Thursday, October 23, 2008

Monkey Business

If you have difficulty understanding the current world financial situation, the following should help.

Once upon a time in a village in India, a businessman announced to the villagers that he would buy monkeys for 10 rupees. The villagers seeing there were many monkeys around went out into the forest to catch them.

The businessman bought thousands of monkeys from the villagers at 10 rupees each but as supply began to diminish the villagers stopped their efforts. The businessman then announced that he would now pay 20 rupees per monkey. This encouraged the villagers to start catching monkeys again.

Soon the supply of monkeys diminished even further and the villagers returned to their farms. The rate offered per monkey was further increased to 25 rupees, and so the supply of monkeys became so low that it was an effort to even see a monkey, let alone catch one.

The businessman then announced that he would buy monkeys for 50 rupees each. However, since he had to visit the city, his assistant would act as his buyer. In the businessman's absence his assistant said to the villagers, "Look at all the monkeys my boss has collected in this huge cage. I'll sell them to you at 35 rupees each, and when my boss returns you can sell them back to him for 50 rupees."

The villagers scraped together their their savings and bought all the monkeys from the assistant, who then promptly disappeared with their money. They never saw him, his boss or their money ever again - just monkeys everywhere.

Welcome to Wall Street.

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