Yesterday I quoted Scott Sumner: “I believe that the depression was caused by events that took place in September and October, when the markets actually crashed,” and replied:

I’m strongly tempted to second Scott.  My main proviso: He’s got to let me count the public’s panic as an “event that occured in those two fateful months.”  How about it, Scott?

In the comments, Scott graciously replied:

As long as you define “panic” as “correctly ascertaining that the
monetary authority was about to embark on a dramatically lower NGDP
growth trajectory that would plunge the world into depression” then I
am completely with you.

I’m afraid I’ve got more in mind.  Why can’t we think of the public’s mood as an independent – and highly volatile – causal variable? 

I didn’t expect a panic in October, 2008.  But when it happened, it sure didn’t seem to be due to news about nominal GDP.  It seemed to be due to news about the public’s mood.  A week before, the natives were calm.  Then they suddenly got amazingly restless. 

As long as this restlessness is unpredictable, it’s perfectly consistent with EMH.  So this account seems to meet Scott’s objections to distant “root cause” theories.  And it seems to fit our experience of actually living through those days, doesn’t it?  So what’s wrong with blaming an exogenous panic attack?