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At Last! Sub-Prime Crisis Clearly Explained
simonleblank
Posts: 369 Forumite
Once upon a time, in a village, a man appeared 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 further announced that he would now buy at $20 for a monkey.
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 small that it was an effort to even find
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 buy
on behalf of him.
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 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.
[and thus was born the credit default swap market!]
They never saw the man nor his assistant again, only monkeys everywhere!
Now you have a better understanding of how Wall Street works.
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 further announced that he would now buy at $20 for a monkey.
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 small that it was an effort to even find
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 buy
on behalf of him.
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 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.
[and thus was born the credit default swap market!]
They never saw the man nor his assistant again, only monkeys everywhere!
Now you have a better understanding of how Wall Street works.
Don't waste your words I don't need,
Anything from you.
I don't care where you've been or,
What you plan to do.
Anything from you.
I don't care where you've been or,
What you plan to do.
0
Comments
-
Pretty much. My favourite explanation is this (takes a while to load up)
http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth=true&pli=1Hurrah, now I have more thankings than postings, cheers everyone!0 -
And don't forget Bird and Fortune's hilarious explanation from a year ago.0
-
Are you crying at the present awfulness? Why not laugh! Try this one.
Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for £5 each.
The villagers seeing that there were many monkeys around, went out to the forest, and started catching them. The man bought thousands at £5 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at £10
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 £12 each 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 £25! However, since he had to go to the city on some business, his assistant would now 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 collected. I will sell them to you at £20 and when the man returns from the city, you can sell them to him for £25 each.'
The villagers rounded up with all their savings and bought all the monkeys. Then they never saw the man nor his assistant ever again, only monkeys everywhere!
Now you have a better understanding of how the stock market works.0 -
Previously posted here:
http://forums.moneysavingexpert.com/showthread.html?t=12282150
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