Third, the international community=s initial response to the crisis, led by the IMF and the
US Treasury, exacerbated rather than eased the crisis in its early stages. The IMF initially viewed the situation as a series of traditional balance of payments crises, rather than a financial panic, and as a result demanded tight fiscal and monetary policies. This approach was reminiscent of the mistaken policies implemented by the United States in the early stages of the Great Depression of the 1930s, and was the opposite of how we would expect industrialized economies to react in similar circumstances. Indeed, when a credit crunch began to develop in the United States in mid- 1998, the policy response was to reduce interest rates and to engineer a private-sector bailout of a large, failing hedge fund.