Inside the American Dream: The Most Billionaires Next to the Most Homeless

There is no place like San Francisco, where the financialization of America has created so many millionaires and billions of "papers" alongside such widespread social destruction. While the city's billionaires are the highest in the world, the homeless rate in the city is also skyrocketing - one in a hundred is homeless

Homelessness seeks shelter in Hurricane Irma, Florida (Photo: Reuters)

Homeless looking for shelter at a bus stop with Hurricane Irma, Miami Beach, Florida (Photo: Reuters)

In 2018, 83% of publicly-issued companies lost money in the 12 months prior to the IPO, an all-time record - according to the Wall Street Journal. But, oddly enough, the shares of such losing companies rose on average in the first year of issuance more than the shares of new companies that showed profits, and much more than the S&P 500 index at that time. This is another aspect of America's financialization.

A company whose business model is built on the destruction of small businesses and not on sustained efficiencies, such as traditional taxi companies in the case of "Uber": "technological" transportation companies can subsidize the cost of tens of billions of dollars of investor money, which they hope to get back in super profits Through the stock exchange and stock.

Of course, this model is not unique to Uber. It is also not new. Amazon was there before her. Jeff Bezos's company lost money in its first 25 years of existence and still doesn't make any profit from its core business, retail trading. This model has spread as financial markets have broadly rewarded such dream companies.
According to research by financial information company Pitchbook, 64% of companies valued at more than $ 1 billion, were funded by venture capital and issued to the public between 2010 and 2018, lost money. Most of them went on to lose and never made any profit after the IPO. Grew to make "Dropbox," a cloud storage company. In the IPO, she stated, "We have a history of losses ... and we may not ever be able to make a profit." The IPO was launched with a value of over $ 9 billion and on the first day trading jumped to $ 12 billion.

Duties peaked

America is not alone, according to a report by the IMF from late 2019, low interest rates have brought global corporate debt to a record $ 19 trillion. The fund estimates that even the interest rate on 40% of this debt concentrated in developed countries, including the United States, Japan, China, Germany, and the United Kingdom, will not be payable in the event of an economic slowdown that is only half the slowdown of the past decade.

Clearly, almost every business startup requires investment. This was the way things were since the dawn of history when the laws of Hamurabi set rules regarding the credit given for sowing a new barley or sesame field. But between a business that requires investment until it generates something of value and profit on its part, and hundreds of billions of dollars worth of trading, each of which derives not from a (non) profit distribution, but from the value of their "trading" shares, there isn't even half that.

There is no place like Silicon Valley where financialization has created millionaires and billions of papers along with such widespread social destruction. In 2019 - the boom year and peak of the "big bubble" - the Silicon Valley capital, San Francisco, was also the billionaire's capital. It had more billionaires per capita than anywhere else in the world including New York, Dubai and Hong Kong. The source of all this wealth has been the huge offerings of companies like "Uber" and "Pinterest" whose business model - turning printed money into huge stock market capital gains - we've covered extensively in previous series.

According to a survey by Wells-Ex, one in 11,000 of the city's residents was a billionaire in early 2019, with a total of 75 people. This compares with New York with 105 billion people on a much larger population. Other billionaires live to the south, between San Francisco and San Jose.
Billion Dollar Baby

Billion dollars is not a simple task even in the inflated stock market like today, but millionaires are plentiful. According to various reports, the entire Bay Area has about 200,000 millionaires, those with over $ 1 million in investments and assets, not including the residence and retirement plans. That number may grow at least by another 5,000 with the series of offerings made at 2019. Wealth production from the offerings air was therefore a blessing to hundreds of thousands but a curse to millions of others.

The Bay Area is a relatively small area unit and its construction is limited by a maze of rules. So it's not surprising that by 2019, the price of the median housing unit in San Francisco was about $ 1.6 million, a price that only 12% of the city's households could afford. According to an analysis by Business Insider, this is a price that is not even available to most high-tech workers. The California Realtors recommended that applicants buy an apartment in the city that the household wages would not fall from $ 330,000 a year. The rental market is also clearly unlikely.

In the U.S., the standard explained the pay-to-rent ratio is about 30%. A study conducted by the Smart Asset website in mid-2019 found that "for an average two-bedroom apartment in the Bay Area, including San Francisco, the rent is $ 4,953 a month. Therefore, according to a key rule of 28% salary-to-salary ratio, the average household must earn a gross $ 196,843. "The site ranked the region as the most expensive in the U.S. in terms of rent-to-rent ratio. He was founded in New York.

In these circumstances, it is not surprising that many residents want to leave, are pushed to leave, or simply move in the car. In a 2018 survey conducted by a bi-Ariya Council, nearly half of the participants replied that they planned to leave the area soon. And 58% said they were rejecting plans to have children for the cost of living. And so, besides being the billionaire capital of San Francisco, he has another honorable title, the city where there are more dogs than children. According to the State Information Bureau, San Francisco has the lowest number of children per household in the U.S. Only 18 percent of households in the city have a child aged 19 and under, compared with a national average of about 30 percent.

Sleeping in the car

"The Uber" driver at a rally held a few months ago summarized the matter: "Living in San Francisco has become so expensive. And now with more and more billionaires and millionaires in town, it will all become more expensive. Uber's CEO received nearly $ 50 million last year And the drivers are forced to sleep in their vehicles. ”The driver of the cooperative economy has not exaggerated.

Anyone who has visited San Francisco recently could have seen with his own eyes how the beautiful city of America has become something reminiscent of Brazilian Pavalah. So was the UN representative who visited the city in 2018. The lady, Lalani Farah, a Canadian lawyer, toured downtown and what she saw in the bridges beneath the main roads made her market: "The last time I saw such plays was in Mumbai, India. I am very disturbed by what I have seen. It is an unbearable situation in light of the wealth there is in the country. "

Among the things she saw were people doing their needs in the open spaces and sidewalks. The problem became so widespread in the city that in 2018, the San Francisco City Council established a "patrol" that raised five employees with a salary of about $ 180,000 a year per employee. The role of the patrol is to clear the streets of man. Patrol was set up in the face of a flood of phone calls from the city by angry residents. 14,500 of those in eight months, according to the San Francisco Chronicle. An NBC 2018 end-of-year study found from analyzing the number of calls to the city's call center that the problem has grown sevenfold since 2008 steadily throughout the bubble years.
553,000 homeless people

This phenomenon in the streets is closely related to the increase in the homeless population in the San Francisco area. According to a 2019 White House report in and around San Francisco, there are 16,920 homeless people and, according to a report from the San Francisco City Council, there are 9,784 homeless people in the city. In other words, one in every hundred inhabitants of the city, eight to eight thousand, is homeless. Of course, this is not a unique phenomenon for the city, according to a report by the federal Department of Housing and Urban Development in January 2018 that about 553,000 Americans were homeless. And according to an intergovernmental report from the federal government, about a third of homeless people had families with children. California and New York top the list of states with the most homeless: 129,972 homeless in California in January 2018. California also has the highest rate of homeless people without public shelter - 69%.

Although the phenomenon of homelessness has existed for many years and its origins are not purely economic, the connection between it and the availability of homes is clear. A study conducted and published by the White House in 2019 estimated that increasing the volume of construction and lowering rental rates, respectively, would reduce the homeless population by 54% in San Francisco, 40% in Los Angeles, and 38% in Washington, DC.

In addition to the "hard" homeless living in tents or streets, there are "softer" cases of those living in cars or caravans. In the past two years, the number of those in San Francisco has risen by about 20 percent. In neighboring cities the numbers were higher, for example, in Oakland, a 43% increase over the past two years. Many car drivers are working people, explained Jeff Kositsky, who heads the department at the municipal office that handles homeless people. "I have seen people with beautiful (auto-home) campers but no permanent place to live and many of them have jobs. It highlights what we all know - California has a difficult problem of affordable housing," he said.

According to the City of San Francisco in 2019, 1,794 residential cars were counted in the city, and in the Oakland area 2,817. The number of these is even greater in Silicon Valley suburbs and has even doubled in recent years. This is a new phenomenon that was not at all in the 1990s and early 2000s.

Not all casualties became homeless. Many simply had to leave the places and communities where they had lived for decades. And here's the irony of history, the three most liberal cities in America, Berkeley, San Francisco and Oakland, have experienced the greatest gentrification (leave) of minority and poor people in the last decade.

According to a study by the Bay Area Aquatic Atlas, a San Francisco-based nonprofit organization, in 2018 approximately 54% of Black and Latino households in the city lived in neighborhoods that were in the process of being pushed out or at high risk. The numbers are also high around. The city of Oakland, for example, has lost about 16% of its population in the last 15 years as a result of the steady rise in real estate prices in the region, most of them in small cities in central California.

San Francisco, a professor of urban planning at Columbia University, is "the US ground zero for this type of gentrification due to real estate prices." In view of all this, it is not surprising that the Bay Area also holds the dubious title of commute champion - travel time to work. According to a study from early 2019, more than 120,000 people are forced to travel to the workplace for more than three hours every day.
Erosion of purchasing power

Of course, not all of the population is forced to leave for Central California, but the entire population, and not just San Francisco, has increasing gaps between the top tier and the rest. According to a study by Bloomberg, San Francisco and the region are leading to an increase in gaps between the U.S. classes. In addition, the gap between the upper two deciles and the lower two deciles has increased in San Francisco more than anywhere else in the United States. Second place, by the way, is San Jose, which is the southern border of Silicon Valley.

Not only did the gaps grow. In light of the money flood, official erosion in purchasing power, the consumer price index that is supposed to measure price increases, is also higher in this region than anywhere in the United States. In October 2019, the State Bureau of Statistics reported that this index had risen by a full one percent in the past two months - an official annual inflation of about 6%.

Here is another irony of the financialization of America's creator. The most liberal region in the United States won by Democratic House Speaker Nancy Polosi, with about 87 percent of the vote, is also the least social area in most of the possible measure in the United States.

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