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This color is him and the rest is me:

An interesting question came to mind while reading your article. Wouldn't the purchasing power of the "post fiat" dollars in Mr. Howell's cache have fallen as he "spent" them for goods or services in much the same way that the purchasing power of fiat dollars in our economy falls as more dollars are printed and put into circulation?

Yes, excellent point. If Howell can control the supply of dollars, he can heavily influence the exchange value of dollars, but his control is limited in three critical ways:

(1) He can parcel them out, but he can't print more, so his control of monetary policy is temporary;

(2) The castaways are free to choose a different currency if Howell's policy is seen to be overly burdensome -- gold and shells are less good than his post-fiat dollars only under certain circumstances and they can become better forms of money under changed circumstances;

I would think this would at least be true until the total volume of dollars hoarded in those suitcases became public knowledge, and the actual final scarcity of this commodity was actually known.

(3) The expectation effect: in our own economy, prices aren't just affected by the current money supply but also by the anticipation of how much the FED will inflate the money supply. The truth is that the price the Skipper seeks for his fish isn't just based on yesterday's actual coconut prices, but also on his anticipation of tomorrow's potential prices for all other goods he might seek. Since the castaways know the size of Howell's suitcases, and have some experience with the denominations inside them, they do have some information on which to base the expectation of short-term inflation.

Please let me know if what I am saying makes sense. I am new to this whole economics theory thing, but I enjoy learning more about it immensely.

I'm new to it, too. I read Gene Callahan's book, Economics for Real People, only a year ago and began reading Mises.org only shortly prior to that. The Mises Institute is doing a valiant job of making economic concepts more accessible to us laymen.