Real money vs Casino chips

This is a story about a casino - a very busy casino. So successful was this casino, that most of its patrons never needed to leave. They ate at the casino's restaurants, and they slept in the casino's hotels. They even brought up their kids in the casino (they went to school there!).

Because they almost never left the casino, the patrons hardly ever used real money.  They paid their food and rent bills with the casino's "chips" (ie, the high tech plastic tokens used for gaming machines, poker tables, and all other casino services). Very convenient.

In fact, the tokens were so convenient that patron rarely cashed in their chips for real money.  So infrequent were the patron's trips to the cashier, that one day the casino decided to shut their cashier down altogether.

Well, the patrons realized that this meant that they would be trapped in the casino, as all their chips - and some patrons has amassed quite a hoard - could never be wagered or spent outside the casino.

So the patrons started heading for the exit, (which took some finding mind you - it was well hidden), as they thought that the casino would eventually go bust if it wouldn't redeem patron chips for real money, and if the casino did go bust, everyone's chips would become worthless.

Without patrons, the casino could not survive, so it had to do something to stop the exodus.  The casino played the only card that it could. It reset all the games and machines to pay out big. Some paid out as much as 20% each time you played.

It worked!  The exodus stopped, and the patrons returned to the gaming machines.  With the casino paying out so much, they wagered much more than before.

Over time, two things happened..



The children that were born in the casino hospital grew up to be institutionalised, as they only ever saw chips used for payments - never real money. They never had any thoughts about leaving the casino, and only the most creative and imaginative of them even theorized about such a concept.

The other thing that happened over the years was that the casino ever so slowly adjusted the machines back to their original loss-making (for the patron) settings. It was very subtle, so very very few patrons spotted the game.  Eventually, somehow, even the most prudent gamblers seemed to be taking losses more often than not.

Now, before when I said that the casino closed the cashiers, that's not quite the full story. They do rent floor space to semi-private operators to provide cashier services.  This, however, is largely a facade. They keep a close eye on the chip:real-money exchange rate, and intervene to maintain a very high value for their chips.  The losses on these trades is justified by the corresponding value created in their chips.  This forces them to limit trading volumes to "trickle" amounts, and so these markets are too small for high rollers.

Consequently, there is a black market for real money.  This black market enables the high rollers to cash out - but only very highest of high rollers know about this black market.  On this black market, the price of real money is very expensive, as this black market consists of some people outside the casino, who place very little value on the casino's chips.

Things brings us to the present.

Nowadays, most patrons make losses.  Despite searching high and wide for the winning games and strategies, they just can't seem to find any.  The games seem to be rigged.  Stacks are dwindling, and patrons are beginning to looking for the exits again.  Not only that, but ever increasing numbers of patrons are heading to the cashiers.

So, what will happen? No one knows for sure.

At some point, the casino will need to concede that the black market value of their chips is indeed fair market value, and the casino must provide cashier services using this fair market pricing for their chips.

Now, if you were a patron in this casino of life, and you knew of the black market for real money, and hence the expensiveness of the casino chips and relative cheapness of real money, as well as inevitability of the return to normal prices, what would you do?