"More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly."
- Woody Allen.

The financial sector is now littered with shards of broken glass, in both metaphorical senses. A creeping lapse in ethics has permeated the system; bad money, if you will, has crowded out the good. And in its zeal to quench the resultant banking conflagration with torrents of capital that amount to claims on future generations, Big Government is now threatening to drown the survivors. It is a necessary but not sufficient condition for recovery that financial practitioners start to learn how to navigate with a moral compass. Since the moral rot has become endemic, the rolling crisis may require a fundamental change in our politics before it finds resolution.

Huge crises can swell from seemingly inconsequential sources. In chaos theory, small differences in initial conditions, within a complex and dynamic environment highly sensitive to those initial conditions, can trigger widely divergent outcomes. A fraudulent mortgage broker extending credit to an impecunious borrower leads to the real possibility of a sequence of sovereign bankruptcies. Where that sequence ends (Iceland ? Ireland ? Greece ? The UK ? The US ?) is anybody's guess. But the malign original input need not be strictly illegal. It might merely reflect skewed incentives. Portsmouth FC on Friday became the first Premier League football club in the UK to enter administration. Which shows that the business of football, at least, operates like a proper market, in which outright failure is always a possibility. What football has in common with banking is the sense of entitlement on the part of its employees. Portsmouth's wage bill accounted for 90% of the club's turnover. Having made an operating loss of £6.2 billion in 2009, RBS feels obligated to pay at least 100 of its investment bankers at least £1 million in bonuses for 2009. The bank presumably believes that it might run into difficulties as a business if it does not. UK taxpayers are the owners of RBS, but they have not been consulted over its remuneration policy (or lack thereof). As bankers determinedly polish up their tin ear to public criticism, those who work in genuinely entrepreneurial, risk-taking professions, facing a rising tide of taxation and diminished public services, are justified in thinking despairedly of taking their wealth-creating, economic value-adding abilities to a locale that might more properly appreciate them. Can you have an economy that consists solely of state-employed bankers selling each other financial services? We may soon see.

David Fuller's view Here also is the 22nd February issue of Tim Price's erudite letter - Generation game.