Alan and Bob each own a bar. Alan's is in very northern New York, and Bob's is just across the border in Canada.

As it turns out, at the beginning of this problem, a Canadian Dollar is worth exactly the same as the U.S. Dollar, and people are quite accustomed to using them interchangeably (including banks).

But, alas, the U.S. Government and the Canadian government get in a spat. So, the U.S. "devalues" the Canadian dollar 10%, so now they will treat it as worth 90 cents (U.S. currency). In retaliation, Canada does the same and "devalues" the U.S. dollar 10%, so they treat it as worth 90 cents (Canadian currency).

Enter Charlie.

Charlie goes to Alan's bar and purchases a 1 dollar drink and pays with a 10 dollar bill (U.S.). He receives, in change, a 10 dollar bill (Canadian). He then walks across the border to Bob's bar and purchases another 1 dollar drink, paying with a 10 dollar bill (Canadian), and he receives, in change, a 10 dollar bill (U.S.).

Charlie proceeds to continue doing this until he finds himself quite intoxicated.

I think it obvious that Charlie is gaining on these transactions. The question is.... WHO (if anyone) is losing out on these transactions?

I agree with Charlie (not the Charlie in the puzzle). The bars lost the minute the U.S. government and Canadian government devalued each other's money. Each bar had currency from the other company, or else they wouldn't be able to give Charlie his change in the foreign currency. Of course, I can't assume; the bars might have gotten the money after it was devalued. Then, whoever decided to pay them in foreign currency is the loser. Charlie used this this devaluation to his advantage and gained what the bars lost.

Posted by Tristan on 2003-11-02 16:11:16