What defines the difference between the Austrian versus the Keynesian approaches?
Ludwig von Mises wrote, "The essence of Keynesianism is its complete failure to conceive the role that saving and capital accumulation play in the improvement of economic conditions."
Keynes believed that people are too future oriented, save too much, under consume and because of the unused savings the flow of money is interrupted and leads to unemployment with unemployment reducing society's income.
What Keynesians fear, Austrians cheer: increased savings (hoarding) helps facilitate the process of deflation, leading to lower prices especially in the early stages of production. The assets don't go away, they just change hands as debt is liquidated. The increased savings speeds up the corrective process as the structure of production changes to reflect what consumers really want.
Savings should be encouraged to hasten the rebuilding process, capital cannot be created by government, only through the delaying of consumption and saving on the part of consumers and businesses. Forcing rates lower keeps people from saving and less capital is accumulated, delaying the recovery.
Is it possible theoretically for a government to “fix” economic problems? ..
Mises pointed out that any government intervention leads to unintended consequences that the government will then have to counteract with further interventions. The cycle continues until the government takes complete control of an economy. There is no third way. Governments have been meddling with economies for centuries and gold has proved itself to be the only harbor of safety.