investigate the state of the Irish currency and the exchange relations between Ireland and England. Henry Thornton played a leading role on the committee.

Before the Irish crisis, King had published several pamphlets in accordance with the bullionist thesis, one of them entitled Thoughts on the Restriction of Payments in Specie at the Banks of England and Ireland (London 1803).