The economic war
Sir: Surely no one in his senses ever doubted that the size of the budget deficit and the amount of money about are important economic variables (Tim Congdon, 29 May). What they do is to disperse more widely the capacity to undertake certain ac- tivities that do not pay off at once — invest- ment, retraining, writing a book or just laz- ing. The policy problem is how to direct people to desirable activities, so far as it is possible.
Undiluted monetarism, like any old- fashioned 'squeeze' — which is what the City seems to have considered it anyway puts pressure on all activities that do not pay off at once, because people thinking in the long term have to persuade people counting money now that the term is not too long. The sum is simple: divide 70 by the interest rate, and without a return that is the number of years in which your debts' will double.
Innis Macbeath 11 Broadhurst,
Ashtead, Surrey
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