However, the greatest criticism of the IMF's role in the crisis was targeted towards its response.[14] As country after country fell into crisis, many local businesses and governments that had taken out loans in US dollars, which suddenly became much more expensive relative to the local currency which formed their earned income, found themselves unable to pay their creditors. The dynamics of the situation were closely similar to that of the Latin American debt crisis. The effects of the SAPs were mixed and their impact controversial. Critics, however, noted the contractionary nature of these policies, arguing that in a recession, the traditional Keynesian response was to increase government spending, prop up major companies, and lower interest rates. The reasoning was that by stimulating the economy and staving off recession, governments could restore confidence while preventing economic loss. They pointed out that the U.S. government had pursued expansionary policies, such as lowering interest rates, increasing government spending, and cutting taxes, when the United States itself entered a recession in 2001, and arguably the same in the fiscal and monetary policies during the 2008–2009 Global Financial Crisis.Although such reforms were, in most cases, long needed, the countries most involved ended up undergoing an almost complete political and financial restructuring. They suffered permanent currency devaluations, massive numbers of bankruptcies, collapses of whole sectors of once-booming economies, real estate busts, high unemployment, and social unrest. For most of the countries involved, IMF intervention has been roundly criticized. The role of the International Monetary Fund was so controversial during the crisis that many locals called the financial crisis the "IMF crisis".[15] Many commentators in retrospect criticized the IMF for encouraging the developing economies of Asia down the path of "fast track capitalism", meaning liberalization of the financial sector (elimination of restrictions on capital flows); maintenance of high domestic interest rates to attract portfolio investment and bank capital; and pegging of the national currency to the dollar to reassure foreign investors against currency risk.[14][edit]IMF and high interest ratesThe conventional high-interest-rate economic wisdom is normally employed by monetary authorities to attain the chain objectives of tightened money supply, discouraged currency speculation, stabilized exchange rate, curbed currency depreciation, and ultimately contained inflation.In the Asian meltdown, highest IMF officials rationalized their prescribed high interest rates as follows:From then IMF First Deputy Managing Director, Stanley Fischer (Stanley Fischer, "The IMF and the Asian Crisis," Forum Funds Lecture at UCLA, Los Angeles on March 20, 1998):”When their governments "approached the IMF, the reserves of Thailand and South Korea were perilously low, and the Indonesian Rupiah was excessively depreciated. Thus, the first order of business was... to restore confidence in the currency. To achieve this, countries have to make it more attractive to hold domestic currency, which in turn, requires increasing interest rates temporarily, even if higher interest costs complicate the situation of weak banks and corporations..."Why not operate with lower interest rates and a greater devaluation? This is a relevant tradeoff, but there can be no question that the degree of devaluation in the Asian countries is excessive, both from the viewpoint of the individual countries, and from the viewpoint of the international system. Looking first to the individual country, companies with substantial foreign currency debts, as so many companies in these countries have, stood to suffer far more from… currency (depreciation) than from a temporary rise in domestic interest rates…. Thus, on macroeconomics… monetary policy has to be kept tight to restore confidence in the currency..."From the then IMF Managing Director Michel Camdessus himself ("Doctor Knows Best?" Asiaweek, July 17, 1998, p. 46):"To reverse (currency depreciation), countries have to make it more attractive to hold domestic currency, and that means temporarily raising interest rates, even if this (hurts) weak banks and corporations."IMF’s high-interest-rate prescription in the Asian turmoil was quite controversial because it was not the moderate increase in interest rates of usually fraction of one percent, as done in both advanced and developing nations during normal times, but bad-loan provoking high bank lending rates of as much as 60%, as actually implemented during the crisis, especially in the Philippines and Indonesia which had to bear peak non-prime high interest rates of up to 40% and 65%, respectively. The high interest rates, which were a matter of record in the crisis-hit Asian nations, became necessary because of IMF’s prior failure to prescribe to the Asian nations under its sway the needed exchange rate hedging on foreign fund inflow—loans and investments—that surged into the region under the aegis of globalization and currency liberalization promoted by IMF. When the Asian financial crisis erupted in Thailand, it provoked contagion crisis in perceived similarly situated Asian economies. To prevent capital flight that would undermine the exchange rate, IMF prescribed high interest rates aimed at stabilizing exchange rates and saving dollar-debt-ridden Asian corporations from staggering exchange losses on their unhedged foreign loans. The exchange losses could have caused their collapse, with consequent humongous bad loans to their foreign creditors—banks and non-banks—in advanced nations that rule IMF. Thus, instead of leaving economic players by themselves under free market—which meant having the stockholder-owners of dollar-debt-laden Asian companies suffer huge exchange losses from their negligence to hedge on their foreign loans—IMF disturbed the financial market by having discriminated Asian borrowers save, through impoverishing high interest rates, dollar-debt-laden Asian corporations that they do not own, from which they did not derive profits in the past, and from which they will not derive profits in the future. In sum, the high interest rates were not designed to save the ailing Asian economies. These were aimed at saving the Asian corporations' foreign creditors from bad loans, and never mind the concomitant massacre of Asian banks and borrowers from IMF's high-interest-rate prescription.