If I’m understanding this Lee Ohanian paper (PDF) correctly, he wants us to believe that the Great Recession was caused not by the collapse in aggregate demand that occurred in 2008 and its failure to get back up to trend in 2009-2010 but instead by time travel. In particular, the Troubled Asset Relief Program of the Bush administration and various Obama-era interventions traveled back in time to cause a recession. I’d heard secondhand that Ohanian adheres to a time travel theory of the Great Depression, but thought that might be a caricature. But he really does say on Page 61 of this document that TARP initiated a recession (“perhaps because policymaker communications concerning the underlying strength of the economy increased uncertainty”) which was then exacerbated when the Treasury announced a small means-tested mortgage modification program that inspired people to become unemployed in order to qualify for loan forgiveness.
It’s all down there on paper!
Economics aside, I’ll just make the sociological observation that it’s strange to bolster an argument in favor of free markets and against government intervention via a theory which holds that the operation of the market is in fact so delicate that downbeat utterances from George W Bush can lead to a worldwide loss of trillions of dollars in output.