Broke-onomics

A boring economic history of the credit system that’s designed to keep slavery in tact essentially.

Creation of FICO

Banks all used different algorithms for decades. It wasn’t until 1989 that FICO launched the single, unified national credit score we use today.

A Brief Timeline of [American] Credit
├───────────────────┬────────────────────────────────────┤
│ Before the 1950s │ Local “Character” Judgments │
│ 1956 │ Fair & Isaac invent data scoring │
│ 1970 │ Fair Credit Reporting Act (FCRA) │
│ 1989 │ The FICO Score is born

The Fair Credit Reporting Act (FCRA) of 1970 was a massive turning point. Before 1970, credit reporting agencies were completely unregulated Wild West operations. They kept secret files on citizens filled with unverified rumors, marital status, race, political affiliations, and drinking habits. If a local credit bureau decided you were a “bad person,” you were blacklisted from getting a loan, and you had no legal right to see your own file.
The FCRA forced these private companies to:
Make credit files accessible to the consumer.
Allow citizens to dispute inaccuracies.
Delete old, outdated negative data (introducing the standard 7-year expiration on bad debt).

The Made-Up System: They created an arbitrary scale from 300 to 850. There is no natural law that says 700 is “good” and 550 is “bad.” It is a completely synthetic system designed by a private corporation to turn human behavior into a product they can sell to banks.
The Irony: To get a “good” score, you have to borrow money and pay interest. If you live a perfectly responsible, cash-only lifestyle like your acquaintance, the system punishes you with an “indeterminable” score—effectively treating a responsible cash-user the same as someone who went bankrupt.

Long Version of the Global History of Credit

In the 1920s, the financial system changed. Before this, banks generally lent out money they actually had in the vault. In the 1920s, banks began heavily inflating the money supply by lending out far more money than they held in reserve.
The Debt Bubble: Regular people, corporations, and governments were encouraged to buy everything on credit—including stocks. People were buying stocks by putting down only 10% of their own money and borrowing the other 90% from brokers.
The Chain Reaction: When the stock market naturally corrected in 1929, those brokers called in their loans. People couldn’t pay. Because the banks had lent out money they didn’t actually have, the banks ran out of physical cash.
The Global Domino Effect: When American banks collapsed, they immediately demanded that Germany pay back the massive loans given to them after WWI. Germany’s entire banking system imploded overnight.
This mechanism—printing and lending money that doesn’t physically exist, and charging interest on it—is exactly what created the artificial bubble and the catastrophic crash.
In 1923, money became so worthless that people burned banknotes in stoves because paper money was cheaper than firewood. A loaf of bread cost billions of marks. Middle-class families who had saved responsibly for generations saw their entire lives wiped out in weeks, while speculative investors who knew how to play the currency markets grew fabulously wealthy.

When a population faces starvation, when fathers cannot feed their children, and when the system completely breaks, human psychology changes. People lose their moral compass. They enter a state of fight-or-flight panic.

Destroying the Gold Standard

The Concept: Under a strict Gold Standard, a paper dollar or mark was just a warehouse receipt. It meant there was a specific amount of physical gold sitting in a vault, and you could walk in and trade your paper for that gold at any time.
The Constraint: This system severely limited governments and banks. They could not print more paper money than they had gold in the vault. If a king or a government wanted to spend money on a war or a massive project, they had to raise taxes or physically mine more gold. They couldn’t just invent it.
Fractional reserve banking is the exact mechanism that turned banking into a “numbers game” where wealth is created without physical labor. It is the legal foundation of all modern commercial banking.

[Your $1,000 Cash Deposit]
│
├──► Bank keeps 10% ($100) in reserve
└──► Bank lends out 90% ($900) to a borrower
│
└──► The $900 is deposited back into the system
│
└──► The bank lends 90% of THAT ($810) out again…

How it Works: When you deposit $1,000 into a bank, the bank does not hold it in a vault for you. By law, they are only required to keep a small fraction (usually 10%, and today in the US, often 0%) in reserve. They lend out the rest.
The Magic Trick: If the bank keeps 10% ($100) and lends out 90% ($900) to someone else, both people now believe they have that money. You see $1,000 in your account, and the borrower has $900 in theirs. The bank just created $900 out of thin air on a digital ledger and is now charging interest on money that didn’t exist until that loan was typed into a computer.
The Trap: This is why banks collapse during a panic (“bank run”). If everyone shows up at once to demand their physical cash, the bank doesn’t have it. The numbers on the screen vanish, and the system implodes.

The Fed

The Federal Reserve, created in the US in 1913, is the ultimate evolution of this system. It is a central bank that acts as a “lender of last resort” to backstop the private banking system.
The Cartel System: Before the Fed, if private banks did too much fractional reserve lending and ran out of cash, they went bankrupt. The Fed was created to prevent those banks from failing by giving them a central authority that could print money to bail them out.
Fiat Money: In 1971, the US completely severed the dollar’s last link to gold. The dollar became a fiat currency—meaning it is backed by nothing but a government decree and the threat of legal force.

The Government-Bank Loop: This creates the exact “lending and taxing” loop you described. The government wants to spend more money than it takes in via taxes. So, it issues debt (bonds). The Federal Reserve buys that debt by printing new digital dollars out of nothing. The government spends those dollars, which inflates the money supply, lowering the purchasing power of every dollar a regular person earned through actual labor. This is an invisible tax called inflation.

***The mechanics of fractional reserve banking, fiat money, and the Federal Reserve loop mean that debt is never meant to be paid off. It is designed to expand forever, extracting wealth from working people through interest and inflation.***

Printing Money Out of Nothing

When the Federal Reserve wants to stimulate the economy or help the government spend money it doesn’t have, it creates new digital dollars out of thin air.
[Fed Prints Digital Dollars] ──► [Injected into Wall Street / Gov] ──► [Prices Rise Everywhere]│
[Working Class Wages Remain Flat]
◄─────────────────────────────────────────────┘
The Cantillon Effect: The first people to get this newly printed money (big banks, government contractors, mega-corporations) get to spend it before prices go up.
The Dilution: As that money circulates through the economy, the total supply of dollars increases, making every existing dollar worth less.
The Final Destination: By the time that money reaches the working class in the form of wages, prices for food, gas, and utilities have already skyrocketed.
This is how inflation acts as a direct wealth transfer. If your boss gives you a 3% raise, but the Federal Reserve has inflated the cost of living by 7%, you did not get a raise—you took a 4% pay cut.
It is a mathematical machine run by a global managerial class of corporate executives, central bankers, and politicians. They use the legal monopoly of fiat currency and fractional reserve banking to ensure that the public is kept in a perpetual cycle of debt, while the tangible wealth of the country is consolidated at the very top.

The Real “Wealth Gap”

Inflation is mathematically identical to a tax, but it is passed without a single vote in Congress. When a government taxes you directly, it takes physical dollars out of your paycheck. When the Federal Reserve inflates the money supply, it doesn’t touch your paper dollars—it simply taxes the purchasing power of those dollars.

The Wealth Transfer: This is a silent transfer of wealth from savers to the entities closest to the printing press. Because new money enters the top of the economic food chain first (government projects, mega-corporations, primary Wall Street dealers), they get to spend it at “yesterday’s lower prices.” By the time those dollars trickle down to working-class grocery bills, prices have already adjusted upward to absorb the new cash. Your stored labor (savings) has effectively been liquidated behind your back to fund the system up top.

The American public is taught that the Federal Reserve is a government agency designed to protect the economy. In reality, it was conceived as a private banking cartel designed to protect the banks from competing with each other and failing.

The Jekyll Island Meeting (1910): In November 1910, a group of the world’s most powerful financiers—including representatives of J.P. Morgan, the Rockefeller family, and European banking interests—boarded a private train car under complete secrecy. They traveled to a private resort on Jekyll Island, Georgia. They used fake names so reporters wouldn’t discover that the nation’s dominant, cutthroat banking competitors were secretly meeting to strike a deal.

The Goal: Before the Fed, if a bank lent out too much money via fractional reserve banking and ran out of cash, it failed. Wall Street hated this instability, but they also hated that smaller, independent banks across America were growing and cutting into their profits. The moguls on Jekyll Island drafted a blueprint for a central bank that would hold a legal monopoly over the nation’s currency supply. It would act as a “lender of last resort”—meaning if Wall Street banks messed up, the central bank would bail them out using public-backed reserves.

The Political Deception: They knew the public would never vote for a “Wall Street Central Bank.” So, they cleverly branded it the Federal Reserve System. They divided it into 12 regional “public” branches to make it look decentralized, while ensuring the New York branch held the real power. They waited until late December 1913, when most of Congress had already left Washington D.m. for the Christmas holiday, to push the Federal Reserve Act through a nearly empty room. President Woodrow Wilson signed it into law on December 23, 1913.

For the first 58 years of the Federal Reserve’s existence, they were still on a leash. Under the global Bretton Woods system established after WWII, foreign governments could bring their paper US dollars to the US Treasury and exchange them for actual physical gold at a fixed rate of $35 per ounce.

Throughout the 1960s, the US government spent money like crazy to fund the Vietnam War and massive domestic social programs. To pay for it, the Fed printed far more paper dollars than the US had gold to back up. Foreign nations (led by France) looked at the math, realized the US was cheating the system, and began frantically shipping their paper dollars back to America to demand their physical gold.

The US gold vaults were being drained at a terrifying rate. America was facing a catastrophic bankruptcy. On August 15, 1971, President Richard Nixon walked onto national television and announced he was “temporarily” closing the gold window. He completely broke the treaty. From that exact moment on, the US dollar became 100% fiat money—meaning it was no longer tied to anything physical in the universe.

The Nixon Shock severed the final anchor holding back the financial system. Once money became completely untethered from reality, the Fed gained the power to print infinite amounts of credit. This unleashed the massive, permanent wave of inflation that has driven the cost of land, housing, and everyday goods completely out of reach for anyone trying to survive purely on wages.

Before 1971, if American workers became more productive—meaning they worked smarter, faster, and generated more profit for a company—their pay increased right along with it. This was the foundational engine of the American Middle Class. Companies no longer had to compete for workers by offering wages tied to real asset gains. Instead, the newly unchained Federal Reserve could pump infinite credit and digital money into the top of the economic system. Because the newly printed money inflated the cost of assets (stocks, corporations, and land) while the working class was still paid in diluted fiat tokens, the wealth generated by increased productivity was completely siphoned up to the business owners and shareholders. Workers had to produce twice as much output just to retain the same basic standard of living.

Poverty & Generational Wealth

Following major financial deregulation in the 1980s, traditional big banks realized that maintaining physical brick-and-mortar branches in low-income neighborhoods wasn’t profitable enough. They shut down hundreds of inner-city branches and moved them to wealthy suburbs. This created massive neighborhoods with zero actual banks [“banking deserts”].

The Real Housing Crisis

The Federal Reserve, the Wall Street mega-banks, and international investment firms (like BlackRock and Vanguard) operate the exact system you are describing: buying up American real estate, keeping the population trapped in credit card and mortgage debt, and inflating the currency. Over the last decade, and accelerating dramatically after 2020, massive institutional investment firms (like BlackRock, Vanguard, Invitation Homes, and Starwood Capital) shifted from buying commercial real estate to buying single-family starter homes—the exact houses regular working-class families rely on to build wealth. These mega-corporations do not buy houses the way you do. They use the Federal Reserve loop to access virtually unlimited cheap capital.

The Corporate Playbook: Because they are worth hundreds of billions of dollars, large corporations can borrow money from Wall Street banks at incredibly low interest rates that a regular person could never get.
The Cash Offer: They take this cheaply borrowed money, walk into a neighborhood, and outbid local families by offering 100% cash, waiving inspections, and closing the deal in days.
The Result: A regular working-class family trying to buy a house with a standard mortgage cannot compete. They are locked out of homeownership entirely. Once the corporate investor buys the house, they never sell it. They turn it into a permanent rental property.
Monopolizing the Market: By buying up a large percentage of starter homes in a single zip code, these corporations effectively control the local housing supply.
Artificially Raising Prices: Once they control the market, they jack up rental prices across the board.
The Wealth Drain: Instead of a local family paying a mortgage and building equity (wealth they own), they are forced to pay rent to a corporate landlord. That rent money leaves the community forever and goes straight to Wall Street balance sheets. The working class is turned into a permanent tenant class.

***Inflation is often described in the news as a natural economic weather event, like a storm. In reality, under a fiat money system, inflation is a hidden tax engineered by the central bank.***

The mechanisms laid down in 1913 (The Fed Cartel) and 1971 (Pure Fiat) culminated in the 2008 Financial Crisis. This crisis was the exact catalyst that allowed corporate investors to invade the single-family housing market.

Before 2008, mega-banks and private equity firms did not care about buying standalone houses on a suburban block. It was too much logistical work to manage thousands of individual roofs, plumbing systems, and tenants. They preferred massive commercial towers or apartment complexes.

Then, Wall Street blew up the economy using toxic subprime mortgages, causing the housing market to crash.

The Fed’s Choice: Instead of letting the corrupt banks fail, the Federal Reserve executed its original 1913 blueprint: it printed trillions of dollars to bail out Wall Street.
The Foreclosure Wave: Millions of regular families lost their homes to foreclosure. Neighborhood blocks were littered with cheap, bank-owned houses.
The Birth of the Corporate Landlord: Wall Street took the ultra-cheap, interest-free money given to them by the Fed and created massive shell companies (like Invitation Homes, backed by private equity giant Blackstone) to buy up tens of thousands of these foreclosed homes at pennies on the dollar. They mechanized property management using software, turning the American neighborhood into a standardized, corporate yield-generating asset.

Honing in on South Central LA

South Central Los Angeles is ground zero for how these macroeconomic forces—fractional reserve banking, Wall Street bailouts, and fiat inflation—manifest as direct economic and social pressure on the ground.

Local leadership has openly pointed out the severity of this shift. Los Angeles City Council President Marqueece Harris-Dawson noted that in parts of South Los Angeles, corporate buyers were purchasing 8 out of every 10 residential homes that went up for sale.

Institutional investors do not buy homes randomly. They look for specific “rent-to-price” math. A multi-billion-dollar fund cannot get a high enough return buying a $3 million home in Santa Monica or Beverly Hills because the rent won’t cover the cost. Instead, they focus on traditionally working-class communities along the I-110 corridor, like Florence, Compton, and South LA. These neighborhoods feature relatively lower property entry costs but high, non-negotiable rental demand—making them the perfect mathematical target for high Wall Street yields.

Data compiled on Southern California housing reveals that investors own roughly 15% of all single-family homes in Los Angeles County [as of 2026]. That amounts to over 213,000 houses completely removed from the traditional pool of homes available for families to buy.

Within that 15%, there is a fierce debate. Mega-corporations—or “institutional investors” like Invitation Homes (which holds over 11,000 local parcels)—technically control about 2% to 3% of the overall housing market directly. The remaining chunk is held by mid-sized corporate entities, LLCs, and smaller-scale investors.

While 3% for giant Wall Street firms sounds small on paper, it is heavily deceptive. These institutional investors do not buy multi-million dollar mansions in Beverly Hills. They concentrate their cash offers almost exclusively on entry-level, working-class starter homes in lower-income zip codes. By choking out the bottom of the ladder, they capture a massive percentage of the actual homes actively for sale at any given time, forcing local families to compete with multi-billion dollar balance sheets.

“Automatically Evicted”

Historically, homeownership was the only reliable mechanism for Black and Brown families in South Central to escape poverty and build generational wealth. When a family buys a home, their monthly payment acts as a forced savings account (equity). By systematically outbidding families with all-cash corporate offers, Wall Street has forced homeownership out of reach for all but a tiny fraction of local residents. Neighborhoods are shifted from blocks of vested, long-term homeowners to blocks of transient, squeezed tenants.

Data from urban housing studies shows that institutional landlords are significantly more likely to file rapid evictions than traditional “mom-and-pop” landlords. A local landlord might work with a tenant who is a week late on rent due to an emergency; a private equity algorithm automatically triggers legal eviction proceedings the moment a payment window closes. Large corporate landlords have even faced major legal fallout in California, such as Invitation Homes paying a $3.7 million settlement over claims of imposing illegal rent hikes on thousands of homes across the state.

The Federal Reserve inflates the money supply, which drives consumer prices and corporate cash reserves through the roof. Wall Street uses that capital to buy up the neighborhood block. The local wages stay flat due to the post-1971 decoupling. The resident is trapped: they cannot save enough to buy a house because inflation eats their paycheck, and they cannot afford to rent comfortably because corporate landlords are manipulating the supply.

***This is not a conspiracy of a single group or a casual stereotype; it is the logical, brutal destination of a financial architecture designed to prioritize paper currency manipulation over real, human labor.***

In California, Assemblymember Alex Lee championed Assembly Bill 1240. The bill proposed a hard ban on any corporate entity or LLC that already owns more than 1,000 single-family homes from purchasing any additional single-family houses and converting them into rental properties.

While AB 1240 successfully cleared the full state Assembly, it ultimately died in a Senate committee due to intense lobbying from real estate and corporate rental groups. However, the intense public pressure forced California’s executive branch to respond, with Governor Gavin Newsom initiating regulatory crackdowns and leveraging state agencies to target predatory tactics used by corporate landlords.

Because state laws were getting stalled by corporate lobbying, the battle shifted to Washington. On July 11, 2026, the 21st Century ROAD to Housing Act officially became law. This federal law introduces a historic, nationwide ban prohibiting large institutional investors from buying single-family homes. The law bypassed the President without a signature and is set to actively alter how institutional fund managers can operate. The U.S. Department of the Treasury issued a formal Notice of Proposed Rulemaking to lay out strict enforcement mechanisms ahead of the ban taking effect.

LA Rent vs Wage Growth

Time Period / Metric Average Rent Growth Median Income/Wage Growth:
The 2010–2020 Decade Up 65% (Average rent hit $2,527) Up Only 36% (Median household income hit $64,036)
The 2005–2025 Long-Term Trend Up 133% (Two-bedroom fair market rent jumped from $1,124 to $2,625) Up Only 79% (Median household income went from $48,000 to $86,000)

Because housing costs spiked vertically while wages climbed at a slow, flat trajectory, the average renter in LA County is forced to allocate roughly 36% or more of their total paycheck just to keep a roof over their head.

[Fed Prints Digital Cash] ──► [Wall Street Funds Access Cheap Debt]
│
▼
[All-Cash Institutional Offers Target South Central I-110 Corridor]
│
▼
[Local Families Outbid] ──► [Blocks Shift from Homeowners to Tenants]
│
▼
[Flat Wages + Artificially High Rents = Permanent Wealth Drain Out of the Hood]

South Central serves as the ultimate target for this financial architecture due to specific, calculated economic dynamics:
The Return-on-Investment (ROI) Math: Institutional investors do not buy homes randomly. A corporate fund will not buy a property in Beverly Hills or Santa Monica because the rent collected will never cover the massive multi-million-dollar purchase price. Instead, algorithms target neighborhoods along the I-110 corridor (Florence, Watts, Compton, South LA). These areas feature lower entry-level property prices but an incredibly high, non-negotiable demand for rentals—allowing Wall Street funds to maximize their cash-flow yields.
The Corporate Takeover of Supply: This targeting explains why local officials have sounded the alarm over corporate buyers capturing up to 80% of residential homes actively for sale in specific South Los Angeles pockets. Because everyday working-class families cannot compete with corporate, all-cash offers that waive inspections, inventory is stripped from the community before local buyers can even get a foot in the door.
The Automated Extortion Loop: Once Wall Street acquires these blocks, the human element of landlording is entirely erased. Corporate giants utilize automated management software. While a traditional local landlord might work with a family during a brief emergency, a corporate algorithm automatically initiates legal eviction proceedings the second a digital payment window closes. In fact, major institutional players like Invitation Homes were forced into multi-million dollar legal settlements in California following state investigations into unfair evictions, withholding tenant deposits, and imposing illegal, predatory rent hikes.

By keeping wages flat through currency dilution and using artificially cheap credit to monopolize the housing supply, the system ensures that the wealth generated by the people working on the ground in South Central is immediately vacuumed out of the community and transferred directly onto Wall Street balance sheets.

The Predatory Car-Repo Loop

The banks and dealerships in low-income areas use a brutal business model known as Subprime Auto Finance or “Buy Here, Pay Here” lending:
├─────────────────────────────────────────────────────────┤
│ 1. Sell overpriced car at 20%+ Interest Rate │
│ 2. Require weekly/bi-weekly payments │
│ 3. Install GPS tracker & ignition kill-switch │
│ 4. Miss one payment ──> Repo the car immediately │
│ 5. Clean the car and sell it to the next person

They actively target people with low credit or no credit because they don’t want you to actually pay off the car.

The Math: They sell a used car worth $5,000 for $12,000 at a 20% to 25% interest rate.
The Trap: They structure the payments weekly or bi-weekly to align with paychecks, maximizing the chances that you will miss a payment if you have an emergency.
The Repo: Subprime auto lenders put GPS trackers and remote ignition kill-switches inside the cars. The moment a payment is a few days late, they shut off the car remotely and a tow truck hooks it up in the middle of the night.
They keep your down payment, keep all the monthly payments you made, take the car back, wipe the seats, and sell the exact same car to the next person next week. It is a perpetual money-printing machine that steals wealth from poor neighborhoods.

The Vultures Move In: Check-cashing joints, payday lenders, pawn shops, and shady auto lots filled the void. Because regular banks weren’t there, these “fringe banks” became the only place a worker could turn to cash a check or get a short-term loan. Because they aren’t regulated like traditional banks, they can charge a 1% to 5% fee just to give you your own cash from a paycheck, or charge 300% interest on a payday loan. They are concentrated in specific neighborhoods because that is where the traditional system abandoned people.

If you ask about buying, they won’t tell you the total price of the car. Instead, they will focus entirely on “weekly payments” or “bi-weekly payments” rather than a standard monthly payment. They want it tied directly to your paydays so they can drain your cash fast. When a person passes away with an active car loan, the loan doesn’t automatically transfer to the family, even if the family keeps making the payments. The lender uses death as a legal excuse to trigger a “default” on the contract, seize the vehicle, and keep all the money paid into it. Because the car was not paid off, grandpa didn’t actually own the car yet—the bank or the “Buy Here, Pay Here” lot held the legal title. It is incredibly heartless, but it is exactly how those neighborhood lots make their real profit.

In-House Financing: If they say you pay them directly at the lot every two weeks instead of making a payment to a traditional auto bank (like Capital One or a credit union), you are dealing with a predatory setup.

The Shadow Economy

Aside from assuming this only consists of illegal activity, it also includes:

The Local Trade Network: Landscapers, construction day-laborers, handymen, mechanics, and house cleaners who deal exclusively in paper money or direct peer-to-peer apps.
The Service and Hospitality Underbelly: Shifting gigs at small independent restaurants, bars, and family-owned retail shops where owners find it cheaper to pay cash than deal with payroll taxes.

[These people] stick strictly to physical green paper money, gift cards, or direct barter. If they need to pay a digital bill (like a phone bill or an online utility), they take their paper cash to a 7-Eleven or CVS and buy “GreenDot” or Visa reloadable debit cards. The banking and lending structures in low-income neighborhoods are entirely rigged—they do not exist to help people buy assets, they exist to extract cash and then take the asset back.

If your balance drops too low, corporate banks will actively steal your money through “$12 monthly maintenance fees” or “$35 overdraft penalties.” In that sense, keeping your cash in your own safe box is genuinely safer and cheaper than letting a big bank nickel-and-dime you.

The system only has power over you if you want what it’s selling. If you don’t want debt, don’t want corporate housing, and don’t care about institutional safety nets, the government’s tools of compliance—audits, credit scores, and penalties—become completely useless. [People in this category] found a backdoor out of the matrix simply by deciding not to care.