The real problem is to reason in the Austrian/gold-bug frame that "money is a thing".

Exactly.

And, just as shoveling 1 megawatt into a TV results in a TV that don't work so good, shoveling hundreds of billions into an economy that cannot or does not usefully, e.g., Housing bubbles, use the money results in an economy that don't work so good.

However, the illusion that money is a thing seems to be psychologically necessary in order for a fiat money system to work. Because, if people think that fiat money is not a real thing they will think it's worthless and destroy the fiat part of the fiat money system.

Most people only want to take "money" - whatever it is - down to the local shop and exchange it for a can of beans.  If they can do that they don't care if it is "backed" by gold or fried rat tails.  Economic policies based on "Money is a thing" are only psychologically necessary IFF the Economics one brings to the game is based on "money is a thing."  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

I agree that a large part of the problem is the misapplication of the idea that money is ONLY a thing. The paper money in your wallet is a thing and has current value. How that value varies over time is a function of government policies and the operation of the economy.

But money is also a relationship. This is especially true when there are significant time periods between the incurring of a debt and the payment of that debt. This is especially true, in the USA, for the "pay as you go" Social Security System. Opponents of that system convinced all to make the system more solvent, on a "money is a thing" basis, back in the late '70s early '80s, and so we did, by significantly increasing the withholding taxes for SS and Medicare.

But the "money is a relationship" aspects were flouted and the extra withholding was not used in ways that would help the society pay the debt when it came due. Instead it was used to paper over massive deficits that resulted from Reagan Administration tax cuts for the rich and increases in defense spending. Keynes had warned that there were problems involved in inter-generational wealth transfers and this sorry episode is example one, for the USA especially.

The idea that "We increased taxes to adequately fund retirements, but corrupt governments have squandered that money on tax breaks for their rich buddies and now want to blame the victims" argument should be very appealing to older demographics. The example should be a warning to younger demographics as well.

"It is not necessary to have hope in order to persevere."