The EconomistAugust 10th 2019 Finance & economics 592 The damage to America’s economy is
less tangible. A survey by the Federal Re-
serve Bank of Atlanta suggested that tariffs
and trade-war uncertainty had hurt private
investment by 1.2% (and manufacturing
investment by over 4%). The unease has
also made it harder for the Fed both to pre-
serve stable growth and to raise interest
rates to more normal levels. That will give
it less room to act if the economy flounders
for other reasons.
In a tweet, Mr Trump called on the Fed
to respond to China’s weakening currency.
Although the dollar is technically the re-
sponsibility of America’s Treasury, the
Fed’s decisions have a profound influence
over its value. It does not take orders from
the president and treats the exchange rate
with benign neglect. But if the uncertain-
ties of the trade war inflict enough harm on
confidence and spending, it might cut in-
terest rates anyway. The futures market
prices in a roughly 40% chance of at least
0.75 percentage points of easing by the
year’s end. The fog of war can be as damag-
ing as war itself.
The trade fight has reverberated global-
ly. America’s Treasury had already expand-
ed the list of countries it is monitoring for
signs of currency manipulation. None of
the countries listed met all three of the
Treasury’s criteria (a large bilateral surplus
with America, a material overall surplus
and persistent currency intervention by
the central bank). But then, neither did Chi-
na. The definition of manipulation is, it
seems, highly manipulable.
One of the currencies most affected has
been Japan’s yen. A haven in troubled
times, it rose sharply after Mr Trump’s sur-
prise announcement. A strong yen makes
it harder for Japan’s central bank to revive
inflation, especially as its interest rates al-
ready lie below zero. Although Japan has
not intervened directly in the currency
markets since 2011, its officials are watch-
ing the yen’s rise with alarm. If the curren-
cy strengthens closer to the psychological
threshold of 100 to the dollar, Japan’s au-
thorities might feel compelled to act. Cur-
rency wars can also be the continuation of
monetary policy by other means.
Nor has Europe escaped. Industrial pro-
duction in Germany fell by 5.2% in the year
to June. “Foreign macro shocks” account
for about two-thirds of Germany’s slow-
down since 2017, according to Goldman
Sachs. European banks, including abn
amro, Commerzbank and UniCredit, this
week warned of squeezed interest margins,
rising provisions or flagging revenues. In a
recent economic bulletin, the European
Central Bank worried that trade uncertain-
ty had delayed global investment, damag-
ing European exports of manufacturing,
machinery and transport equipment. In a
globalised economy, everything is a con-
tinuation of everything else. 7
M
ark tucker and John Flint always
seemed an unlikely double act at the
top of hsbc, Britain’s biggest bank. Mr
Tucker’s first profession was football—he
was on the books of Wolverhampton Wan-
derers, now a Premier League club—and
you imagine he was robust in the tackle. He
never made the first team, but instead be-
came a star in the insurance business. He
captained Britain’s Prudential and aia, a
big Asian life insurer, before transferring to
hsbc, as chairman, in 2017.
The wiry Mr Flint, by contrast, com-
pletes triathlons and was an hsbclifer,
joining from university in 1989. He climbed
the ranks in hsbc’s time-honoured way,
running the retail and wealth-manage-
ment division before becoming chief exec-
utive in February 2018.
On August 5th, to general surprise, hsbc
declared that Mr Flint was standing down
after just 18 months. Noel Quinn, the head
of commercial banking, will take interim
charge. The bank’s tradition has been to ap-
point its chief executives from within—Mr
Flint’s predecessor, Stuart Gulliver, ran the
bank for the last seven of his 38 years on the
staff—but it will look externally as well as
internally for a permanent replacement.
At first blush, Mr Flint’s ousting looks
harsh. On the same day as it announced his
departure, hsbcreported that its net in-
come in the first half of 2019 had risen by
18.1%, to $9.9bn. Its return on tangible equ-
ity (rote), a standard measure of profit-
ability, was a respectable 11.2%. In Asia,
where it made almost four-fifths of its pre-
tax profit, revenue grew by 7%. Not every-thing is rosy—the American business is
flagging and will miss its rotetarget for
next year—but all in all the record looks de-
cent. Moreover, Mr Tucker told analysts
that there was no disagreement about a
strategy that was revised only in June 2018.
Nor, despite the contrast in their charac-
ters, was there a clash of personalities.
So why did Mr Flint have to go? Al-
though results are heading in the right di-
rection, Mr Tucker thinks progress should
have been brisker. He also sees more diffi-
cult times ahead and evidently believes
that Mr Flint is not the man to lead hsbc
through them. Lower global interest
rates—the Federal Reserve cut its bench-
mark rate on July 31st for the first time in
more than a decade—are not good for
banks. The geopolitical outlook is dicey
too. Trade wars are not good for trade spe-
cialists like hsbc, and a Sino-American
trade war is especially worrisome for a
bank with Hong Kong and Shanghai in its
name and its marrow. The board, Mr
Tucker said, had decided that “a change
was needed to make the most of the signif-
icant opportunities ahead of us”. Mr Quinn,
he added pointedly, will bring “pace, ambi-
tion, decisiveness”.
Mr Flint may perhaps count himself un-
lucky. At Standard Chartered, another Brit-
ish bank with an Asian centre of gravity, the
chief executive has so far had four years to
knock the institution into shape. But Mr
Tucker has brought an unwonted impa-
tience to hsbc. It may just be for the best. 7The surprising departure of the British
bank’s chief executiveHSBC
Chipped away
I
n several countries—Britain, say, or
Sweden—bank transfers are more or less
instant. The moment your wages leave
your employer’s bank account, they arrive
in your own, giving you the wherewithal to
pay the bills and feed the family. But Amer-
ica is far behind. Transfers can take days to
clear, landing many Americans—chiefly
those who can least afford additional ex-
pense—with hefty overdraft fees or push-
ing them towards payday lenders charging
high interest rates. In an age when millen-
nials can split a drinks tab on their smart-
phones before leaving the bar, this almost
beggars belief.
The Federal Reserve wants to speed
things up. On August 5th it said that it
would build a faster-payments system, as
central banks have in other countries. But
not, alas, instantly. FedNow, its proposedThe Fed says it will build a real-time
interbank payments system. EventuallySpeeding up paymentsOverdue
1