15 AUGUST 1970, Page 24

The liquidity crisis

Sir: Mr Davenport maintains that (a) the current monetary squeeze in the us and Great Britain has caused both the recent wave of bankruptcies and the present record levels of unemployment in the two countries, and (b) the level of the money supply does not det4rmine the level of economic activity,

it being possible to circumvent monetary restraints by resort to other forms of credit.

Before he makes intemperate attacks on other people's 'lunatic' theories, which at

least have the merit of consistency, Mr Davenport might well try to reconcile this glaring contradiction in his own.

Peter Ltiley 74 Elm Park Road, London sw3