[I first heard this deceptively difficult puzzle in the 1960s or earlier; I have no idea where it comes from.]

Around 1900, back when you could still buy a ten-cent beer, a small logging town on the U.S.-Canadian border was experiencing a strange currency exchange situation. On the Canadian side of the border, a U.S. dollar was only worth ninety Canadian cents, while on the U.S. side, a Canadian dollar was only worth ninety U.S. cents. (In other words, the citizens of both countries discounted the other country's currency by ten percent.)

In this particular town, the international border ran right down the center of the main street, and there were bars on both sides catering to loggers from the surrounding area. One Saturday, an American logger rolled into town with little money (only U.S. $1.00) but lots of financial cunning. He stopped at the first bar he found on the U.S. side of the street, ordered himself a ten-cent beer, paid with his U.S. dollar, and asked for a Canadian dollar in change (worth only U.S. $.90, remember). After finishing his beer, he walked across the street to a Canadian bar, ordered another ten-cent beer, paid with the Canadian dollar, and asked for a U.S. dollar in change (there, worth only Canadian $.90). Back he went to the American side for another beer, then back across to the Canadian side -- and so on all afternoon and evening, finally staggering back to his camp after a final drink from a Canadian bar and a U.S. one-dollar bill in change -- just as he had started out with.

But what his fellow loggers could never figure out was, who paid for the beer? See if you can help them by choosing correctly from the list below and giving an explanation of why that is correct by showing the specific mechanism involved.

• The logger
• The bartenders
• The bars
• The townspeople
• The federal treasuries of each country
• The banks
• The exchange rate, or the difference in currency rates
• The United States and Canada
• Everyone
• No one
• Someone or something else, namely, ...