Thread by @SahilBloom

1/ A Thread on Markets

It is the year 1500 and you enter a market in Renaissance-era Italy.

There are buyers and there are sellers. Prices of the various goods are determined by the interaction by and among these individuals.

Now in walks Mr. FEDerico, a man of endless means.

2/ Mr. FEDerico climbs a tower in the center of the market and proclaims, “I am a buyer of any and all goods in this market, regardless of their price.”

He climbs down off the tower and exits the market to return to his mansion.

What happens in the market when he leaves?

3/ Sellers, knowing they have a buyer, increase their prices. Buyers, previously unwilling to pay these prices, realize they can flip and sell the goods at a higher price, so increase their bids.

Even you, the silent observer from the future, are tempted to get in on the fun!

4/ The fun continues for a while. Buyers and sellers flip goods at higher and higher prices, turning profits as they do. Wealth accumulates.

The poor and middle class are forced to go to a market several cities away. They can’t afford to pay 5000 Florin for a bag of corn...

5/ But one day, Mr. FEDerico returns to the market, climbs the tower, and proclaims, “This market is incredible, bustling and vibrant. I am no longer needed and will move on to new cities in need of my brilliance!”

What happens next?

6/ Without a buyer at any price, sellers frantically try to sell. But buyers are silent, and prices plummet.

Back in your time machine, you see the irony - Mr. FEDerico never actually had to buy anything, only his intention to do so.

“History is wild,” you say, “I prefer 2020.”