The Restriction period that began in England in 1797 marked a crucial turning point for monetary theory and policy. The debates during the Restriction concerning the relationship between inflation, the exchanges and monetary aggregates came to be known as the “Bullion Debate.” The Bullionists were critical of the Bank of England and supported a return to convertibility, whereas the anti-Bullionists defended both the Bank and inconvertibility.

This paper re-evaluates Henry Thornton's seminal contribution to monetary theory and argues that Thornton's pathbreaking Paper Credit (1802) presents an innovative and consistent anti-Bullionist position. His views differ from those of the Bank of England and other anti-Bullionists; unlike them, he rejected the Real Bills Doctrine and Smith's monetary thinking in general as it applied to both convertible and inconvertible monetary arrangements. Thornton stressed the discretionary role the Bank played in managing the monetary system under both currency regimes.

After 1802 and particularly as a member of the famous Bullion Committee, Thornton played an important role on the side of the Bullionists; later scholars therefore describe him as a “moderate Bullionist.” However, his reserved support for convertibility during this period reflects his disappointment with the Bank directors whose fundamental misunderstanding of the monetary system threatened the stability of the British economy. For this reason, the shift in Thornton's position is better understood as a pragmatic political response to an untenable situation resulting from the directors' mismanagement, not as a reversal of his monetary theory.

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