Cause and effect in the gold points mechanism: A criticism of Ricardo's criticism of Thornton

Noting that it is Thornton, not Ricardo, who is the originator of the classical analysis of the gold points mechanism, this paper shows that Ricardo rejected this mechanism. This is done by considering his criticism of the causal link between deficits, the exchange rate and the price of gold. The paper first emphasizes Thornton's analysis of the links between gold points, bank risk and the high price of bullion. It is then shown how far Ricardo is led astray in his criticism of Thornton and his explanation of the high price of bullion and of the exchange market.