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Thread: Free Beer

  1. #1
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    Free Beer

    Circa 1965, back when you could still buy 10 cents a beer, a small steel working town on the American-Canadian border was undergoing a weird currency exchange problem. On the Canadian side of the border, an American dollar was only worth ninety Canadian cents, while on the American side, a Canadian dollar was only worth ninety American cents. (In other words, the people of the two countries discounted the other country's currency by 10 %.)
    In this steel town, the border ran right down the middle of the High Street, and there were pubs on both sides serving steel workers from the local area. One weekend, an American steel worker arrived in town with only U.S. $1.00 but lots of fiscal daring do. He stopped at the first bar he found on the American side of the street, ordered a ten-cent beer, paid with his American dollar, and asked for a Canadian dollar for his change. He finished his beer and went across the street to a Canadian pub, ordered another 10 cent beer, paid with the Canadian dollar, and asked for an American dollar in change. He returned to the US side and ordered another beer, then returned to the Canadian side and so on all evening, finally staggering back home after a last drink in a Canadian bar and still having an American one-dollar note in his pocket!
    But what his fellow steel workers could not work out was who paid for his beer? So who could it be:
    Jerry

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    Re: Free Beer

    <span style="background-color: #FFFF00; color: #FFFF00; font-weight: bold">The steel worker. He would order a drink in the USA, and with his $.90 (the equivalent worth of 1 Canadien dollar), he'd exchange it, walk across the street, and use the same method....clever chap. </span hide>

    <img src=/S/whisper.gif border=0 alt=whisper width=29 height=17><span style="background-color: #FFFF00; color: #FFFF00; font-weight: bold">I think</span hide>
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    Re: Free Beer

    <img src=/S/nope.gif border=0 alt=nope width=15 height=15> You would think so wouldn't you
    Jerry

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    Re: Free Beer

    <img src=/S/igiveup.gif border=0 alt=igiveup width=31 height=23>
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    Re: Free Beer

    <img src=/S/evilgrin.gif border=0 alt=evilgrin width=15 height=15>
    Jerry

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    Re: Free Beer

    <span style="background-color: #FFFF00; color: #FFFF00; font-weight: bold">I'm guessing that the two pubs are who paid the price...</span hide>

    <span style="background-color: #FFFF00; color: #FFFF00; font-weight: bold">The steel worker still has his original dollar. The banks, countries, treasuries and citizens are not out anything. The pubs are the only losers as they are each missing product and don't have any more $ to deposit than they did prior to the workers visit.</span hide>
    - Ricky

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    Re: Free Beer

    <img src=/S/scratch.gif border=0 alt=scratch width=25 height=29><span style="background-color: #FFFF00; color: #FFFF00; font-weight: bold">The beer brewers. He drank imported beers....American beer in Canada....Canadian beer in America.</span hide>
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    Re: Free Beer

    I'd guess at either <span style="background-color: #FFFF00; color: #FFFF00; font-weight: bold">no one as the 'loss' had not yet been made</span hide> or <span style="background-color: #FFFF00; color: #FFFF00; font-weight: bold">previous customers of the bars who had paid for their drinks with the 'wrong' currency and thus only got a 90c/$1 rate of exchange when they paid for their drinks (assuming that was where the 'foreign' currency came from).</span hide>

    I'm not sure about explaining the method, as you appear to have done that yourself!

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    Re: Free Beer

    I was looking at this last night and I can tell you now that I have a great big biro smudge on the top of my head..reason, I had my scratch pad next to my PC and I kept scratching my head with it whilst thinking ( I normally use a pencil) Mrs J nearly wet herself when she saw me doing it as she knows this is one of my mannerisms when I am thinking and she didn't have the heart to tell me.....

    I am also amazed that everyone has got a different answer. I am going to let this run a little longer to see if other Loungers can chip in and we can see if anyone agrees. By the way I have tried to Google proof this one but I imagine a few googlemeisters will have a good bash but try not to. <img src=/S/evilgrin.gif border=0 alt=evilgrin width=15 height=15>
    Jerry

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    Re: Free Beer

    <span style="background-color: #FFFF00; color: #FFFF00; font-weight: bold">The banks. The net effect is that the steel worker is returning Canadian dollars to Canada and US dollars to the US without paying the banks commission for exchanging them.

    The bars are paid for the beer. Let's say that our steel worker buys 5 beers on each side. At the end of the night, the US bar has 5 US dollars more in its cash register, and 5 Canadian dollars less. Since the Canadian dollars are worth only 90 cents in the US, it now has US$0.50 more - precisely the cost of 5 beers. The situation for the Canadian pub is similar, with the role of US and Canadian dollars reversed.

    Normally, of course, the rates for buying and selling currency are different, so you're s <img src=/w3timages/censored.gif alt=censored border=0>d both ways.</span hide>

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    Re: Free Beer

    <span style="background-color: #FFFF00; color: #FFFF00; font-weight: bold">But how did the US dollars get to Canada (and vice-versa) in the first place? Is it not possible that the banks made their commission out of that exchange? I don't think the banks necessarily come into it.
    I still think the cost lies with whoever placed the 'foreign' currency in the till in the first place. For example, a Canadian buying a beer in the US with Canadian currency, would have to pay (approx) 11c, whereas he could have just paid 10c by staying on his own side of the street. I think it is him who has paid for the free beer by paying the 10% exchange rate commission.
    If, however, the US bars 'bought' Canadian dollars to use as change, it would be their loss on the exchange that would be funding the beer.</span hide>

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    Re: Free Beer

    Right I have the official answer...I google proofed this last night but if you like i will hunt out the URL in time to show what was written.

    If you chose:

    <span style="background-color: #FFFF00; color: #FFFF00; font-weight: bold">1) The Steel worker. WRONG. The logger ends his day with as much money as he started and loses nothing else (except maybe consciousness)

    2) The bartenders, or the bars. WRONG. The bartenders/bars get value for each beer they sell. It doesn't matter that they are dealing in U.S. and Canadian dollars; they could be exchanging beaver pelts or cowrie shells; the fact remains that for each beer they sell, they take in something with a certain value to them and give back something of lesser value. Some people say that the bartenders pay for the beers in that they let the steel worker do what they could do: take the foreign currency across the border and get more value for it. This is an opportunity cost, however, not a real cost. If I walk past a hundred dollar bill on the street and decline to pick it up, am I $100 poorer? No, I'm $100 poorer than I might have been. I'm ignoring the opportunity to get richer, but it doesn't make me poorer. Think of it as if there were two stacks of dimes sitting on the two barrooms' floors, dimes left by some previous, absent-minded patrons. The steel worker walks into one bar, picks up a dime, pays for the beer, crosses over to the other bar, picks up a dime there, pays for the beer, crosses back, etc. The bartender has lost an opportunity to get the dimes for himself, but the fact remains that s/he got value for the beer.

    3) The townspeople. WRONG. If the bartenders/bars aren't paying for the beer, then how can the townspeople be? An even stronger argument is that there need not be any townspeople at all; we could just have two bars facing each other across the border.

    4) The United States and Canada; the federal treasuries of each country. WRONG. The decisive argument is that the two bars need not be operating within an established government at all; they could each be issuing scrip that the other bar accepts (albeit at a discounted rate).

    5) The banks. WRONG. What banks? None of this involves banks or requires banks to work.

    6) The exchange rate, or the difference in currency rates. WRONG. The exchange rates? Even if the beer purchases did affect the exchange rates, this doesn't specify who therefore lost money (so that the loss pays for the beer).

    7) No one. WRONG. The beers didn't materialize by magic; someone had to make them, and they had to either get paid for them or take the loss themselves.

    8) Someone or something else. RIGHT, namely: the people who brought the foreign currency into the country in the first place. Say I'm a U.S. citizen with U.S. $1 in my pocket. I could buy ten beers with that. If I go to Canada, the same dollar will buy me only nine beers. For each dollar I take across the border, I lose a beer. When the steel worker takes that dollar back to its country of origin, he is drinking that beer I lost.

    and finally:

    A MORE GENERAL ANSWER is that the beer was paid for by whoever was holding the dollars when they were devalued from $1.00 to $0.90. If the bills are devalued by crossing the border, then the above answer is certainly correct. But this second, more general formulation also covers the case where the dollars were simply devalued suddenly, creating a loss for each person holding the "wrong" country's dollar. </span hide>
    Jerry

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