19 December 2008

The bailout explained

Once upon a time a man appeared in a village and announced to the
villagers that he would buy monkeys for $10 each.
The villagers, seeing that there were many monkeys around, went out to the
forest and started catching them.
The man bought thousands at $10 and, as supply started to diminish, the
villagers stopped their effort. He next announced that he would now buy
monkeys at $20 each. This renewed the efforts of the villagers and they
started catching monkeys again.
Soon the supply diminished even further and people started going back to
their farms. The offer increased to $25 each and the supply of monkeys
became so scarce it was an effort to even find a monkey, let alone catch
The man now announced that he would buy monkeys at $50 each! However,
since he had to go to the city on some business, his assistant would buy
on his behalf. In the absence of the man, the assistant told the
villagers: "Look at all these monkeys in the big cage that the man has
already collected. I will sell them to you at $35 and when the man returns
from the city, you can sell them to him for $50 each."
The villagers rounded up all their savings and bought all the monkeys for
700 billion dollars.
They never saw the man or his assistant again, only lots and lots of monkeys!
Now you have a better understanding of how the

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