Fair enough.
But the problem with LGEM (and I will continue to use that term until an economist can give me a better one that covers all of the issues we see in the late game) is that it isn't just one thing. That's the fundamental misunderstanding many players have about the economy of the late game. If it was just one thing, we could probably whip up a quick mod and :BOOM: problem solved. But since it's not just one thing, it defies any kind of simple solution.
It's also why flexibility with government economic policy is really helpful. You need to be able to switch gears from LF to state capitalism to interventionism as needed. But if you can get your ducks in a row, LF can be a boon in the late game (as long as you can still go in an correct things when necessary, like when you conquer 4 states from Germany and need to sort their factories out).
The problems I see in the late game that contribute to malaise (it's not a Depression in most cases, or even a recession in the strictest sense, I don't think) are as follows.
1) Insufficient currency in existence: There are literally not enough pounds sterling in existence. This can be mitigated by key conquests and colonization, but it cannot be entirely solved through in-game actions. It also interacts with problem #2.
2) Insufficient currency in circulation: The pounds in existence tend to pool in the national banks. This wouldn't necessarily be a problem in real life, since the banks would be loaning that money out to people who need it (like capitalists who need to invest in new projects), but in Vic2, only governments can get loans. This means that capitalists are screwed in the early game for no good reason (thus demonstrating the efficacy of state capitalism), and the money tends to sit there if governments are in the black. The national bank gets fatter and fatter, until there are too many goods chasing too few pounds. This problem can be partially solved by running your own government on a deficit (which means you can also lower taxes to zero to help POPs), but you can't control what other governments do. And, because of weird quirks in the bankruptcy system (like going bankrupt for no reason), it is dangerous even when you have 50 million pounds in the national bank and a healthy economy.
3) Insufficient rubber: Rubber is the limiting factor for several late game luxuries. Unless you manage to conquer hordes of the stuff and get your tech levels high, you end up being unable to expand a very lucrative part of the economy because the resources aren't there. And it can be hard to get people to move to empty rubber provinces, since many of them are in areas POPs don't want to move to. In this case, you may not be able to shift labor from overproduced industries to underproduced ones. The good news is that you can plan your conquests to get around this problem.
4) Wars and occupations: If a Great War breaks out, and lots provinces are occupied, it can kill the economy. If 4 million craftsmen are unemployed AND their factories are all dead, it may be impossible to even build up to pre-war levels before the end of the game. (It's far worse than the devastation after WWII sometimes.) The fact that factories go from level 50 to level 1 when they go bankrupt ensures that economic damage is severe when provinces are occupied. Ditto all of this for revolutions. Because it takes 12-24 months to upgrade 1 factory to the next level, there may be no possible recovery to be had if things go bad in some places.
5) High taxes and high subsidies in AI nations: You, as the player, can't control the economic destiny of other countries directly. This means that if they are killing POP demand through excessive taxes, you can't directly alleviate this problem short of conquest (which invokes problem #4). The AI nations will run up taxes, but then turn around and subsidize their own failing industries. This leads to a weird cycle of overproduction and underconsumption that hurts the economy of the world. If 150 million British POPs are not buying clothes, but Britain is subsidizing their regular clothes factories, good luck making money in that area of the economy.
6) RGOs are finite, but POPs won't move around: Yes, POPs do migrate and immigrate. But they move around a lot slower than the economy would otherwise demand. You end up in several cases where RGOs end up being full, but the POPs won't move to empty areas (in appreciable amounts) because of how colonial states function. Ghandi won't go to South Africa to find work and learn how to run a civil disobedience campaign. This tends to hurt AI nations more than player nations, but everyone is hurt by it. I understand why RGOs are finite and why POPs won't move en masse, but this issue does cause economic problems in the late game (especially for players who get out of hand with healthcare reforms).
7) Factories take too long to build in the late game: I'm not the only one who has seen population growth literally out pace the speed of factory construction. I'm not talking about regions decimated by war. Areas I've held since the beginning of the game end up with POPs growing faster than factories complete. This is not a case of overproduction, since there is still demand for these factories (the factories are profitable and the capitalists are spamming them as fast as I can). A simple economic tech that speeds up factory construction would solve this problem nicely.
There are some other issues I am probably leaving out. But the larger point here is that there is no uniform problem or solution to LGEM, and that flexibility in economic policy is important. Knowing when to run LF, and when to fix problems with state capitalism (and what problems can actually be fixed by state capitalism) is part of playing the game.
