Las Vegas is a city built on the dream of getting something for nothing. But not only the tourists seek Lady Luck.

Casinos, small businesses and governments have all planned and expanded, counting on the dream of easy money – namely, more money and expanded credit for everyone, courtesy of the Federal Reserve.

During the past decade, "Americans could reap without planting," financial author Bill Bonner writes. "They could consume without earning. They could invest without saving, and spend as much as they wanted without running out of money. They were the world's luckiest people – they had the world's reserve currency … and access to the whole world's credit."

With The Maestro, Alan Greenspan, at its controls, the Fed, America's central bank, wildly created money out of thin air. The M-2 money supply (currency, demand deposits, money market funds, savings accounts and small time deposits) rose from just under $5 trillion to just over $6.7 trillion from January of 2001 to January 2006. Then Greenspan handed the reins of the Fed over to Ben Bernanke, who proceeded to create another $1 trillion more. The amount of money created just since the beginning of 2001 – $2.7 trillion – was the total M-2 money supply just two decades ago, in late 1986!

This furious monetary pumping – labeled "Operation Enduring Bubble" by investor and financial commentator William Fleckenstein – was a reaction to the tech stock crash of 2000 and the Y2K scare, and served to produce the housing bubble that is now busting.

With the Fed providing high-powered monetary punch, Americans were ready to party. Though they hadn't saved any money, their houses were increasing in value everyday. So it was time to borrow some money and let the good times roll in Vegas. Gaming wins in Clark County climbed from $7.6 billion in 2001 to nearly $10.9 billion last year. Total employment increased by over 200,000 jobs in the same time period, and annual visitor volume increased from 35 million to over 39 million.

No wonder new resort projects totaling more than 4.7 million square feet of new convention space and 38,127 new hotel rooms are scheduled for construction between now and the end of 2010. Over $30 billion in bets on the Strip are riding on assumptions that Americans will not only maintain their pace of partying during the stock and housing bubbles, but that even more people will join in.

However, it's not just private business that ramped up during the Greenspan/Bernanke bubbles. Nevada's state government general fund budget is projected to be $3.5 billion in 2009, a near-doubling from 2003's $1.8 billion. Local municipalities have also beefed up, as the city of Las Vegas budget more than doubled from 2001 to 2008, and Clark County and the city of Henderson nearly doubled.

Unfortunately, this explosion in development on the Strip and in local government was based not on sound economic fundamentals, but on an economic chimera created by the Fed. "The ‘boom,' then, is actually a period of wasteful misinvestment," economist Murray Rothbard wrote in America's Great Depression. "It is the time when errors are made, due to bank credit's tampering with the free market."

What Rothbard was describing, as have other Austrian-school economists, was the business cycle – when "businessmen are misled by bank credit inflation to invest too much in higher-order capital goods," like land, plant and equipment.

What follows is a bust – a recession or depression – where these wasteful investment errors are liquidated. As Rothbard explains that some investments will be totally abandoned, he mentions something Nevadans are very familiar with: Western ghost towns.

The cleansing of these malinvestments is now well underway, starting with the housing market. David Rosenberg of Merrill Lynch contends that the five-plus-year consumer spending binge is over, and that a long consumer de-leveraging process is underway.

Now, instead of casinos adding the jobs they once projected, Strip properties are shedding unneeded workers. State tax receipts have fallen nearly $1 billion short of the budget levels state lawmakers presumed last year, and rumors circulate that local government employers may soon be handing out pink slips. And while a lack of financing has stopped some projected resort properties, on the Strip construction continues around the clock. The anticipation is that once the new building is completed, the tourists will still come – and will spend generously.

As all gamblers know, bucking the house odds is no way, in the long run, to get rich. It's the same with the printing of money and creation of easy credit: They won't produce prosperity.

Which means that the next Vegas boom, almost certainly, is a long way off.

Doug French is executive vice president of a Southern Nevada bank and a policy fellow of the Nevada Policy Research Institute.