very basic finance textbook

It is that, despite the first appearance that he got his hotel stay for nothing, there will always remain a chance that someone will present the cheque to his bank. OK, so the islanders are friendly and unwaveringly trusting, but sooner or later some less trusting outsider will be on the receiving end, and will rush to the bank with it.

In message , Aztech writes

He still has an outstanding liability in his balance sheet. The remaining holders have no such entry.

From a balance sheet point of view, none. In fact he might benefit from the interest on the unclaimed money if it were left in the account upon which the cheque was drawn.

"Ronald Raygun" wrote

Yes it does.

"Ronald Raygun" wrote

That doesn't matter. It wasn't an "island's" cheque that the holidaymaker wrote, it was drawn on his own bank back home.

"Ronald Raygun" wrote

The question was: "why would they suddenly stop and question its validity?"

Whether or not they were going to present it to a bank is irrelevant, what matters is whether/why someone might not accept it...

"john boyle" wrote

What applies or doesn't apply on the island doesn't matter - it's what the man's bank back home applies (or doesn't apply) that matters!

And this NG is " UK.finance " ...

"Aztech" wrote

Of course - but Troy wrote: "A *man* holidays on an island...". He did *not* say "A *nation* holidays on an island...".

Troy didn't actually specify where the visitor banked. It is quite conceivable that it was indeed an island bank, given that the visitor was well known and trusted there.

Troy said at the outset, "it is never presented at a bank", so you can have your bank wherever you like.

Yup - that's what I meant. Substitute the central bank for this man and banknotes are exactly like his cheque.

Everybody else who owns the cheques - as it'd cause high inflation. Exactly like a central bank printing more banknotes.

When the bank will exchange it for a different piece of paper with a promise of payment from a different entity (eg the BOE).

It's wider than, "everybody else who owns the cheques".

If the cheques are now currency then that is (as you say) "like a central bank printing more banknotes". Every banknote issued diminishes the value of every other banknote already in issue.

So the answer to the question: "Who paid the hotel bill?" is "Everybody on the island"

Surely it's just people on the island who own the cheques - or perhaps own the currency in which the cheques are denominated?

Somebody owning a different currency shouldn't be affected (as the exchange rate of their currency should improve against the cheque's currency), somebody with no money shouldn't be affected, and someone with a big debt in the cheque's currency should be better off!

There was me thinking this was all a crafty allegory ;)

"Troy Steadman" wrote

I don't agree; if it was written on "Toytown Bank", then even though everyone trusted the holidaymaker, they would all *know* that the cheque could not be cashed and was therefore worthless.

It might as well have been a simple 'IOU'...

It is wonderfully English of you, Tim, to assume that whatever remote island you visit in the world, it will inevitably have a population that speaks English and who are familiar with Big Ears. Can we put Enid Blyton to one side for a few minutes and remember that we are in the adult area of Usenet, with the grown-ups?

Or beads, or anything that will serve as "currency". Here's a suggestion for your follow up:

Tim will write:

"The cheque could have been made out of chocolate and then everyone would see it wasn't real".

In message , Tim writes

Ok, well in that case if the cheque is presented after the drawer dies then it would be returned unpaid by the drawee with the answer 'drawer deceased' but that doesnt mean the holder has lost out because the debt is still enforceable against the estate. I am sure our island hopping holiday maker is an astute record keeper and his executor will notice the unpresented cheque, or notice the return of the unpaid cheque and so will retain some funds to cover it.

Spoilsport!

"Troy Steadman" wrote

Our Tim is exceedingly literal and a teensy bit thick.

As a Cambridge graduate in statistics and probability, "thick" is not a word I'd use about Tim. He strikes me as the equivalent of a brilliant scientist who cannot tie his shoe laces or fry an egg.

"John Redman" wrote

Well, at least I'm not as thick as you were below! :-

"Ronald Raygun" wrote

"Ronald Raygun" wrote