Teaching Story - About Monkeys and Market Crashes

Once upon a time, in a village in Africa, a trader man arrived on a mighty ship 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 built a giant cage to hold them until the ship returned, but as supply started to diminish, the villagers stopped their effort. The trader man further announced that he would now buy monkeys 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 increased to $25 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 $50 !

However, since he had to fly to the city on some business, his assistant would now do business on behalf of him.

In the absence of the trader 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.

They never saw the man or his assistant again, only monkeys everywhere!

Now do you have a better understanding of how the markets work?