It is widely (i.e., it’s not just an Austrian or libertarian belief) and correctly held that it was an excess of spending that caused the current crisis: individuals were consuming far more “wealth” than had previously been created. They were using their homes as ATM, they were borrowing excessively because interest rates were artificially low and they were saving inadequately because yields were artificially depressed.
Some people argue that government spending must necessarily replace a perceived lack of consumer spending, a withholding of consumption that is deleterious to the economy as a whole. But individuals were spending far more than they had previously accumulated in the first place, indeed the pace of consumption was completely unsustainable! So, consumers spent too much, which caused all sorts of bad things to happen. When eventually this realization comes to light, consumers stop spending, at which time the mainstream economic ideology tells us that the only way out of the crisis is more spending — and that if only individuals weren’t so stingy with their funds, the government wouldn’t have to step in and make up the perceived lack of consumption spending.
They can’t continue spending at a pace on par with that of earlier this decade, because they weren’t spending in the first place, they were primarily borrowing. They were borrowing and consuming immediately. And at some point, the costs of servicing debt become so prohibitive that it’s no longer possible to keep borrowing, or even to keep consuming at the previous levels.
Keynesian economic policy suggests that governments should spend, in order to make up for a perceived lack of private consumption, but this couldn’t be more wrong: it wasn’t private spending that caused, e.g., the current crisis. It was private borrowing. And anyone who knows even the first thing about personal finance knows that it’s quite impossible to “borrow” one’s way to prosperity.
Fact: Governments don’t have any money, either. So to whatever extent the government decides to “spend” its way out of a depression, you can be assured 100% of the way, that what the government is really doiing is “borrowing.” And they’re using you as collateral.