We might take a look at cryptocurrencies soon. This is a complicated subject about which I have many questions but as yet not many answers. It can be difficult to identify the risks and weaknesses in any financial system, much less complicated ones. To demonstrate, let's consider, not for the first time, the case of The Englishman's Holiday. This is a problem involving a very simple set of facts, much simpler than cryptocurrency facts, yet it  still manages to intrigue. It demonstrates that in economics nothing is simple.  Here is the problem.

There once was a very upright and very proper Englishman who regularly took his summer vacation on a tiny agreeable Aegean island. The Englishman had returned to the island so many times that his credit worthiness had been established beyond any possible doubt. There was absolutely no chance that this Englishman's bank would fail to honour his cheques and indeed all of them had always been honoured promptly.

Since the Englishman's credit was so sound the islanders were totally happy to allow him to pay by cheque with the certain knowledge that they were good cheques. Indeed, so well-known and trusted was the Englishman on this tiny island that the islanders were happy to accept the Englishman's cheques from each other. For example, if the restaurateur wished to pay the grocer partly with a cheque he had received from the Englishman in payment for a meal, the grocer was happy to accept the cheque. The grocer was then able to buy fuel with the cheque and so on. In this way the cheques circulated around the island forever and were thus never returned to the Englishman's bank for collection.

Who paid for the Englishman's holiday?

I will allow a little time in case any reader wants to offer his or her answer to the question. Then I will say a few words about cryptocurrencies.