Slate Money – "Naked Swimmers" (August 10, 2019)

Host: Felix Salmon (Axios)
Co-hosts: Anna Shymansky, Charles Duhigg (guest host)
Theme: An in-depth look at the week's major business and finance news, focusing on the US–China trade war, currency manipulation accusations, Elizabeth Warren’s agriculture plan, instant payments in the US, and the launch of the Apple Card.

1. Episode Overview

This episode, titled "Naked Swimmers," explores the ongoing US–China trade war—especially the recent escalation around tariffs and currency manipulation. The hosts dig into the real mechanics and politics behind China's currency, the bizarre consequences of official currency manipulator designations, and the signaling games played by governments and markets. They also dissect Elizabeth Warren’s proposal to address the plight of American farmers, debate the merits of government-subsidized agriculture, and discuss the US lag in adopting instant payments. The show wraps up with the launch of the Apple Card and its implications for payments, finance, and consumer behavior.

2. Key Discussion Points

A. Charles Duhigg Debuts New Podcast & Bank Robbing Anecdotes (01:00–02:27)

• Charles Duhigg introduces his new "How To" podcast—a problem-solving show inspired by the advice column "Dear Abby," with a twist: investigative journalism and real experts.
  • Memorable moment: "Someone wants to learn how to rob a bank. That was actually me. I want to learn how to rob a bank. So I went and I hung out with a bank robber all day, and then I robbed a bank." (01:35)
• The lighter banter transitions into serious financial topics for Slate Money to tackle.

B. US–China Trade War & "Currency Manipulation" (03:50–16:53)

Escalation of Tariffs & Currency Devaluation (03:50–08:13)

• The panel discusses President Trump’s decision to expand tariffs to nearly all Chinese imports and the predictable effect on the Yuan.
  • “You walk in, you're like, give me all your money… and you get like, what, three or $400?… and then you go to jail … for seven years.” (01:59)
• Felix Salmon: “When you announce that you're starting a trade war, the world freaks out a bit… people stop buying the Chinese Yuan, they start buying the US dollar.” (04:31)
• Trump labels China a currency manipulator after the Yuan weakens, despite market-driven factors causing the change, not direct intervention.

The Irony & Political Motives (06:00–09:54)

• Anna Shymansky: “He’s labeling them a currency manipulator for manipulating their currency less.” (06:00)
• Charles Duhigg: Details China’s true historical manipulation (up until 2014), and the move to a "managed float."
• Both US political parties are comfortable with China-bashing; candidates rarely offer meaningful alternatives.

The Real Impact of Currency Manipulator Label (10:47–12:45)

• Felix Salmon: “The designation of China as a currency manipulator is one of the weirdest things… It has literally zero effect on anything.” (09:54)
• It mostly annoys China, complicating trade deal prospects.

The Role of Signaling and Trump’s Approach (13:08–16:53)

• Charles Duhigg: “Financial policy from the White House … is usually a signaling device as much as it is actually a stick.” (13:26)
• Trump’s unpredictability amplifies market anxiety. Lack of clear signaling makes business and market reactions volatile.
• Markets react more to signals than substance, especially as hints of recession begin to appear.

C. US Economy: Signs of Stress Amid Long Expansion (16:28–19:01)

• Anna Shymansky: “You're starting to see this in hard data. And that's why I think the market is also going to react more to these things.” (16:28)
• Charles Duhigg: Uses a (tortured) "naked swimmers" metaphor (and Warren Buffett reference) to explain how a long period of prosperity hides underlying vulnerabilities: “The rising tide of the last eight, nine years has covered so many naked swimmers… at some point the tide goes out.” (18:33)

D. Focus on American Farmers & Elizabeth Warren's Plan (21:45–33:58)

Trade War Hits Farmers (21:45–23:45)

• China retaliates by boycotting American agricultural products, especially soybeans. Trump’s solution: write checks to cover farmer losses, but this does not replace lost markets or relationships.
• Felix Salmon: “Trump writes a check and says, listen, can I just make it better with some money? And the farmers say, no, not really, because this isn't about my annual income so much as it's about my relationships with these Chinese buyers, which it took me decades to put together.” (21:58)

Dissecting Elizabeth Warren’s Agriculture Plan (23:45–33:58)

• Anna Shymansky:
  • Praises investment in R&D for sustainable agriculture (23:45)
  • Criticizes price controls and cost-coverage loans as flawed, historically failed policies that lead to overuse of fertilizers and inefficiency (24:09 onwards)
  • Emphasizes the decline of small farmers is not recent and their incomes aren’t as dire as commonly portrayed (26:25, 29:45)
• Felix Salmon: Sees political logic in distributing subsidies to small farmers rather than corporations, but recognizes efficiency trade-offs (28:19)
• Charles Duhigg: Highlights food security as the historical rationale for farm subsidies, not efficiency or justice (30:29)
• Consensus: Farm subsidies are likely inefficient at wealth redistribution compared to other policies.

E. Instant Payments and US Banking Infrastructure (34:24–41:55)

The State of Instant Payments: RTP and FedNow (34:24–41:20)

• Felix Salmon: Passionately explains that US instant payments (like RTP) exist but are underused; the Fed plans a new “FedNow” system to standardize and expand access (35:13, 36:09)
• Hosts agree payments infrastructure is a natural monopoly—competition adds complexity rather than efficiency.
• Charles Duhigg: Advocates for support of small banks and credit unions, seeing FedNow as a democratizing move (38:13, 41:20)

Barriers to Adoption (39:51–41:04)

• Payments processors (Fis, Jack Henry) and legacy systems are the main obstacles.
• Practical challenges for credit unions and the transformative potential of standardized solutions.

F. Apple Card Launch and the Future of Consumer Payments (41:55–49:59)

• Felix Salmon: Details how the Apple Card is innovative but not revolutionary—high security, embedded in the iPhone, with dynamic CVV codes (44:29)
• Anna Shymansky: Cautions against loosening credit standards during economic booms (43:06)
• Behavioral economics at play: The Apple Card encourages higher payments, more transparency (45:26).
• Apple as a tech giant stepping into finance—data privacy is a feature (Apple holds no transaction data) (45:38).
• Felix: Critiques the principle of “walled garden” cash-back ecosystems (46:41), preferring universally accessible funds.

Cashless Economics & Societal Implications (47:51–49:59)

• Discussion about the move toward contactless, cashless payments and behavioral economics: e.g., “Forever Stamps,” toll increases unnoticed due to lack of physical transactions.
• Charles Duhigg: Warns of consequences for the poor and the elderly in cashless systems.

3. Notable Quotes & Moments

• On Currency Manipulation:
  • Anna (06:00): “He’s labeling them a currency manipulator for manipulating their currency less.”
  • Felix (09:54): “The designation of China as a currency manipulator is one of the weirdest things... It has literally zero effect on anything.”
• On US–China Relations & Political Posturing:
  • Felix (08:36): “Donald Trump certainly believes that China bashing is good on a sort of political, electoral level.”
• On Agricultural Policy:
  • Anna (24:09): “There's the second part, which is basically just another version of price controls... We've seen this over and over, so many administrations have tried to do this type of thing. It is always a disaster.”
• On Payments Infrastructure:
  • Felix (36:09): "...the Fed has now basically said, okay banks, you had your chance, you rolled out this RTP thing. It was just dead in the water. No one's using it. We are going to come out and do our own version of this. It's going to be called FedNow."
• On Tech Companies Entering Finance:
  • Charles (45:26): "It is also in terms of the transparency of the fees and the interest, kind of the best credit card out there... It's using a bunch of behavioral economics to actually try and minimize the amount of interest that you pay rather than maximize it."

4. Important Timestamps

• [01:00] – Charles Duhigg on his new "How To" podcast and robbing a bank experiment.
• [03:50] – Start of trade war and currency manipulation discussion.
• [09:54] – Why labeling China as a currency manipulator is symbolic, not practical.
• [18:33] – Duhigg's "naked swimmers" metaphor (Buffett reference).
• [21:45] – Effect of trade war on American farmers; Warren’s plan introduced.
• [23:45] – Breakdown and critique of Elizabeth Warren’s agriculture plan.
• [34:24] – Payment system woes; introduction to RTP and FedNow.
• [41:55] – Apple Card and its role in changing payments.
• [47:51] – Debate on the societal implications of cashless transactions.

5. Flow, Tone, and Closing

The show maintains a witty, skeptical, and informative tone throughout, often mixing policy wonkiness with dry humor and personal anecdotes. The hosts are unafraid to challenge conventional wisdom—especially around trade, politics, and tech—and frequently use analogies (sometimes tortured) to make complex topics accessible.

6. End Segment: Numbers of the Week & Bet

• [50:28] Felix: UK’s Q2 GDP shrank by 0.2%.
• [51:08] Anna: Reminds everyone about the government cheese stockpile—over 120 football fields’ worth underground, illustrating the folly of price support policies.
• [52:52] Charles: Bets Felix that Trump will tweet “no more than 13 tweets” per week in August. Felix takes the over, and they wager a steak dinner.

Summary prepared for listeners who want the facts, insight, and flavor of Slate Money—without having to listen for an hour.