We try not to go mad, mainly because we had a Christmas a few years ago where some family members got massively carried away and bought vast amounts for each other and their new baby. When the presents were piled up it looked a little obscene, to be honest, and I don't usually get all pious about other people's spending. They also brought huge amounts of extra food and sweets and biscuits. Everyone said afterwards that they had felt a bit sick at the waste, and there was a conscious, mutual decision not to have such ostentatious expenditure again.
DS1 was 6 months at his first Christmas and he got the Vtech walker and some cheap bits and pieces in a stocking - probably a maximum of £40-50. His grandparents probably spent about £30 on him and his aunts spent about £20 each. My father, who we very rarely see, always sends about £50 and we buy something out of it and put the rest in his account.
His second and third Christmases he got a balance bike and an innotab and then some bits and pieces - probably about £80 - £90 in total.
This year he is getting a proper bike from us, so he will have a bit more spent on him this year, and he has some Toy Story toys from ebay from the rest of the family. DS2 isn't going to have much spent on him at all because he will be 11 months and not really into anything particular. He has also inherited all the stuff that DS1 has ever been given so isn't exactly short of toys. He will probably have a max of £30 spent on him from us.
I don't think there is anything wrong with spending more money if you can afford it, but just buying piles of stuff for the sake of it does make me a bit uncomfortable. I can still remember that insane pile of presents spreading across the floor from that Christmas and people actually losing interest in present opening because it went on for so long, and about three out every four presents were for these two family members, so we just had a couple of hours of sitting watching them open parcel after parcel and occasionally coming across something for someone else to open!