Monday 17 November 2008

Understanding the Credit Crunch

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

Once upon a time a man announced to the villagers that he would buy monkeys for Rs. 10.The villagers seeing there were many monkeys around, went out to the forest and started catching them.
The man bought thousands at Rs. 10, but as the supply started to diminish, the villagers stopped their efforts. The man further announced that he would now buy at Rs. 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 Rs. 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 Rs. 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 Rs. 35 and when he returns from the city, you can sell them back to him for Rs. 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!

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