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Consider the residential housing construction market and its boom and bust. In a nutshell, what happened was we built too much residential housing, particularly in areas like inland SoCal, around Las Vegas, and South Florida. When developers realized they had built way more housing than they were going to sell, they laid-off tons of construction workers and many developers went bankrupt. So now workers are getting less work and spending less money, and banks are stuck with crappy loans that won't be repaid. So how do the different sides describe a solution?

Keynesian: What we're seeing here is a classic Keynesian feedback loop. Construction workers get fired, so they spend less money and buy less stuff, so the people they buy from have less money, so they spend less, and the factories make less, so the factory workers have less money, and so on and so forth in a downward spiral. So let's have a government intervention. The government can borrow money cheaper and easily and then they put that money in someone's pocket, preferably someone who will spend it asap. They buy stuff, so whoever they buy stuff from now has more money, and just as the downward spiral happens, we get an upward spiral. This gets us back on the right trajectory. Eventually people have enough money that they buy up all that extra housing.

Austrian: The problem isn't that people have too little money - it's that they were doing the wrong thing. Why did we build all this housing that we don't demand? Something (probably unnecessary government meddling eg mortgage interest tax credit, Fannie/Freddie Mac, etc) messed up the market's incentives and price signals so we built too much. A Keynesian intervention is just going to continue us on the wrong track, paying construction workers to do more construction when we already have too much. What we need is what Schumpeter called "creative destruction". Too much of our economy is in construction - let's close down some of our construction industry and move into other industries that the markets demand more of. So retrain our construction workers as IT experts and health care professionals - let the market shift us to more demanded industries. This will get our economy doing actually productive stuff again, rather than continuing on the path of more-of-the-same that got us here.

Keynesian reply: There are huge frictions in the creative destruction process you describe. It's not so simple to turn construction workers into nurses and engineers. It'll take a long time, during which there will be human suffering as people are poorer and have all the problems that go along with that. Indeed, they might be so much poorer that it won't be possible for them to retrain in IT - they'll be too busy barely getting by working 3 jobs at Walmart. Government intervention and spending can hurry this process up by getting money moving again, to say nothing of a moral obligation to relive suffering.

Austrian reply: Your government intervention will just encourage another unproductive boom-bust cycle. Let the market decide and people will be put to work the right way!

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Massive spending, focused on infrastructure, that would sustain demand while giving the private sector time to work out its enormous debt issues. It's a worthwhile investment since infrastructure is the backbone of productivity, and government borrowing is so ridiculously cheap that the payoff would be well, well worth it.

An unemployment insurance extension to go along with it. Homeowner mortgage relief for people who are viable-but-underwater, along with allowing people to rent foreclosed homes if they really, really can't afford the mortgage, so the houses don't disintegrate from neglect.

Couple that with a fed policy targeting inflation at about 3-4% to let the market know that hoarding will cost you money, and a policy allowing the dollar to drop to what it should be worth, since the US dollar should be trading a frack of a lot lower than it had been in 2008, and China needs to understand that they can't fuel their growth with cheap exports forever. They need to become a grown-up, consumer-driven economy like everybody else.

Oh, and resurrecting Glass-Steagel, considering the fact that rescinding it was the entire fraking problem in the first place. Banks need regulation. They're simply too powerful to be left to their own devices.

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