The Beginning of the Bullionist Controversy

Economists often credit Walter Boyd, and a document he wrote called "Letter to William Pitt" as one of the earliest definitive documents arguing the pro-bullionist position of the bullionist controversy. The 1801 letter criticized certain decisions made by the Bank of England a few years prior. Boyd blames the Bank of England with driving up food prices by printing too much paper money. Boyd's arguments drew a significant amount of criticism, including one particular response from Sir Francis Baring. Baring contradicts Boyd, by attributing the jump in food prices to a bad harvest season rather than anything the Bank of England did. The debate between Boyd and Baring does not represent the first time such debates occurred, but rather, these are the most comprehensively sustained presentations of such arguments. In Boyd’s time, the British monetary unit, the sterling, amounted to its value in silver but technically, any precious metal can become a standard against which a country backs its currency.

Historically, controversies of this type re-appear through out world history whenever a country begins leaning toward the over-value of a paper currency as opposed to one backed by some form of standard based on metal, be it gold, silver, or other. Such a debate appeared in Sweden around 1745, and again in England and Ireland toward the close of the 19th century.

Bullionists support a "fixed exchange rate" while anti-Bullionists support a "floating exchanged rate." Sometimes, when a country experiences financial duress, they change legislation in such a way that allows the value of money to oscillate. What this allows them to do is print larger amounts of currency in order to remedy the deficit. Bullionists argue that this strategy inevitably aggravates things more than it helps to fix them. Essentially, Bullionists and anti-Bullionists differ in terms of the direction of the cause and effect between inflation and deficit. Bullionists say that inflation worsens deficit; anti-bullionists think the two do not correlate in any significant way.

For example, during a period of time the value of a nation was linked to silver bullion, bullionists would argue that in order to save the country from deficit and keep the quality of life high, citizens and government should keep this link between fiat currency and silver bullion strong. Anti-bullionists would argue that the problems would persist regardless of how strong this connection remains. For this reason, the anti-bullionist would argue, printing increasing amounts of currency will not aggravate the existing problems.


Event Calendar