However, I would suggest that explaining the depth of the recession is a challenge for just about any macroeconomist. There is no well-established theory that can explain how we got to 10 percent unemployment.
This is a great blog post. Even the comments are great. Maybe we are on the frontier of economics, but my sense of it is that the Austrian Business Cycle Theory is the most compelling explanation. Of course, Austrians don’t do numbers. No self-respecting Austrian would make a prediction for 10% unemployment because future unemployment numbers are unknowable. What is predicted is that if you try to trick the market with phony interest rates (or anything else), the market will get even. We did and it has, yet it seems doubtful that anyone has learned very much.