The American Dream – Viva Las Vegas Style
January 4, 2011
With every New Year’s resolution, optimism and even the expectation that the future will get better has long been a staple within the popular culture. By nature, people want to believe in a better society. The American Dream means different things to diverse people, but it always had a vision for great achievements and daring exploits. America was great because she dared to forge an independent and freedom loving country.
Las Vegas is the kind of region that evokes strong and varied reactions. Many people see Vegas as freedom and a state of mind, while others curse it as a Sodom and Gomorrah, den of iniquity. Yet when you strip away the glitz, glamour and gambling, you get down to the real guts of the metropolis – MONEY.
The casinos may have a license to coin chips that translate into cash, but the overarching experience of the facade generates a broad base economy that has little respect for the fiat paper notes that pass for legal tender. The saying “What happens in Vegas, stays in Vegas” really applies to the money you bring when you visit. Lately this huge cash cow machine moos not because it is content, but because the feed supply doesn’t meet the obligations and indebtedness of this dreamscape.
Examine the enormous project called City Center. The Wall Street Journal reports:
“The $8.7 billion project, with its hotels, condominiums, casino and giant mall designed by Daniel Libeskind, is the largest privately funded construction project in the U.S. It was supposed to usher in a new era of sophistication and urban living in the gaming capital. But it almost collapsed before it opened, and because of its huge scale, its fortunes and those of Las Vegas are closely linked.
Over the summer, executives of Dubai World and MGM Resorts International, which jointly own the project, studied and rejected closing two of the site’s three hotels and the Viva Elvis Cirque du Soleil show, according to documents reviewed by The Wall Street Journal.
The documents show that the partners have also outlined a plan to seek relief on the terms of the complex’s $1.8 billion loan, which requires the joint venture to earn far more cash than currently seems feasible. If they can’t renegotiate the terms, City Center could be in default on the loan as early as mid-2011″.
Could this be the next “Too Big to Fail” rescue candidate for a midnight stealth earmark coming from the lavish Senator Harry Reid? Politics aside, why was this project ever built? The clear answer suggests that Excess as a Way of Life is the basis for monumental scale developments.
Take a word from the environmental “true believers” SUSTAINABLE. Is the economics sound for a project that constructs such opulence? Certainly, Las Vegas is not the only area that labors under the illusion that the flow of riches will never end. Someone forgot to tell the developers that building on sand dunes have an added cost.
The LV Review Journal cites “Las Vegas lost 13,400 construction jobs, a 23 percent decrease, the Washington, D.C.-based contractors association reported. Overall, the city has lost an estimated 55,000 construction jobs since the recession began — roughly half of its construction work force — leading to one of the nation’s highest unemployment rates at 14.3 percent in November”.
|CNBC quotes: “Washington is unpredictable these days,” declares the CEO of Wynn Resorts. “No one has any idea what’s next…the uncertainty of the business climate in America is frightening, frightening to everybody, and it’s delaying the recovery.”
Wynn speaks of “wild, uncontrolled spending,” and “unbelievable, unsustainable debt”. As he plans to split his company headquarters between Las Vegas and Macau, with a bigger emphasis on Macau because of its tremendous profitability, he has no qualms about dealing with “Macau has been steady. The shocking, unexpected government is the one in Washington.”
For a more detailed analysis on the regional economy view the video, Is Las Vegas Collapsing?
Is this fiscal dislocation the price for pursuing your own dreams, having a decent job at a living wage? Encouraging rational development based upon sustainable growth and a viable economy was the standard used in this nation to build every metropolitan city. If the average worker is condemned to bear the pain of a collapsed economy, what do the mega developers do to survive?
The example of Sheldon Adelson and Steve Wynn provides the answer, both focuses on Macau. “The Las Vegas Sands chairman Sheldon Adelson has said that his company will soon be a mainly Chinese enterprise, and quipped that Las Vegas should be called “America’s Macau”. The Venetian is a 40-story, $2.4 billion anchor for the 7 hotels on the Cotai Strip in Macau. The 10,500,000-square-foot (980,000 m2) Venetian Macao is modeled on its sister casino resort – The Venetian in Las Vegas – and is the largest single structure hotel building in Asia and the fifth-largest building in the world by area”.
The Wall Street Journal expands, “Sands China’s promise has always rested on its plans to turn swampland called Cotai into the Las Vegas Strip of the East. Its two completed casino-resorts—the Plaza and the Venetian—have been raking in revenue”.
MarketWatch states, “Casino magnate Steve Wynn said he plans to build a third major casino in Macau and will consider relocating the Las Vegas headquarters of publicly held Wynn Resorts to the Chinese gambling hub. Wynn Resorts reportedly gets about 60% of its revenue from operations in Macau”.
Adelson and Wynn have a dream and it looks like a big part of it is to bail out of the United States. If Las Vegas is the poster symbol of the corporate gaming mega metropolis, it looks like the gamble is less than profitable. These projects rally up massive debt that demands an unimaginable steady cash flow to keep the payments current. Just think what will happen when their bankers baulk at a rollover of their loans, when interest rates gravitate upward.
Remember the days when a pension fund would be the primary financing for a Las Vegas resort. All those made hotels are dust to the wind these days. Corporate Wall Street took over the strip and proceeded to re-engineer New York, Egypt, Paris and King Arthur’s court. If you did not know better, this surge takes the shape of a circus. In comparison, the banksters wheel their own Excalibur that has more in common with the Sword of Damocles than the benign chivalry that built out Bugsy Siegel’s dream in the desert.
Now the allure of former Sin City is replaced by the grandiose schemes of immoral financers in Armani suits. The old Brooks Brothers attire, based upon traditional lending practices, are as dead as expendable enforcement hoods who lie buried in some desolate hole. The greed of business titans using exotic financial instruments to construct uneconomical monuments to their own ego destroys productive economies. Off shoring, the Vegas experience to Asia is the final straw that might just break the back of that camel. Exporting decadence is nothing new. Bankrupting an entire town just might break new ground.
Desperate dreamers bet their last dollar hoping that the next pull of the one arm bandit will bring coveted riches. The only difference between them and the resort speculators is their line of credit and the skill used to borrow even greater sums. The despairing grow and multiply, while the entrepreneurs consolidate. Las Vegas teeters on a ledge of destruction that would soon spread nationally.
Balance in economic diversity with low debt financing and innovative ingenuity is the formula to achieve a prosperous American Dream for the greatest number of citizens. Buying a half a million dollar house on an unemployment check is folly. Building a City Center where no one has a job is pure madness. Learn the lesson of debt-ridden corporations. Get out of debt, hold real assets and turn in your $25,000 Bellagio chips before they discontinue redemption. The federal government will not be far behind; calling in the dollar for some substitute currency is only a matter of time.
“Hatred is not what Las Vegas is about. We will have zero tolerance for anyone who is intolerant” – Oscar Goodman