At one time, the Canadian and US dollars were discounted by 10 cents on each side of the border (i.e. a Canadian dollar was worth 90 US cents in the US, and a US dollar was worth 90 Canadian cents in Canada). A man walks into a bar on the US side of the border, orders 10 US cents worth of beer, pays with a US dollar and receives a Canadian dollar in change. He then walks across the border to Canada, orders 10 Canadian cents worth of beer, pays with a Canadian dollar and receives a US dollar in change. He continues this throughout the day, and ends up dead drunk with the original dollar in his pocket.
Who pays for the drinks?
Answer
The man paid for all the drinks. But, you say, he ended up with the same amount of money that he started with! However, as he transported Canadian dollars into Canada and US dollars into the US, he performed “economic work” by moving the currency to a location where it was in greater demand (and thus valued higher). The earnings from this work were spent on the drinks.
