Thursday, October 30, 2008

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

I just received the following by an email from my brother. I loved it! Hope you enjoy it as well!

Once upon a time in a village in India , a man announced to the
villagers that he would buy monkeys for $10.
The villagers seeing there were many monkeys around, went out to the
forest and started catching them.
The man bought thousands at $10, but, as the supply started to
diminish, the villagers stopped their efforts. The man further
announced that he would now buy at $20. 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 rate increased to $25 and the supply of
monkeys became so little that it was an effort to even see a monkey,
let alone catch it!
The man now announced that he would buy monkeys at $50! However, since
he had to go to the city on some business, his assistant would now act
as buyer, 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 collected. I will
sell them to you at $35 and when he returns from the city, you can
sell them back to him for $50. '
The villagers squeezed together their savings and bought all the
monkeys.
Then they never saw the man or his assistant again, only monkeys
everywhere! Welcome to WALL STREET.

3 comments:

Anonymous said...

well i don't think the analogy is entirely correct. The story describes a kind of monopoly in demand (only one person buys the monkeys and sets prices on it). While in a free market there would be probably several people buying monkeys at competitive prices. This way there would always be monkeys for anyone who wanted them and at a reasonable price too.

Anonymous said...

well i don't think the analogy is entirely correct. The story describes a kind of monopoly in demand (only one person buys the monkeys and sets prices on it). While in a free market there would be probably several people buying monkeys at competitive prices. This way there would always be monkeys for anyone who wanted them and at a reasonable price too.

Princess, Auntie, and Mummy said...

Hi Rodman,

Well, it is a very very very simple plan of what happened in Wall Street and for sure it is not up to the standards of a perefct explanation for the case, as you meantioned.

Looking at it with the view point of a funny story, it is worth a smile at least, I believe!

Thanks for coming by...