Encrypt all the things!

^ read that. It's fucking scary.

We have maths on our side though. It will always be cheaper to encrypt than decrypt. That said though, have their system reached a point where they can decrypt even the most encrypted things on the fly?

No.

And the response from people in charge of security at companies is to increase the key size. LFGSS hardly needs security, yet we are using a 4MB public key on our SSL.

One of the things I like about encryption is how it becomes non-trivial. At what point does trying to decrypt become so significantly more expensive than just following due process and getting a judge to grant you access?