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How the bailout works

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  • How the bailout works

    Once upon a time in a place overrun with monkeys, 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,
    they became harder to catch, so the villagers stopped their effort.

    The man then announced that he would now pay $20 for each one. This
    renewed the efforts of the villagers and they started catching
    monkeys again. But soon the supply diminished even further and they
    were ever harder to catch, so people started going back to their
    farms and forgot about monkey catching.

    The man increased his price to $25 each and the supply of monkeys
    became so sparse that it was an effort to even see a monkey, much
    less catch one.

    The man now announced that he would buy monkeys for $50! However,
    since he had to go to the city on some business, his assistant would
    now buy on his behalf.

    While the man was away the assistant told the villagers. 'Look at
    all these monkeys in the big cage that the man has bought. I will
    sell them to you at $35 each 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 nor his assistant again and once
    again there were monkeys everywhere.

    Now you have a general understanding of how the government bailout works.