The Cause of the Crash
The current economic implosion results not from market failures, but government success. Government exists purely to centralize benefits and socialize costs; anything else is pure marketing.
The most effective means of transferring wealth from the productive classes to the plutocrats is inflation. Government is now dealing with the inevitable consequences of long-term inflation. Of course, the only thing they can do about it is what the US is in fact doing: inflate more.
All the bad behavior by Wall Street, the banks, and the other usual suspects was subsidized, hence encouraged, by the US government, whose partners in crime they were. (The US is massively subsidizing such behavior again, under the guise of "stimulus," i.e. direct transfer payments to the rich.)
How much of this is "capitalism" is a matter of semantics. I'm inclined to agree with Kevin Carson's "free-market anti-capitalism" formulation myself.
The collapse certainly has nothing to do with the markets being "too free." They've been manipulated every step of the way. Meanwhile it was the hard money and real free market types (not the neocons and their conjoined equally-evil twins, the neoliberals, passing off their mercantilism-warmed-over as "free markets) who predicted the meltdown all along.
Mainstream economists, who cheer-led the inflationary bubble and predicted it would expand forever, now tout the Bush/Obama Rich-Only Recovery as "green shoots." One wonders how much of this is innocent stupidity, and how much is paid.
Progressive Taxation: Cementing Aristocracy
Progressive taxation has first and foremost the effect of cementing the existing wealthy into an unassailable aristocracy. It's sold, of course, as somehow benefiting the poor. But its actual intent is to make it difficult - in time, impossible - to rise in economic status, by making it difficult to accrue wealth. Thus the Old Rich, who already have theirs, protect their positions of privilege and power from arrivistes, and in time transform themselves into a nobility in everything but name.
That's not the narrative we're taught, of course. Nor what most of us believe. Even "libertarians" and other believers in the real free market tend to accept that progressive taxation is meant to ensure more equal outcomes ... when the truth is the very opposite.
Why? Habit. Time to break it.
The simple singular fact of politics is that anything government does, it does for the primary purpose of increasing the wealth and power of its proprietors. Who, by the way, are never "the people" at large - the very fact democracy is designed to hide.
What "everything" means here is everything. If taxes are raised - and if taxes are lowered. If regulations are imposed - or abolished. All of these actions, apparently contradictory as they are, represent at the most the temporary ascendancy of one or another faction of the ruling class.
More usually, it's a shell game: mountains of paper designed to do nothing but hide business as usual. If it's not meant to cover another ruling class grab at power and wealth.
Here is the Big Truth, that I'll repeat over and over - a million times, if need to - until it actually enters your awareness:
The only purpose of government is to centralize benefit and socialize cost.
Anything else is a lie.