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I recall this simple tale that summarizes the role of money in economy. I am looking for the original reference to its text, author and initial date of publication.

A foreign merchant reaches a wealthy town. At the tavern, the innkeeper asks for a coin of gold to stay the night, but the merchant does not own any currency accepted there. So, they produce a counterfeit coin that the innkeeper accepts, thinking it is true. The innkeeper later uses the counterfeit coin to pay the cook, who uses it to pay-off his debt to the butcher, and finally the butcher buys a knife to the foreign merchant. On the morning of the next day, the foreigner exits the town with their counterfeit coin, but it has enabled a series of transactions that would otherwise not have been possible.

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  • $\begingroup$ 1. Are you sure you have all the details right? I read a very similar short story, with some distinctions: a) The town used to be prosperous, but was currently impoverished and most people in the town owed money to someone else. b) This was in the Wild West, thus the currency produced was not a fake coin but a fake bill. It was only revealed at the very and that the bill was fake. $\endgroup$
    – Giskard
    Mar 27, 2022 at 9:46
  • $\begingroup$ 2. The story is a nice intro into the role of money/liquidity, but I am still not sure this is on-topic here. After all, this seems to be a question about literary fiction. $\endgroup$
    – Giskard
    Mar 27, 2022 at 9:48
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    $\begingroup$ @Giskard About (1) no, I am not sure of the details: we're probably talking about the same story. (2) I cannot judge. My reasoning was "who is most likely to know about this?" I do think this is a pedagogical story meant to teach economics, rather than literary work that happens to contain a valuable lesson. $\endgroup$
    – AlexisPrel
    Mar 27, 2022 at 10:12
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    $\begingroup$ The tale is referenced here with a $100 bill: forbes.com/sites/bobmcteer/2011/11/29/the-tale-of-the-100-bill/… $\endgroup$
    – AlexisPrel
    Mar 27, 2022 at 10:19

1 Answer 1

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The story you are looking for might be "The Enchanted Valley" by Eugene Manlove Rhodes.

this 1909 story, published in Redbook, could have come from the pen of O. Henry. With a mythical community in a remote mountain valley, it describes in microcosm the economy of the West. The cash flow is zero because there is no cash in circulation, thus everyone is in debt to everyone else.

People get along by bartering goods and services. The loan of a hundred dollar bill quickly makes the rounds as one after another uses it to pay off his debts. The irony, as we learn in the last line is that the bill is counterfeit.

Source

I was unable to find the text of the story online, but here are some notes on which magazines it was published in:

The Enchanted Valley [#63] & Wizard of Finance [#131] (XXXVII-XXXVIII, pages 346-363 in the Fly Edition) . This story first appeared in The Red Book Magazine, March 1909 and as Wizard of Finance in Zane Gray’s Magazine, March-April,1947, pages 144-153 and as The Enchanted Valley in pages 49-61 of The Rhodes Reader.

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