The much touted "free market economy" and the slogan that governments should stay out of economy as it will (allegedly) take care of itself, is pretty much gone down the tubes.
Darius, the free market economy hasn't failed for it has never left academia's book shelves to start with. What has failed is government meddling, regulations and control.
It is the Fed that went on a reckless cheap money policy during the 90s that kick started the enormous amounts of malinvestments, the dot com bubble, the housing bubble and so forth. I remember Greenspan boasting that he had finally laid the the ghost of inflation to rest. How he must be eating humble pie at the mo.
It is the government that forced the banks to relax their lending criteria, also during the 90s, and hand out mortgages to people who couldn't afford them to promote home ownership in one of those "nobody left behind" absurd populist drives.
As for today, government is there yet again meddling, regulating and "trying" to sort the crisis that it has created in the first place. What they should do is precisely nothing. Companies should be allowed to go bust, interest rates should be raised to their appropriate market level to encourage savings and discourage reckless lending, and more importantly, prices MUST be allowed to go down. Trouble is such policy would create a recession and most politicians are haunted by America's great depression.
Throwing money at the problem, wont solve it, it will merely compound it and delay it.