Bankers excessive salaries as predictors of Depression

Chart shows excess wages over mean for financial sector from NYU- (hat tip Paul Kedrosky) as a predictor of recessions / depression it...well, the implications are clear.

As to why, once it starts the system dynamics are pretty unsubtle - as the Economist noted today, the main problem is that banking also suffers from adverse selection issues as well, as fear moves to greed in the boom time:

...as a boom takes its course, fear is supplanted in what a senior quant at an American bank calls the “Cassandra effect”. The more you warn your colleagues about the tail risks—the rare but devastating events that can bring the bank down—the more they roll their eyes, give a yawn and change the subject. This eventually leads to self-censorship. “The system”, he says, “filters out the thoughtful and replaces them with the faithful.”

Greed without Governance, allowed to build over N years, equals depression, and its absolutely predictable