>Low carb diets do not cause muscle wasting - at least if one continues to exercise.

Which you can't do because your muscles have no glycogen stores.

My understanding is that when carbohydrates are in short supply, then gluconeogenesis kicks in and liver starts producing glucose from lactate, glycerol and amino acids.

I.e. some information can be found here: Low-Carbohydrate Diet Burns More Excess Liver Fat Than Low-Calorie Diet, Clinical Study Finds

http://www.sciencedaily.com/releases/2009/01/090120074631.ht...

I personally did not follow a low carb diet for more than 12 weeks, but I kept my regular 3 times per week workouts and maintained my strength while losing about 8kg bodyweight from ~83 to ~75 kg. My workouts were fairly short (40 to 50 min), but quite intensive.