Your analysis is a bit superficial. The government connections keep them from being regulated but don't adequately explain how they can skim so much off the top. For instance, how do the big firms (e.g. Goldman) manage to get into oil futures, create new fangled products that others will buy, get everyone to follow them into the same market sector, raise the price of oil, pocket billions of dollars, and leave the market before it goes south. It's actually hundreds of years of accumulated know-how in a somewhat needed but mostly bogus market sector -- of which the first priority is how to convince very intelligent and hard working people that they are doing some admirable or at least neutral when they are in fact destroying the economic base of the country they are in, siphoning all of the talent into meaningless and counterproductive tasks, and pouring their money into the political machine in order to increase corruption so they will never be held accountable for their actions.
The short answer is an excellent understanding of human psychology leading to good marketing. Most criminals think they aren't doing something wrong. Most people can be trained to do very damaging (even evil) actions by acculturation and habituation. Americans have been re-educated in the past fifty years to think that all sorts of things are okay that they never would have thought when we were the industrial superpower that invented and produced everything imaginable (e.g. car, plane, tv, space shuttles, etc.). Of course, most of these changes in American thinking aren't politically correct to mention.
Nowadays people either go into finance or work on some little web startup in the hopes they will make a billion dollars -- but at least that is better than being a patent troll. The AirBnB scandal is in fact a great example of the present dynamic. It is a great service on top of existing infrastructure. That's basically all Americans do these days -- a service economy on top of actual products that are increasingly being produced elsewhere. Sometimes those services are good, sometimes not so good, but barely anyone actually builds anything that is made to last -- nor do they seem to care.
I agree with everything you said with one important exception: The finance industry is not corrupt because of a lack of regulations. It is corrupt because of the regulations. The fact that Federal Reserve has been regulated into existence is a very deep problem, as is the fact that fractional reserve banks are always protected from failing by regulations. Regulations are the problem, not the answer.
Currency is regulated into existence. Someone has to print it. Like it or not, there are all sorts of natural monopolies which exist in nature. The first and foremost is a monopoly on violence by the state. This is, in fact, demanded by the citizens who have a lot to lose if companies et al. were also allowed to pursue their interests by brandishing weapons. Thus, the first regulation is that companies cannot pursue their interests via force.
Thus, we are already out of the perfect world imagined by Austrian economists and exposing the simplistic lie that their worldview entails -- the social union that is the state is not merely a machine but, in the American republic, exists by the consent of the governed. Consequently, it has the power to issue additional regulations deemed to be in the interests of the governed, of which one might be that there be a single national currency, a single national language, etc. This is because our state is rooted in a Lockean social contract (with undoubtedly a good sprinkling of Hobbes).
Now, the precise nature of the regulations and whether or not they serve the people and whether or not they are consistent with the founding documents and accompanying intentions of the Republic is not always clear. Nonetheless, I think it is clear enough that at least in the American republic (if not a Randian inspired anti-state) that regulations are sometimes an answer to various problems.
Consequently, I would argue that if the SEC was able to attract and retain top talent and execute on its mandate it would have been able to stop this sub-prime nonsense in its tracks long before the present bubble burst and infected the rest of the economy with its TARPy bile. This is exactly why it existed -- because history tells us that banks like Goldman cannot be trusted to regulate themselves and act within the interests of the American people.
Gold is a commodity not a currency. Historically most currencies have been either minted in or based on valuable commodities. Virtually without exception they have been produced by governments.
Do you mean to argue that no currency ever has or should have been created by a government?
So the purpose of currency is to serve as a proxy for goods and services. The basic question of monetary regulation is: "how much currency do we need?"
The Fed system actually somewhat regulate the currency supply based on the market. When you take a loan to start a business, new currency is created at the same time that a new productive enterprise is created. Gold and Bitcoin don't come from the market at all. The amount of Bitcoin added to the economy has nothing to do with the underlying economy --- its based on an arbitrary formula.
