I've been thinking about this debate (also here). First, I should point out that I'm somewhat sympathetic to the Austrian idea of mis-allocation (or re-calculation as these guys put it) in business cycles. I think they overdo their hypothesis, but that discussion is for a different time, because also overdone is the idea that recessions are largely monetary (or due mostly to an excess demand for money). I don't buy that as the whole story either.
For one thing, the mainstream concept of 'money' has to me always been a rather dubious and near-pointless definition in an age where credit is king. To be more succinct, we don't have a demand for money problem, we have a demand for credit problem. It's not that people are demanding too much money relative to production, they are demanding too little credit. We need only look at the Fed's stats to see this.
Interest rates didn't rise because people started demanding more money - that's always been an incorrect causal relationship with mainstream theory. Interest rate spreads started rising due to the financial crisis and uncertainties therein of future profits and sustainability. Those increasing spreads together with the uncertainty etc. meant that people were demanding lesser and lesser loans on credit. Demand for money is nothing more than a by-product and a symptom of the need for 'flight to safety.' Obviously, in a major financial crisis, it makes sense to flock to the dollar and to 'money'.
And, when I say "...too little credit..." I don't want to imply that that is a bad thing. From a certain perspective, and certainly from an Austrian one, it is necessary for credit to drop in order for this resetting to happen. In other words, it is the very fact that we had too much credit (an over-indulgence) that was a significant cause of the problem in the first place so it is only natural that the economy tighten credit now to shore up balance sheets, payoff past debts, etc.
Until economists leave their nice conventional notions of 'money demand' behind, we will never really get down to the real causes and fixes for these types of issues.