You don't hear the phase the literature of exhaustion that much anymore, but it seems just as relevant now as it did back in the late 60s when it was coined (apparently by John Barth -- there is a relatively pithy analysis of what Barth meant here).
However, the idea didn't exactly come from nowhere. Ecclesiastes 1:9 says that there is nothing new under the sun, and this is particularly true for authors. There are only a very few basic plots when background detail is stripped away and stories are boiled down to their essence. I think it is hard to tell, but quite possibly some people who might have made fine writers got discouraged by how hard it is to tell an original story. Successful writers generally didn't let it bother them, though some do dwell on where they fall on the line between homage and theft. (Those that get unduly hung up could be said to suffer from The Anxiety of Influence (to steal from Harold Bloom) and may eventually get out of the business.)
Some cultural critics, who generally find literature to be pretty frivolous, even on their good days, have claimed that fiction isn't relevant, or that it is disrespectful to still be writing frivolous things in horrible times. I think this is a fairly stupid line of argument to take, but it was certainly more prevalent right after WWII (see Adorno). Sometimes the criticism is couched more narrowly -- that words cannot really express the horror of war and particularly of the Holocaust -- and it is disrespectful to try. We continue to hear that about novels about 9/11 -- and certainly the ones I have read that touch on 9/11 haven't really justified their use of the subject (not that I consider this to be a completely taboo subject).
Anyway, John Barth was probably the most prominent novelist of his day who claimed that conventional fictional forms had been completely played out and that postmodern pastiche was the way forward. He has his place, but in fact culture moved on, and basically said that -- no, conventional fictional forms still had relevance. If the cultural amnesia (and general ignorance) that so many people have (not only Americans) has any upside, it is that there is a kind of renewal and a freedom from the past (that would mystify a writer like Stefan Zweig or Joseph Roth). People can still enjoy novels about couples falling in love, or historical romance, or mystery novels. The novel as a form seems endlessly regenerative, and not particularly burdened by the past.
If anything, it is the postmodern novel that seems really cliched these days. Certainly it can be a struggle to read and get into these books and often the struggle just isn't worth it. I really didn't like Graeme Gibson's Gentleman Death. I haven't read Barth's The Book of Ten Nights and a Night, but just from the review, I can tell I wouldn't like it. It sounds almost exactly like The Last Voyage of Somebody the Sailor, which I did struggle through and basically hated. At least 5 or 6 of Barth's recent novels have been about the difficulty of putting words to paper to generate something new. Honestly, give it a rest (and try something that isn't "postmodern" for a change).
Unfortunately, Joseph Heller's last completed book: Portrait of an Artist, as an Old Man falls directly into these tropes of how hard it is for an author (particularly an old author with presumably not much time left on earth) to actually write anything. So he starts and stops 5 or 6 different story lines but never gets much past the first page (and often just the title). I realize this is a genuine problem for creative sorts (and one recently explored by Alan Bennett in The History of Art, which I might go see this season), but it is not that interesting for outsiders to read about. This truly is exhausted (and exhausting) literature -- the equivalent of the last bit of toothpaste squeezed out onto the toothbrush. I hope I have the sense to hang it up rather than writing such self-pitying stuff. (Even if it is Eugene Pota doing all the self-pitying and not "Joseph Heller" it might as well be Heller from where I stand.) Perhaps it will pick up, but I'm not really expecting that.
One thing that is a bit interesting is that Pota is obsessed with older artists that were still creating late in life, so perhaps I will get more examples for my list of last works as they are sprinkled through the text. So far he hasn't brought up Matisse, who in his old age was a lot more inspired than Pota, to be sure, so he might avoid that particular comparison...