Companies in Korea and Thailand need more common stock on their balance sheets. Forecasting how long before capital begins to flow back is tantamount to forecasting when ownership will change. Understandably, this is politically sensitive, and it is taking longer than anticipated. Meanwhile, the stabilization of currencies in the IMF-supervised countries has crushed economic activity. Broad money adds time and other savings deposits to M1.
Government guarantees make deposits the safest investment.
A sharp drop in the velocity of money is terribly de-stabilizing to economic activity. One of a central bank's main jobs is to avoid sharp swings in the velocity of money. Morgan Stanley's Chief Economist Stephen Roach believes that the IMF policies of austerity increasingly will be looked upon as being a part of the problem rather than as a part of the solution. The crisis economies need lower real interest rates. The lack of a framework for monetary policy means there is no credible means of reducing nominal interest rates without the exchange rates in these countries gapping down.