ELI5: What exactly does it mean for a currency to ‘weaken’ against another currency?
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I assume then that Statue of Liberty would be hollow (and in fact the bricks we see would only possess the exterior surfaces we see), since structural strength isn’t an issue with virtual objects, right?
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Right. All the “guts” of 3D models exist in invisible code that tells the object in the game how to behave. The only visible part you need is just the infinitely thin outer surface, along with whatever texturing and decals you apply to the model.
Although in bigger animated productions, they do make a point of simulating anatomy. I believe it was Shrek that first did that, modeling Shrek, Donkey and human characters’ skeletons and visceral organs to try and get motion that looked more natural thanks to the non-uniform weight distribution of their bodies. I think motion capture may have decreased the usefulness of simulating internal organs, now that you can just record people’s performances and get that motion naturally.
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When I was working a little Skunkworks project way back in the 90s there was a guy from the Ivory Coast on the team who had the best attitude.
He was an avid role player too, and he was completely unembarrassed and fearless about being wrong, and when he was he’d get all excited because…Free XP!
Loved that guy, taught me how to think better. Now finding out I’m wrong is a great way to get a quick level up!
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Well, generally, yes, you are SOL (would five-year-olds know that acronym). If the bond-issuer can’t pay then the bonds are reduced to actually just pieces of paper.
And if the bond issuer is a municipality, then you have the beginning of the next major global financial meltdown.
Just that you can buy less of currency B for currency A. If current you have to spend CAD$1.30 to buy USD$1 and tomorrow you have to spend CAD$1.31 to buy USD$1 then CAD has “weakened” against USD.
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That part I get. What I don’t understand is the actual process by which a currency depreciates or appreciates against another currency.
For example: the pound sterling has weakened against the dollar from 1.50USD to 1.30USD. But how? Did people holding liquid assets in pounds suddenly use them to buy up dollars instead?
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That’s really interesting, as a data person I just think of them as attributes, so an object can have dozens of dimensions…it’s just that you can only use two or three of them (sometimes 3-D is ugly as sin) for plotting a location and everything else has to use some other mechanism (size, color, texture, shape, etc.)
That way there’s also no squidginess going from 2-D to 3-D to 4-D. I often have to visualize 4-6 dimensions simultaneously and which ones are used for ‘position’ are generally pretty interchangeable.
Viewed from that direction voxels are kind of delightfully easy to visualize. I dream of only having to worry about three dimensoins! It also helps with context-independence. 
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and @ficuswhisperer too…
Until recently, that was literally never a concern. Of course municipalities wouldn’t go bankrupt! Hah. But yes, sometimes businesses will issue bonds too, and of course companies have always had a history of some not succeeding and thus going bankrupt.
If there isn’t enough money to pay all bills, a municipality is just like a family: you have to decide what’s the most important thing to pay first, then second, etc. Legally, bonds are considered to be in the first group of most-important-to-pay. As long as there is some money available, bonds will be paid and so then maybe garbage isn’t picked up as often, or potholes aren’t filled…or in the case of a business, less product is made or workers are laid off.
Not being able to pay bondholders is a big no-no. Like, that’s the basis of the problem with Greece, etc. If you cannot trust a government to pay their bondholders on time, that means you will not be trusted for generations, if ever.
Also, there is another type of bond which has quarterly or yearly coupons. This means instead of being worth more at maturity, the bond costs the face amount in the beginning but then each term you get a set payment. This can go on until the bond matures, or in some cases can go on as long as you hold the bond (and the company is in business, of course). So those payments are also first-in-line if a business or municipality is in financial trouble.
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You don’t need fiat currency to understand this.
So let’s say that you’re literally five years old and I decide to give you an allowance. But the allowance isn’t money, it’s pieces of paper redeemable for candy called Candyslips (CS). If you really want to, you can redeem it for money at a rate of $1 to CS 1. So it seems like it’s as good as the dollar, right? Except that sugar starts to cost more and more as time wears on, because… I dunno- the sugar bear is infesting sugar crops somewhere. Suddenly, the value of the CS goes up, because you can exchange it for a commodity more cheaply than US dollars. Now this is in part because the CS is pegged to a quantity of candy. In fact, the price of candy goes up so much that I don’t want to buy you candy any more and start offering you more money for the Candyslip. In offering you $5 for CS 1, the dollar has weakened against the Candyslip.
This is an example of something that isn’t a fiat currency, the Candyslip is, after all, pegged to the value of candy. It could be gold or silver or nitrates or any other commodity. The reality of currency exchange with fiat currency has to do with the fact that governments back the currency rather than a commodity. In this case, when a country experiences financial hardship, it’s currency becomes worth less compared to others.
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Got it. So there’s still a non-zero risk but it’s significantly lower than other investments.
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And I assume that attributes like the length of a bond’s term and what percentage of the full face value the bond is initially sold for… these are variables that the offerer can decide at the outset? And that bond payoffs are prioritized so highly during hard times simply to protect the bond as a funding tool ('cause if you don’t pay 'em back as advertised, nobody will ever buy 'em from you again)?
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Bravo! You’re a very smart 5 year old!!
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@ActionAbe explained a sort of why this happens. The actual mechanism for how it happens goes back to there being a fixed amount of each currency in the world. The US government has only printed* so many US$, the UK has only printed so many pounds. When you want to get pounds for your US$ you need to actually need to find someone who is willing to take your US$ and gives you pounds in exchange.
So when Brexit happened the pound devalued the same way a stock does. People had pounds and wanted US$. They wanted to sell their pounds for $1.50 each, but no one was willing to buy at that rate, so they said, “Okay, I’ll sell at $1.49”. A few hours later it was, “Okay, I’ll sell at $1.31”.
Basically this is just trading in the most basic sense. If I have 10 apples and know that people will trade me oranges 1:1 then I could say I have 10 oranges worth of apples. But if suddenly the country that likes apples best institutes isolationist policies to block my foreign apples then suddenly people aren’t going to want my apples as much, maybe you’ll want 2 apples for every orange. Now I only have 5 orange worth of apples. The apple has weakened against the orange.
When you go to the bank and exchange currency, they say, “Hey, I know that people are willing to buy pound at $1.31 because someone just did that, so I will sell them for the same amount.” (Well, they charge you a little extra).
* Many US$ that exist in the world have never been “printed” onto actual paper, but the quantity in existence is still controlled by the treasury.
And for this very reason, your knowledge of bonds will become obsolete in the next 10-20 years when the US municipal bond market collapses and no one ever trusts bonds again!
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Well, at least by then I’ll be out of kindergarten, and can maybe get a job. 
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ELI5: How come I can’t have a pony? I want one!
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This is absolutely false. Banks create electronic US$ at will. And US$ notes are printed by the Federal Reserve (central bank), not the Treasury (government).
But your actual explanation is spot on.
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BECAUSE I SAID SO, THAT’S WHY.
That’s how to explain stuff to a 5-year-old, right?
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That is the correct answer. /thread
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