Liquidity Crisis on the Tabletop

This post is not particularly funny, but I had a very interesting experience last night, and I thought I should share it.

Last night, my roommates and I were playing monopoly, and we managed to push the game into a fullblown liquidity crisis.

First, the game started off pretty normally. However, a few windfalls on free-parking infused a tremendous amount of capital into the economy, which resulted in a housing boom. Then, some wheeling and dealing meant that, suprisingly quickly, there were a tremendous amount of properties on the board. The catch, however, is that this new landed gentry had to put themselves into the poorhouse to build these houses: anytime someone landed on a property and had to pay rent, they inevitably wound up having to sell off some houses to get cash. This, in and of itself, is a pretty interesting analogy to what has been happening recently. Everyone was very highly asset rich, but extremely cash poor, and everyone was betting on another windfall to sustain them through another go around on the board, but, statistically, not only was it improbable, but even one more windfall would just delay the situation. The problem was that all the working capital was tied up, and the economy was not growing. I.e., no one makes money by just giving it back and forth player to player. Money only comes into the game's economy through Chance, Free Parking, and going around Go. For our purposes, let us call those 'economic growth.'

What made the game really interesting is when someone instituted a rule (new rule on a hard 12) that if you owned any houses, you did not get any money when you went around go. The game changed pretty dramatically then. Within a few turns, many properties had been mortgaged, and if you counted only debts outstanding and actual cash held in players hands, there was a net debt. There was more debt on the board than money! This resulted in, eventually, players with massive real estate empires (myself included) having to liquidate all their holdings and mortgage all their properties due to a single bad roll.

By the way, I think that is a really great rule to try sometime. It makes the game way more interesting, and it really can give you a good idea of what exactly a liquidity crisis is: lots of value on paper, but no cash, and lots of outstanding debt. Oh, and the fact that, as law students, we were granting each other temporary rent abatements and all sorts of bizarre property rights, lets call them, oh, say, derivatives, really only exacerbated things. I went from owning all the greens and blues with tons of houses to being eliminated within a matter of a few turns.

Of course, directly afterward, I blamed Ben Bernanke and demanded compensation from my roommates.

None was forthcoming.