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).
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?
(In reply to re: W00t
But Alan and Bob had originally given a full $10 worth of drinks in order to get the bills that they are now using as mere $9 worth of change, if they were already in their possession at the time of the rate changes.
Posted by Charlie
on 2003-11-06 19:41:35