You’ve got to hand it to John Maynard Keynes, the British economist
who saw this whole train wreck before it ever happened. Keynes was a
supporter of capitalism, but had a good understanding of its structural
flaws. He summed it up succinctly like this:

“Our analysis shows… that long-run development is not inherent in
the capitalist economy. Thus, specific ‘development factors’ are
required to sustain a long-run upward movement.”

What Keynes is alluding to is the fact that mature capitalist
economies tend towards stagnation. The basic idea is this: The rate of
return on investment begins to dwindle as overcapacity builds up.
Declining profits, in turn, lead to belt-tightening, layoffs, falling
demand and slow growth. That chokes off investment which puts the
economy into a long-term slump. This is the challenge that all aging
capitalist economies face. The solution–as Keynes notes–lies in
“specific development factors”, which in today’s terms means “financial
innovations”.

Financial innovations, like derivatives contracts and
securitization, have created vast new opportunities for investment and
profitmaking. This complex netherworld of highly-leveraged
debt-instruments and off-balance sheet operations constitutes a shadow
economy where the process of capital accumulation persists despite
inertia in the underlying economy. That’s why the Fed and the Treasury
have been doing their best to stitch the system back together without
changing its basic structure. The same is true of Congress, which has
gone to great lengths to preserve the profit-generating instruments
which brought the global financial system to the brink of disaster.
This is from the Wall Street Journal:

“Lobbying by Wall Street has blunted efforts to step up regulation
on derivatives trading by carving out exceptions or leaving the status
quo in place.

Derivatives took blame for some of the worst debacles of the
financial crisis. But a year after regulators and critics began calling
for an overhaul in the way they are traded, some efforts have been
shelved and others have been watered down.