Why getting out of the current economic downturn isn't as easy as saying "spend"

The recent economic problems, their source and interrelation seem to be so obviously connected, yet so far I haven't seen any pundits make the connections.

Fact: over the last few years, house prices have risen, and people have been capitalizing on the increase in value with second mortgages, or refinancing entirely and pulling out some cash. That money was used to purchase all kinds of goods, including cars, vacations, horse-back riding lessons, and, of course, 50" Plasma TVs.

People were also expanding their other lines of credit: VISA, MasterCard, and store lines.

Now that the house price bubble has burst, and the ARM loans have adjusted, people have no more source of ready capital to borrow, and must live within their means. Some people, saddled with debt they cannot re-finance, must live below their means as they attempt to service that debt.

The past economic boom was all financed with debt. And that game is over. Telling people to "spend" is not going to solve the problem, they have no money to spend, and they can't even dip into their "debt reserve" to refill their wallets, because nobody is willing to loan them one more dime. Their cards are maxed out, and as they pay them down, the credit companies are going to lower the limits on those cards to reward them.