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Department
Geography
Course Code
GEO 312
Professor
Michael J.Bardecki

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Viva Las Vegas Final Exam In Class Notes
Notes:
Las Vegas is the last great mythic city that western civilization will ever create
(Ventura 1995)
Vegas is arguably the most interesting american city of the moment (Newman 1995)
Vegas:
Gambling, the strip, downtown, shows, nightlife,
Things dont last artiechs outlive their creations
Contains the best neon light s
Music Icons
Marriage Bells
The fastest growing city in the united states
Access to excess
City in the middle of desert
Reality and authenticity
Shop till you drop ceasar palace best mall in america
Social problems major number of homeless (very severe)
Graduation rates dismal
Crystl meth high
Oasis in the desert
The mob
Sports entertainment capitol of the world
The Course?
A deconstruction of las vegas
Las Vegas as:
Is las vegas unique?
Typical?
Symbolic?
Bellwether?
Tocsin?
Casino Capitalism->Triumph of the dark forces
The Big Picture
www.notesolution.com
oInflation was the key econmic problem from 1960s-1980s (Kennedy to
Reagan)
o1991: Fall of the Berlin Wall, Triumph of capitalism
Ascendancy of free markets
oSince WW2 there has never been a period of deflation and it
has always been inflation
oHigh volatility, inflation, price stability
oStable inflation through the years
The Feds Role in early 1980s
Paul Volker appointed as chairman of the Federal reserve in 1979-a turning point in
policy as the emphasis turned to breaking the inflationary spiral
The federal Reserves success in taming inflation resulted in two decades of falling
real interest rates and rising share and property prices
As peoples assets rose in value, they felt less need to save
High valued homes provided more collateral against which to borrow
The Big Picture: Consumer Spending
Consumer spending and housing are almost three-quarters of U.S. GDP
The american economy has been resilient and recessions have been mild over 25
years based on consumer spending:
Stable even during economic downturns
Drops in employement and income have been less severe than
of old
Willingness and ability to borrow
Consumer Spending: The downside
The long rise in asset prices particular in housing and raised
consumers net worth and made saving seem less nescessary
Borrowing became easier
Financial innovation and leaders relaxed underwriting, based
on the supposedly reliable collateral of ever more valuable
houses
On averaged save 9% of income, the saving decreased to around
0
Chimerica:
Concept developed by Harvard Professor Niall Ferguson (Ferguson and Schularick
2007; Ferguson 2008)
Symbiotic/integrated relationship between the american and chinese economies
oEast Chimericans are savers; West Chimericans are spenders
oEast Chimericans do manufactures; West Chimericans do services
www.notesolution.com
oEast Chimericans export; West Chimericans import
oEast Chimericans maunfacture; west chimericans Import
China awash in savings
oCheap money flooding banks (esp. in america)
oLow rates, low returns fuels search for high returns, even with higher risk
oAftermath 9/11 ->market swoon
Five roots causes of financial Crisis
Moneytary policy-> budget cutting ethos, military spending
Financial markets grossly underpriced risk -> Housing crash money crash, oil price
volatility, geopolitical risk
Failures in coporate governance -> Lessons not learned in 2001: Enron, Worldcom,
exexutive compensations (options, golden parachute)
The recessionss trigger:
An asset bubble collapse, particualry related to real estate -> loss of confidence,
credit crunch
U.S. Recession
In Dec. 2008 NBER business cycle dating committee proclaimed that the us
recession had started dec. 2007
Official end not yet announced by NBER (mid to end of 2009?)
Recession longest since 1930s
Job recovery projection (Feb 2009): Full recovery not until 2014
More severe than oil shock recessions of 1974 and 1980-82
Las Vegas: Ground zero in the world economic crisis
Housing market increased dramatically highest growth 1970-2005 huge growth
Las Vegas Housing Market:
By 2005: oversupply of housings
o38,000 new homes finished in 2005 consumer demand only 25,000
Housing prices continued upwards in part as a result of easy access to funds
oInterest only mortgages, no documentation loans
oA classic Speculative bubble
What is a speculative bubble?
www.notesolution.com

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Description
Viva Las Vegas Final Exam In Class Notes Notes: Las Vegas is the last great mythic city that western civilization will ever create (Ventura 1995) Vegas is arguably the most interesting american city of the moment (Newman 1995) Vegas: Gambling, the strip, downtown, shows, nightlife, Things dont last artiechs outlive their creations Contains the best neon light s Music Icons Marriage Bells The fastest growing city in the united states Access to excess City in the middle of desert Reality and authenticity Shop till you drop ceasar palace best mall in america Social problems major number of homeless (very severe) Graduation rates dismal Crystl meth high Oasis in the desert The mob Sports entertainment capitol of the world The Course? A deconstruction of las vegas Las Vegas as: Is las vegas unique? Typical? Symbolic? Bellwether? Tocsin? Casino Capitalism->Triumph of the dark forces The Big Picture www.notesolution.com o Inflation was the key econmic problem from 1960s-1980s (Kennedy to Reagan) o 1991: Fall of the Berlin Wall, Triumph of capitalism Ascendancy of free markets o Since WW2 there has never been a period of deflation and it has always been inflation o High volatility, inflation, price stability o Stable inflation through the years The Feds Role in early 1980s Paul Volker appointed as chairman of the Federal reserve in 1979-a turning point in policy as the emphasis turned to breaking the inflationary spiral The federal Reserves success in taming inflation resulted in two decades of falling real interest rates and rising share and property prices As peoples assets rose in value, they felt less need to save High valued homes provided more collateral against which to borrow The Big Picture: Consumer Spending Consumer spending and housing are almost three-quarters of U.S. GDP The american economy has been resilient and recessions have been mild over 25 years based on consumer spending: Stable even during economic downturns Drops in employement and income have been less severe than of old Willingness and ability to borrow Consumer Spending: The downside The long rise in asset prices particular in housing and raised consumers net worth and made saving seem less nescessary Borrowing became easier Financial innovation and leaders relaxed underwriting, based on the supposedly reliable collateral of ever more valuable houses On averaged save 9% of income, the saving decreased to around 0 Chimerica: Concept developed by Harvard Professor Niall Ferguson (Ferguson and Schularick 2007; Ferguson 2008) Symbiotic/integrated relationship between the american and chinese economies o East Chimericans are savers; West Chimericans are spenders o East Chimericans do manufactures; West Chimericans do services www.notesolution.com o East Chimericans export; West Chimericans import o East Chimericans maunfacture; west chimericans Import China awash in savings o Cheap money flooding banks (esp. in america) o Low rates, low returns fuels search for high returns, even with higher risk o Aftermath 9/11 ->market swoon Five roots causes of financial Crisis Moneytary policy-> budget cutting ethos, military spending Financial markets grossly underpriced risk -> Housing crash money crash, oil price volatility, geopolitical risk Failures in coporate governance -> Lessons not learned in 2001: Enron, Worldcom, exexutive compensations (options, golden parachute) The recessionss trigger: An asset bubble collapse, particualry related to real estate -> loss of confidence, credit crunch U.S. Recession In Dec. 2008 NBER business cycle dating committee proclaimed that the us recession had started dec. 2007 Official end not yet announced by NBER (mid to end of 2009?) Recession longest since 1930s Job recovery projection (Feb 2009): Full recovery not until 2014 More severe than oil shock recessions of 1974 and 1980-82 Las Vegas: Ground zero in the world economic crisis Housing market increased dramatically highest growth 1970-2005 huge growth Las Vegas Housing Market: By 2005: oversupply of housings o 38,000 new homes finished in 2005 consumer demand only 25,000 Housing prices continued upwards in part as a result of easy access to funds o Interest only mortgages, no documentation loans o A classic Speculative bubble What is a speculative bubble? www.notesolution.com An unsustainable increase in prices brought on by investors buying behavior rather than by genuine, fundamental information about value. Financial Tsunami: The perfect storm o Greed o Fear o Uncertainty Bubble Psychology: Markets can go out of control One cant afford not to be in the market Unbridled optimism, hysteria, greed and outright fraud (Ponzi schemes) However: Hysteria hard to detect while it is going on Hard to swim the other way Those who get in early and get out make money: enormous sums, but the rest get burned Regulating Bubbles the problem: When the economy is strong it is argued (by bankers, borrowers and others) that the higher prices are justified and regulators dont want to second guess the markets When the economy is ailing one cannot dare prick the bubble What Were the Problems Mortgages? Subprime rates o Higher risk should lead to higher rates o But rates were not high enough Weak documentation o Alt-A: Liar loans o Ninja mortgages = No Income, no Jobs, no Assets Zero down payments mortgages; no principle payments o No equity, no buffer Adjustable Rate Mortgages (ARMs) o Low teaser rates, that rose significantly in subsequent years Predatory loans : designed to exploit vulnerable and unsophisticated borrowers Why Would Anyone Make These Loans? The world was awash in loadable funds FHA funding the drive for home ownership in the US www.notesolution.com
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