In two recent works, The Predator State and The End of Normal, James Galbraith argues convincingly that the growth rates of the immediate post WWII period will not be restored even by robust stimulus packages or any Federal Reserve QEs. Resource costs remain high and unpredictable. In addition even if increased government spending stimulates new investment, that investment is likely to eliminate more jobs.In Galbraith’s analysis crashes are not merely the products of events outside the system, like a meteor from outer space. Instability is built into the very core of the system, primarily through the role of the large investment banks. Bank loans were crucial to the development and spread of new technologies. Nonetheless, initial success, the deregulatory climate, and the desperate quest for new targets to inflate led to loans to a clientele that should never have been served and then the bundling, hiding, and dispersal of these toxic instruments.A true Ponzi economy, but one that has left its mark, the modern investment bank now makes its money in comparable ways. It has lost the incentive and the talent to engage in the legitimate function of underwriting new business ventures and technology. It takes low-interest loans from the Fed and invests in longer-term bonds or in more speculative derivatives. Nonetheless. their continuing status as too big to fail insures them preferential access to capital markets.Read More.Source: The Progressive Populist/John BuellAmerican capitalism is very fragile, not in the sense that it is soon to be replaced by some other system but that its growth is contingent on costly and unpredictable resource base, is increasingly dominated by stock and financial market casinos, and produces a few big winners and many losers. Galbraith advocates a set of reforms that go well beyond the relatively narrow liberal agenda. These include measures to reduce the fixed costs of our resource base, including especially dramatic scaling back of the scope and high tech weaponry of the military.