Copyright 2013 John T. Reed

This is another book I have read about the Canadian border—probably the best one for my purposes. I am trying to predict how viable it would be to live near the Canadian border during US hyperinflation. The basic idea would be that US hyperinflation would trigger price controls which, in turn, would cause shortages of food and other necessities. If you preposition savings in Canada in the form of Canadian dollar savings accounts, in theory, you should be able to drive across the Canadian border weekly or more often, buy your necessities, then drive back across the border to cheaper housing in the US. For most Americans, this would necessitate moving to a U.S. town near the border during the hyperinflation.

Must have stable foreign currency to spend in Canada, not USD

People who do not preposition currency in Canadian dollars in Canada will be forced to burn through their USD savings rapidly then fall back on barter, if they have good things to barter. Read the barter chapter in my book How to Protect Your Life Savings from Hyperinflation & Depression, 2nd edition to see the characteristics of good barter items.

That’s the theory. But I wonder if it would happen that way during such circumstances. I tried to gain insight by visiting the border areas of Point Roberts, Bellingham, Ferndale, Blaine, Lynden, and Sumas, all in northwest Washington State. I also visited the southwestern British Columbia area from Vancouver to Abbotsford, Canada which is what’s immediately north of the border in the Point Roberts to Sumas area.

I also read four books on the Canadian border, most recently The Collectors: A History of Canadian Customs and Excise by Dave McIntosh. It is no great beach read. It is about as technical as it sounds. My copy is used and an inscription in the front suggests it was originally given to a Canadian Customs officer on the occasion of his retirement. I don’t know why anyone else would want to read it. If you are one of my customers, reading books like this is part of what you pay me for.


Basically, the main issues at the border taxes called tariffs or excise taxes and undesirable [to the destination country] humans crossing the border. Excise taxes are sales taxes. Tariffs are a charge for taking goods into Canada. If it is a US tariff, it is a tax for taking products into the U.S. That is also an issue when considering living in Northern Washington state and shopping in Canada. But this book is only about Canadian customs so I will not talk much about US tariffs here.

Tariffs have two possible purposes: revenue to run the government and protecting Canadian manufacturers from competition from U.S. and other manufacturers. Of course, all collected tariffs help fund the government, but the impetus for the tariff in the case of protectionism is mainly to prevent Canadians from buying cheaper imports instead of products produced in Canada.


I hope reader immediately recognize that protectionism is nuts. Canadian tariffs penalize the citizens of Canada for the inefficiencies of Canadian manufacturers. It treats those citizens as a captive audience that can be forced to overpay for goods. Wouldn’t the citizens complain? They should but generally are less motivated or focused than the manufacturers or farmers. Tariffs are always immoral and harmful to the country that imposes them. They are essentially special interest favors to corrupt manufacturers granted by corrupt politicians. The manufacturers and politicians would tell a different story. They are liars.

The tariff problem you might have living in the US near the border and shopping in Canada is the U.S. might charge you a penalty to bring the necessities you buy there back home. If you cannot cost-effectively shop in Canada and live in the U.S. border town, the obvious solution would be to move to Canada on a 90-day tourist visa. But that would mean you would have to leave Canada every 90 days and they may allow only two such visits per year—a common limit around the world. It would be cheaper and simpler to live in the U.S. and just shop in Canada.

Borderlands opinions about smuggling

Long-term residents of the borderlands tend to dislike customs officers and like smugglers. They tend to be related to both, although the government has often found it necessary to assign customs officers from outside the area to avoid family-relations conflicts of interest between customs officers and their smuggler relatives and friends.

Locals help the smugglers. They rarely help the customs officers. It is hard to get convictions of smugglers in jury trials. This is because locals like the low prices at which they can buy from the smugglers compared to the higher prices of legally imported or locally-produced goods. Locals like the availability of prohibited products from the smugglers, guns and porn. Locals also like the smugglers because smuggling is a profitable business in which they or many of their friends or relatives engage and in which virtually all benefit directly or indirectly.

Smuggler poetry

Here are a couple of 1700s English language poems about smugglers:

A beacon gleam on the clifftop edge
Where no light have ever been
And the smugglers lurk in their secret cove
As they flash the lugger in.

If you wake at midnight and hear a horse’s feet,
Don’t go drawing back the blind and looking in the street,
Them that ask no questions isn’t told a lie.
Watch the wall, my darling, while the gentlemen go by.
Five and twenty ponies
Trotting through the dark,
Brandy for the parson,
’Bacy for the clerk,
Laces for a lady, letters for a spy,
And watch the wall, my darling, while the gentlemen pass by.

I must note that in British English “clerk” is pronounced so it rhymes with “dark.”

Excise or sales taxes are the cause of the current problem

At present, the situation is the reverse of what I am worried about. Now, Canadians are living near the U.S. border and going across the border to buy U.S. goods and services. Why? Canadian taxes especially the GST (Goods and Services Tax) and PST (Provincial Sales Tax). In British Columbia, the combined total of the two is 12% at present.

Canadians mainly travel to the U.S. to buy gasoline and milk, often sold in the gas stations. They also buy groceries and use U.S. airports. U.S. airports are subsidized by the U.S. federal government. Canadian airports are not. So Canadian airports have to charge high fees and those fees make it so much cheaper to travel from U.S. rather than Canadian airport including renting cars for the trip. Americans also fly to the U.S. airports near the border then rent cars to drive to their Canadian destination. Many of the cars in the U.S. borderland airport parking lots have Canadian license plates.

This is so extensive that the citizens of Bellingham, WA tried to get a law passed limiting the hours Canadians could shop in Bellingham and they tried to get Costco in Bellingham to restrict the hours and days when Canadians could shop there. Both requests were denied. Discriminating by national origin violates U.S. law. Costco said all Costco members worldwide are free to shop in whatever Costco they want whenever they want.

Hyperinflation in the US means bargains for Canadians

If the U.S. gets hyperinflation, Canadians would probably shop in the U.S. in even greater numbers. Why? Read carefully now. This is a little complicated and counterintuitive.

Hyperinflation is always accompanied by five laws:

• capital controls
• price controls
• financial repression
• rationing
• anti-hoarding laws

Capital controls would prevent Americans from possessing foreign currency or gold and would limit the amount of U.S. dollars (USD) you could take out of the country to piddling amounts for necessary foreign travel. Foreigners, including Canadians, would be exempt from U.S. capital controls.

Price controls would cause goods to disappear from U.S. stores. Ranchers and farmers and manufacturers would be unable to make a profit selling at the controlled prices. What’s exempt from price controls? Exports and imports and resale of used products.

So special stores for foreigners only—like duty-free shops but these would be price-control-free export shops that would have a special license to accept foreign currencies—would arise in the U.S. border towns. There already are duty-free shops next to almost every border crossing. The price-control-free, foreign-currency-only stores would arise either in the current duty-free shops, which would have to expand, or in separate buildings created or re-purposed for this use.

Canadians would flock to these stores because the prices they would be able to buy U.S. products for would be at huge discounts even compared to what they would have to pay today. Why? Because there would be an oversupply of goods for export within the US—due to exports not being price-controlled. Similarly, American business and farmers and manufacturers would disdain the hyperinflated currency and be desperate for non-hyperinflated currency like Canadian dollars (CAD). By selling their products in the export shops with no price controls and no restrictions on receipt of foreign currency, the vendors could make a profit.

Americans could not shop in those stores because A. they would not be exempt from price controls because selling to an American would not be an export and B. they would not have foreign currencies to spend due to capital controls.

USD no good in Canada during US hyperinflation

Americans who had Canadian in dollars in Canada could go to Canada and shop in Canadian stores with that money just like now. Only they would have to have Canadian money. Now, they can easily use U.S. dollars near the border—albeit at lousy exchange rates. Or they can easily convert their U.S. dollars to CAD by simply inserting their US debit card into a Canadian bank ATM. During US hyperinflation, sticking a US debit card into an ATM in Canada would probably not work because of US capital controls limiting the amount of USD you could take out of the country to a very small amount.

Your Canadian dollars would have to be in Canada—or some other country other than the US—because if they were in the US, the U.S. government’s capital controls would force you to sell them to the US government at a lousy exchange rate. More to the point, they would force your bank to convert your foreign money to USD whether you liked it or approved it. Everbank is the only US bank that lets you hold individual accounts in foreign currencies. But the boilerplate in their paperwork says that if the U.S. government orders them to convert your foreign currency accounts to USD they will, even if the rate stinks and you tell them not to.

So what I think is going to happen is that once the US hyperinflation happens, Canadians will go to the US in droves to shop and Canadian retailers will scream for exit visas to be required and withheld to force Canadians to buy from them at the higher prices than in the US. I don’t know if they will get such laws. I think they got them in France in the early 1920s during German hyperinflation. The retailers will also scream for tariffs against cheap US goods being brought back into Canada by Canadians. In France, initially you could buy whatever you wanted in Germany and bring it back into France. After the laws were changed, the French were not allowed to bring anything back unless it was in their stomachs. So they would go over to Germany, pig out and get drunk and stagger back across the bridge or border.

Economic contraction

During US hyperinflation, the US economy would contract severely. That, in turn, would cause an economic contraction in Canada. So logically, Canada should have far greater incentive to encourage the relatively few Americans who had real money to spend to go to Canada to spend it.

However, it is also likely that Canadians will be pissed that the US hyperinflated destroying the USD bank accounts many of them have and destroying the Canadian economy along with the US economy. They will be pissed about tens of millions of newly impoverished Americans trying to enter their country illegally to beg or take work away from Canadians.

I am not sure rationality will prevail under such circumstances. Logically, Canadians should want as many Americans with actual money to shop in their country as possible, but they may get so mad they make no distinction between the Americans with money to spend in Canada from those who are beggars or job seekers. It would not surprise me to see the border closed officially for a time because of mutual anger. I doubt that would last forever, but to paraphrase John Maynard Keynes, national governments can be irrational longer than you can go without food. So you’d better have a Plan C and not assume that just living near the Canadian border and shopping there would solve all the problems caused by USD hyperinflation.

Black market

I have just been talking about various regulations and taxes. But when the differences between two countries on opposite sides of the same border become large—as during the Fugitive Slave Act era and Prohibition—an unregulated illegal black market will arise. And the more profit there is to selling in the black market—smuggling and under-the-table transactions.

Can you buy your food and other necessities in the black market? Yes and no. Certainly tens of thousands of blacks went to Canada via the Underground Railroad during the era of the U.S. Fugitive Slave Act. Similarly, the amount of Canadian alcohol sold in the US during Prohibition was huge.

On the other hand, the black market tends to have limited selection, high prices, often poor quality, much fraud, and much robbery of persons who have just made a purchase or who are enroute to make a purchase. Read Anna Eisenmenger’s diary of Vienna during the early 1920s hyperinflation in Austria. It is available on line for download—apparently out of copyright because it was written so long ago. She was constantly doing business with smugglers in the black market and getting cheated and needed to be accompanied by a large male to protect her. She also lived in constant fear of police finding that she had more coal or some other necessity than allowed. The amount allowed was too little to live on, but any more was illegal.

Having said all that, I would expect the best black markets in the US during USD hyperinflation will be along the Canadian border. When I say best I mean best selection and prices. But best does not mean good.

Get out of Dodge

I have placed savings in Australia, Canada, New Zealand and Swiss francs so I can travel to and live in those countries or any other non-hyperinflated country—on 90-day tourist visas—if necessary. If we have to shop on the black market for necessities here, and we can leave the country, I will probably just go on vacation abroad for the duration of the hyperinflation which I expect will be about 6 to 24 months.

Not a nice place to shop

Because the black market is lawless vis a vis the government, it is also lawless vis a vis the customers of the black marketeers. For example, Anna Eisenmenger would buy a dozen eggs from the black marketeers and find several bad ones. What’s she gonna do? Complain to the police? Take her business elsewhere? Sue? Of course, she could do none of those things because her buying from the smugglers was itself illegal as was the act of selling to her and there are fewer smugglers than competing businesses in normal times. Counterfeiting is also big in the black market. Anna also got cheated on some soap she bought. The black marketeers had taken one bar and turned it into six by combining actual soap with something that looked like soap but was not. Plus as with drug dealers, who are black market smugglers, they tend to kill each other to keep down the competition.

The Mafia was a tiny operation before Prohibition. By, in effect, giving criminals a monopoly on liquor sales, Prohibition turned the small time Mafia into big-time organized crime—a plague on the nation that never went away even though Prohibition did. U.S hyperinflation will do the same to America in general—giving criminals who are now small time very profitable monopolies on the sale of all sorts of goods and services.

Today, some generally law-abiding citizens patronize the black markets for drugs, prostitutes, guns, untaxed cigarettes and liquor. Otherwise law-abiding illegal aliens patronize black market immigration coyotes. During hyperinflation in Germany and Austria in the early 1920s, normally law-abiding citizens were forced to go to the black market criminals for everything to survive. It is somewhat functional, which will be a big step up from the legal stores which will have empty shelves, but you are still dealing with criminals whom you previously shunned—wisely. Like I said, I hope to leave the country on an extended vacation if and when this happens.

The Laffer Curve rules

The earliest customs collectors in Canada like everywhere were like bridge trolls. Just people who had some control over a convenient crossing point who could get away with charging to cross. To an extent, that is still fundamentally what customs are everywhere in the world.

Canada had about 114 crossing points where they collected tariffs and such in 1984 when McIntosh wrote his book. But the US-Canadian border is 5,525 miles long. Also, the Canadian coast is another 125,570 miles long. So you have 131,000 miles of places where you can enter Canada covered only by 114 or so customs posts.

They have ways of covering the other areas—and much of that coast is so remote and cold as to render smuggling through it unprofitable—but you can see that whatever tariffs and other border-related laws they pass in the federal government in Ottawa and the reality of the border are such that smuggling can never be stopped other than by lowering the tariffs and other costs down to the point where smuggling is not worth the trouble.

The Laffer Curve says that tax rates, tolls, and other mass transit fares, and the house’s take in casinos will show increased revenue as you raise the rates from zero. But there comes a point where raising the rates any more will cause people to change their behavior to avoid the cost and the revenue will start to go down not up.

If a gallon of milk in the US costs $3.50 and in Canada costs $5.50, Canadians will go to the U.S. to buy milk. But if a bridge between enacts a $1.00 toll, they will look at the gas cost and those farthest away will probably not make the trip any more. If they raise the toll to $2.00, everyone will stop making the trip. So it is for smugglers and tariffs and prohibition and so on. The higher the politicians set the tariffs and the more restrictive the laws, the greater the incentive to smuggle and the more smuggling will occur. If you increase the number of customs posts, you get more revenue, but also more costs to administer the tariff.

On at least one occasion, Nova Scotia lowered the tariff on imported rum and saw the tariff revenue increase as a result. Because the lower tariff lowered the profits of smuggling, but did not lower the costs of smuggling. That combination causes less smuggling which means more imports that pay the tariff.

Nova Scotia’s head guy said in 1865,

The only way we can keep out smuggling is to keep our tariff so low as to make it not worth while for anyone to smuggle.

John Banks, author of the 1871 book Smugglers and Smuggling said,

We may lay it down as an axiom that whenever duties exceed 30 percent ad valorem it is impossible to prevent a contraband traffic. The lowering of the import duties in this country [Britain] since 1830 has done more to prevent smuggling than all the Customs-house officers, Coast-blockade, Preventive-men and Coast-guard put together.

Fundamentally, all taxing authorities, mass transit bridges, trains, and buses; and gambling operations like casinos and lotteries need to find the Laffer Curve peak where revenue is maximized and not exceed it. But they don’t. They almost always overreach and thereby collect less revenue than they could if they were less greedy or punitive about the rate.

In short, there is always smuggling whenever any government tries to stop or tax the movement of goods. The higher the tax rate, the more the smuggling. Ditto non-availability as in Prohibition or as in future U.S. hyperinflation combined with price controls. Smuggling is illegal but it is a victim-less crime unless you consider government bureaucrats being deprived of more taxes or inefficient businessmen being deprived of the ability to overcharge for their products victims. But when the incentive is greatly increased as during hyperinflation, and the stakes rise to issues like starvation, violation of the law becomes almost universal and regarded as moral considering the alternative is to starve.

Section III of the book is titled “Smuggling” and its second paragraph begins with the sentence,

Smuggling flourishes wherever there are high duties or outright prohibition on imports.

That, of course, will be the case during US hyperinflation and U.S. capital controls, price controls, financial repression, rationing, and anti-hoarding laws.

Don’t revolt, smuggle

McIntosh says “it has been suggested” that the reason Canada did not declare independence from Britain was that they were not concerned about the tax on tea because they simply evaded it by smuggling. Specifically, they smuggled Chinese tea from American into Canada duty free and thereby did not pay the tea tax on British tea. I don’t get why we Americans were so excited about the tax on British tea then if the Chinese tea was already in our country without any need to smuggle it there.

Percentage of items seized

For more than a century, lower ranking Canadian customs officials got a percentage of the proceeds of auctioning off items seized for nonpayment of customs duties. This also included the methods of conveyance, that is they would seize the horses and ships of the smugglers.

We have this going on today in some states such that local police get to used items seized—typically from drug dealers—themselves or they use the proceeds of the auctions to buy stuff that they use collectively like a flat screen TV for the day room. It is a bad idea, incentivizes abuses, and should be outlawed. If I understand correctly, Canadian customs agents no longer profit individually from seizures.

Competing on leniency

At times, Canadian customs duties were not uniform, so importers would go to the customs office with the cheapest fees or lowest appraisals or most favorable categorization. This forced the various customs officers to compete on who could be the most lenient because their income was depended on how much “business” they did.

We have had this in US banking. When one regulator cracks down, you read about many banks changing to a different charter to get a more lenient regulator. And ultimately, because bureaucratic turf and budgets depend on the size of your regulatory empire, banks leaving your jurisdiction hurt your agency. Of course, regulators competing on who could be the most lenient is a formula for disaster resulting from lax regulation. Lax regulation is worse than no regulation where regulation is appropriate because any claim of regulation causes people to let their guard down.

If I understand correctly, Canadian customs fees and procedures are now unified but some things like appraisals of value and categorization will always be subjective.

My sense reading this book is that Canada tends to be protectionist, that is, goods tat are produced in Canada will cost more in Canada because of tariffs artificially raising the prices of competing imports and the Canadian producers relaxing their efforts to be more efficient as a result. In the hyperinflation grand scheme of things, this is a trivial non-issue. However, should Canada increase its protectionism during a hyperinflation economic contraction crisis caused by the U.S., it is quite possible that the U.S. might impose retaliatory tariffs on imports to the U.S. from Canada—like your weekly bag of Canadian groceries.

De minimus exceptions

True, there generally are de minimus exceptions. The current duty-free shop rules are examples of de minimus exceptions. For example, you can take U.S. cigarettes into Canada duty free. You have to buy them in the duty free shop next to the border crossing. You can only buy a maximum of 200 cigarettes (1 carton). They must be for your personal use. And you must have not been in Canada since at least 48 hours ago. I may have garbled that a little but you get the basic idea. There typically are some exceptions for small

• quantities
• dollar amounts
• numbers of visits per day or week
• personal use only
• categories of goods

The smaller the keyhole through which you must do your cross-border shopping, the more vulnerable you are to border delays, increased restrictions, and so on. If you are relying on going across the border for necessities and you can only buy and bring back small quantities of only some items, you could be cut off for days or weeks and that would create an intolerable situation.

Canadian manufacturing independence

When you step back and look at Canada, you note that it is a very northern country with a brief crop growing season and no ability to grow many crops that require lower latitudes and longer growing seasons. They have lots of natural resources of the water, oil, and mining nature. Given that, they really are not in a very good position to be imposing tariffs on imports. They have to export minerals to make Canada profit and they have to import lots of stuff they cannot make because of their geographic location.

If their manufacturers truly cannot compete without protectionism, one wonders if the country’s basic business model is viable. I suspect they can compete but have simply not had the confidence to try. Whatever, they like tariffs.

On occasion they have lowered tariffs. When they did it on timber in 1841, New Brunswick lumberjacks could not compete and emigrated to the U.S. as a result.

They did agree to the NAFTA agreement which is good. But one wonders if that will stand when the ’flation hits the fan and both countries are suffering from the contraction and the U.S. is also suffering hyperinflation and sucking Canadian consumers and business buyers into the US as a result. Our hyperinflation will make U.S. products extremely cheap to Canadians. Will they get more protectionist to protect their producers and retailers from that extreme price competition? And if they do, will the U.S. retaliate, thereby making it very difficult for you to import necessities from Canada?

For an example of the two countries being mad at each other, look at the period after we won the Revolutionary War against Britain, of which Canada was a part. For many years, Britain tried to force Canada to buy everything they needed from Britain or its colonies and sell everything they wanted to Britain with the shipping only being on British ships. Obviously, it cost a lot more to ship all Canadian imports and exports all the way across the Atlantic Ocean as opposed to just crossing the border with the U.S.

Until around 1900, Canada had a tariff on exports!? Although that tariff has since be reduced to zero, it is still on the books. I guess that is to give Canadians a break on not having to bid evenly against Americans for the items in question. If they reinstated that, it might interfere with your ability to buy the necessities of life by going into Canada for that purpose.

1947 Canadian restrictions

In 1947, Canada imposed restrictions on

• a wide variety of consumer goods
• quotas on other consumer goods
• imports of capital goods
• travel restrictions
• excise taxes on many durable goods

These appear to have been designed to help the country lower its World War II debt. So you can expect similar laws in the event of any significant fiscal crisis, like the dramatic reduction in tax revenue of all types that would flow to the Canadian government during an economic contraction caused by U.S. hyperinflation.

US tourism into Canada

U.S. Tourism has been important to the Canadian economy for at least 150 years. That is in our favor to the extent that the mind-set in Canada to encourage U.S. tourism continues during U.S. hyperinflation. Page 139 details the various instructions to Canadian Customs officers to be really nice to American tourists so they will stay longer, return, and recommend Canada to their U.S. friends.

Company town

Some of the other books I read suggest that Canadians are proud of treating Indians better than Americans did. There is an interesting aspect to that. Unlike most of American development, Canadian development was often in the form of the British crown granting business monopolies to large areas of Canada to private companies—most notably the Hudson’s Bay Company.

Furthermore, Hudson’s Bay Company—a department store chain there now—had a very narrow focus: fur trading. As a consequence, they discouraged farming, ranching, settling, pretty much everything but fur trading. And they enacted their own laws, had their own police and even their own private military force.

Where did they get the furs? They bartered for them from Indians and trappers. The Indians were stone-age hunter-gatherers so their “way of life” happened to coincide with what the Hudson’s Bay Company wanted: dead furry animals. The Indians were also useful idiots to the Bay Company—selling their furs really cheap. In other words. It would be more precise to say that the Hudson’s Bay Company was nice to the Indians, not the Canadians, plus they were nice to them because they were independent contractors who were ignorant of the real market value of their product: furs. In terms of how much the Hudson’s Bay Company paid the Indians, they were not nice to them. And the Hudson’s Bay Company held down the population of white settlers out of fear that it would hurt their fur monopoly.

In contrast, the American policy and mind-set regarding migration into the West was come-one-come-all, go west young man and make your living however you want—fur trapping, mining, ranching, farming, railroading, retailing, whatever. So armies of whites went West in America into Indian country; only the small number of white trappers allowed by the Bay Company went into Western Canada. It is easier for Canadian whites to get along with Indians when few of them ever encounter one and when those who do encounter them are their employers paying them with goods they have never known until the white man came, e.g.,., guns, liquor, blankets.


Terrain matters in the customs business. The ideal country for customs purposes would be an island with one harbor and the rest of the coast being high, sheer cliffs with waves crashing on rocks at the base and no beaches.

By that standard, Canada is a bitch. it has something like 4,000 miles of heavily wooded, rugged terrain land borders, a 1,000 miles or so of inland water borders like the Great Lakes, St. Lawrence River, and the straits and bays around Victoria and Vancouver, Canada and Seattle, WA. It also has over 100,000 miles of ocean coast. In both the ocean coast and the fresh water shorelines, there are zillions of secluded coves and bends in the rivers.

When you defend a perimeter in the military, how far apart the foxholes are is a function of the density of the vegetation and other visibility-limiting factors like hills, mountains, coves, river bends, fog, and so on. With regard to Canada’s border, you would need a prohibitive number of “foxholes.” The same is true going the other direction into the U.S. That’s’s why it’s so hard to prevent liquor from coming from Canada during Prohibition or Latinos from Mexico now. Too many places to cross.

As in defense strategy and tactics, there is also a never-ending arms race as each side, the smugglers and the customs guys come up with new ways to defeat each other’s tactics. Furthermore, the smugglers, like drug dealers, are unregulated entrepreneurs and the customs guys are government employees and bureaucrats so the smugglers have the upper hand in terms of flexibility and incentives.

During hyperinflation and its five accompanying laws, it is good to to be in a job or business that engages in international trade. For one, shipbuilding greatly benefits from smuggling. And I would expect ship builders can do so without breaking the law and probably get a government license to be able to sell to foreigners and accept foreign currency as opposed to the rest of America which will be prohibited from possessing foreign currency by capital controls.

Other international industries where you would be able to get foreign currency and permission to take USD out of the US and all that include:

• tourism
• exports
• imports
• international transportation
• fishing

During the war of 1812, which was between the U.S. and Britain (including Canada) Canadian soldiers were supplied with goods smuggled out of the US into Canada because the legal goods—from Britain or other British colonies—were too hard to get or too expensive. As an aside, during the U.S. Civil War, Confederate soldiers demanded to be paid in Union (enemy) Greenback currency which was hyperinflated because their Confederate dollars were even more hyperinflated. And they were paid in Union Greenbacks! With hyperinflation, a nation goes through the looking glass.

Smuggling is usually two-way because of the simple economics of the ships or vehicles or aircraft being expensive to operate if they are empty for half of their movements. In other words, smuggling that is not normally profitable—from the high tariff country back into the low tariff country—becomes profitable when the transportation vehicle in question is already traveling from the country with high tariffs or prohibitions back to the country with low tariffs and/or fewer prohibited items. You might even see the vehicle carry illegal contraband as a smuggler one way then carry legal goods back the other way. Basically, shipping companies abhor an empty moving vehicle, aircraft, or ship.

Smugglers operate by entirely avoiding customs agents or by lying to them about consignees, destinations, origins, valuation, contents of boxes or barrels, use to which goods are to be put upon arrival.

At times either Canada or the US has had capital controls. This puts the border guards of the country in question in the business of searching their own citizens leaving the country for “excess” money. The citizens hate that and the customs guards hate having to do it. I surmise from the book that capital controls are the least favorite border law of travelers and customs guys ever in the history of Canadian customs.

Smuggling vehicles, ships, and aircraft are disposable in the smuggling business because of its high margins. Under Canadian law, even the flotsam and jetsam from shipwrecks are goods on which duties must be paid!

Smugglers rob each other and plain old non-smugglers robbers target smugglers because they have a lot of cash after sale or a lot of valuable contraband before sale.

So can you live in the U.S. along the Canadian border and shopping in Canada to get necessities unavailable in the U.S. during hyperinflation? Yes. You can now. And you may be able to during US hyperinflation. But the history of the border and the ongoing disagreements between the two countries indicate that although the long-term future of the border will be about the same as now, for short periods, one or both countries may restrict movement of goods, money, or people across the border.

During U.S. hyperinflation, the U.S. economy will contract. So will Canada’s—as a result of ours contracting. The USD will collapse in purchasing power, directly hurting Canadians who currently have USD bank accounts or other USD-denominated bank accounts. U.S goods and services will be extremely cheap to Canadians which will hurt Canadian providers of goods and services. Canada may get angry at the U.S. for all this and enact laws designed to punish the U.S.—even to the extent of hurting themselves as much as or more as they are hurting us.

Bottom line, you need to have a backup plan to living in the northern U.S. borderlands and shopping for necessities in Canada. One backup plan would be stored necessities—perhaps across the border in Canada to avoid U.S. anti-hoarding laws. Others would include pre-positioning currency in foreign savings accounts in selected countries so you could leave the U.S. and stay in some non-hyperinflated country spending your non-USD currencies while there. You would not need to go the the countries where you had currency, although that would save you a second currency conversion cost. You may want to swap houses with a person in another country and, if you are exempt from capital controls in another country which is hyperinflated, swapping with a home owner in another hyperinflated country might make the most sense of all.

During my visit to Northwest Washington State, I noticed that there are tons of large farms there. They appeared to be mostly in the hay, corn, berry, or dairy businesses. That doesn’t make for a very balanced diet, but it is likely that farmers would diversify their crops even into crops that in normal times do not make economic sense in their area. Such a development would result in a within-U.S. black market for food and a legal, albeit inefficient, barter market.

If you search for the words I have not elaborated on here—like barter or house swapping, in the search box at the top of each of my web pages, you will find more details on those subjects.

Stated in 25 words or less my advice on using the northern US border areas as a place to take refuge from US hyperinflation is

Yes, you can do that but it may stop working for periods to time too long to live with. You need a back-up plan in case those periods occur.

John T. Reed