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But policy makers will eventually find their borrowing desires will exceed the willingness of capital to flow into long-term low-interest government bonds. The zombie banks and businesses--the equivalent of dead but still-standing trees--will finally start toppling over.

You can't make people who are already over-indebted take on more debt, and you can't make people whose collateral is falling creditworthy. To shove more debt into the system is to pile more deadwood onto the already-dense pile of dry debris littering every inch of the economy.

The big conceit here is that borrowing trillions of dollars is risk-free as long as the government is doing the borrowing.

That is an illusion--there is always risk when you borrow or print or "backstop"/guarantee trillions of dollars of risky debt; the risk has simply been transferred to taxpayers, who will soon suffer the consequences.

For the crisis in capitalism is not just debt-based--it's also resource and demographic-based.

Here in the U.S., the Social Security system will reverse its long trend of generating a surplus in 2016 (or sooner as the Depression cuts tax revenues) and as a result it will start adding to a Federal budget deficit that's already running $2 trillion a year.

Medicare is even more fragile, and thus we can easily foresee a fiscal crisis looming in which the Federal government can no longer borrow enough trillions to fund these entitlements. And despite all the repeated soothing official assurances, the crisis is not in 2035--it will hit in 2015 or perhaps even earlier.

This is a classic example of the Trend Extrapolation Trap. Back when the Social Security system was designed, it was assumed there would always be 10 workers to "pay as you go" to support 1 retiree. The Baby Boom in the 1950s made that projection reassuringly long-term--or so it seemed.

Now that we're approaching a worker-retiree ratio of 2.5-to-1, the system cannot possibly pay the benefits promised without borrowing trillions of dollars each and every year--and from whom?

Meanwhile, oil has plummeted in a long-anticipated head-fake in which global recession cuts demand, masking the arrival of Peak Oil. Will there be enough oil to fuel 100 million new Tata minicars in India plus run the 600 million existing vehicles currently burning oil? And exactly where will the electricity come from to charge up 100 million plug-in hybrid cars made by China's BYD? (Not to mention the lithium-ion batteries.)

As for all the alternative fuels, well, maybe, but right now all alternative energy sources provide only a few percentage points of global energy.

Ramping up alternative energy from 3% to 30% of global energy production will be stupendously costly--and aren't governments vacuuming up much of the world's capital to squander it on their financial sectors and local government pork-barrel projects?

Neoliberal capitalism is in crisis for one fundamental reason: the State has played "the fixer" with monetary and fiscal policy in the belief that risk could be suppressed by spreading it over the entire taxpaying populace.

But the excesses of credit, risk, leverage and overcapacity are now gutting the very middle class which the State relies on to pay most of the taxes. And as tax revenues dry up, entitlement spending ramps ever higher and borrowing is no longer cheap or even possible, then the State and the "private sector capitalism" which depended on passing off its risks and gambles-gone-awry to the State will find the firestorm was not suppressed-- it was only delayed--and not for long.

The best explanation of systemic financial risk and why it cannot be "disappeared" is The (Mis)behavior of Markets: A Fractal View of Risk, Ruin, and Reward by Benoit Mandelbrot.

The demographics trends which are about to overwhelm entitlements programs are described in Fewer: How the New Demography of Depopulation Will Shape Our Future and The Coming Generational Storm: What You Need to Know about America's Economic Future.

Perverse Incentives,