'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 monkeys at $20 each. 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 scarce it was an effort to even find a monkey, let alone
catch it! The man now announced that he would buy monkeys at $50 each!
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 already 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 with all their
savings and bought all the monkeys.
Then they never saw the man nor his assistant again, only lots and
lots of monkeys! Now you have a better understanding of how the stock
Story is not finished yet.
...Villagers went to the city and asked the man, why he disappeared.
Man told them that he lost all the money and cannot buy more monkeys.
Villagers collected some money from surrounding villages to help that man
so he can continue his business of buying monkeys. Now you have a better
understanding of how bailout works.