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Home Publications Blogs Beat the Press Laura Tyson, of Morgan Stanley's Board of Directors, Urges Going Slow on China Currency Issue

Laura Tyson, of Morgan Stanley's Board of Directors, Urges Going Slow on China Currency Issue

Friday, 06 May 2011 15:06

Laura Tyson, the former chair of President Clinton's Council of Economic Advisers, had a column in the NYT today urging patience in addressing the over-valuation of the dollar relative to the Chinese yuan. The heading of the piece identifies Tyson only by her role as a professor at the Haas School of Business at the University of California at Berkeley and her former position in the Clinton administration.

The NYT's identification did not mention that Ms. Tyson is also currently a member of the board of directors of Morgan Stanley. She received almost $350,000 in compensation for her work in this position last year.

This is relevant to the piece because Morgan Stanley has extensive business dealings in China. It is likely that Morgan Stanley would benefit from having the dollar remain high against the Chinese yuan, since this means that its dollar assets will go further in China. In other words, the position being advocated by Ms. Tyson in this piece happens to coincide with the interests of the company on whose board she sits.

It is entirely possible that Ms. Tyson came to her views on the dollar and yuan without any consideration of its impact on Morgan Stanley. However, the NYT should have informed readers of this potential conflict of interest.

As far as the substance, her argument that there is little link between the value of the dollar against the yuan and the U.S. trade deficit with China is weak. When China raised the value of its currency against the dollar in 2005, many other nations followed suit. This led to a substantial decline in the U.S. trade deficit measured as a share of GDP. (The only relevant measure.) It matters little to workers in the United States whether the improvement in the deficit came in trade with China or other countries.

Also the plea for patience must be seen in a context in which tens of millions of workers are unemployed or underemployed with little hope for any improvement in sight. Deficit hawks in both political parties (including many of Ms. Tyson's former colleagues in the Clinton administration) have closed off the option of further fiscal stimulus. The current political context also seems to offer little hope for more expansionary monetary policy.

Given the options, an improvement in the trade balance seems the best hope for a more rapid increase in employment. It is understandable that those struggling to get by in a downturn that resulted from a combination of Wall Street greed and incompetent economic policy may not be as patient as Ms. Tyson. 

Comments (8)Add Comment
NYT News and Editorial Page Rules
written by David Cay Johnston, May 06, 2011 3:55
Editorial (opinion) has its own rules apart from the news department.
You should send a copy of this to the public editor: public@nytimes.com
written by izzatzo, May 06, 2011 5:49
It is entirely possible, that Ms. Tyson came to her views on the dollar and yuan without any consideration of its impact on Morgan Stanley.

When doing god's work one considers impact as directed by god however the results belong exlusively to the mere mortals being directed.
inherent conflict of interest
written by Union Member, May 06, 2011 11:04
It is possible that Ms. Tyson came to her views without consideration of it's impact on Morgan Stanley, but what of the impact of her views of a high dollar on HER JOB at Morgan Stanley, considering that the trade-off of a high dollar is sustaining high unemployment in the U.S. on behalf of an institution (Ms Tysons employer)too big to fail which received enormous govt handouts, followed by bonuses upon wreckless tax cuts that proved a toxic cocktail which ultimately threw millions out of work and their homes. In short Ms. Tyson doesn't deserve the benefit of the doubt; there is too much at stake for ordinary workers who are defenseless and powerless in these policy debates; and also, thanks to the NYT kept, ignorant of what the true cost of these phony public discussions are to their economic well-being.

And thanks David Cay Johnson, you are absolutely right, but the NYT follows its Editorial Principles about as closely as President Obama does his campaign promises.

(Note: when are people gonna stop trading on their associations with the Cinton Administration as though that's some bonifide connection to FDR or something?)
written by Merrill Goozner, May 07, 2011 6:42
As you know, I spent several years lobbying press organizations, including the Times, to follow their conflict of interest disclosure rules when it came to covering published science. The rules here are plain: in the case of editorial commentary, as in news, disclosure is required. An interesting comparison comes from the medical literature, where at leading journals, authors of scientific studies are required to disclose conflicts of interest, while writers of editorials, reviews and commentary are prohibited from having them.
China Trade Deficit
written by Ron Alley, May 07, 2011 6:49
The trade deficit with China is the direct result of a broad, bipartisan federal government policy of favoring manufacturing operations in China as a method of engaging China economically and diplomatically. That policy is expressed in everything from international trade treaties to tax preferences for corporations engaging in manufacturing operations in China while closing manufacturing operations in the United States. Ms. Tyson is wrong in assessment that the value of the yuan is immaterial. The undervalued yuan pegged to the dollar is China's most important contribution to the success of the bipartisan policy of favoring manufacturing operations in China over domestic manufacturing.
written by Paine, May 07, 2011 9:27
Lovely lovely
Yes the export dollar is optimally a strong dollar
Hi fi types with their ready access to freshly created issue can avoid the disinflationary credit rations that throws the system into now and again
Putting aside the occasional self made implosions

At any rate bravo
I wish dean y.ou drank in this point more deeply sometimes
And spit it at the Wally worlders more frequently
I know your target is the press flacks
And hackademic merlinoids like the ever fetchingly butch

A contrived strong
Export dollar is like ham and eggs with a contrived cheap import product

m Tyson
written by Paine, May 07, 2011 9:37
Why call policy in the bush years incompetent
Yes merited liberals find that maybe worse even then venal
But venal it was
Just like the mighty midget ms tysons sage advice

You I suspect know my forex focus is of long standing
But really it is strategic not counter cyclical

Keep firing the job market cannon at the god damn o.'barry boys
That won't talk stimulus
The present framing is a joke
No new budget busters
Remind the Dems their man might not make it in12 without something beter then stag party results on the job front
The fed diversions are worthy of new Keynesian duffers
Let them cry QE till blue birds return to the north pole
But they won't get us anywhere until we crank up the transfer paints and spending credit strapped class tax holidays
written by Paine, May 07, 2011 9:49
Nice points
I'd only hammer home
The MNCaspect of the why here

It's arbitrage profiteering combined with long range market penetration
Under bush the arbitrage was top billing ie trade with over valued advanced markets
Now it's participation in the chindian boom at least as much as re export
From cheap plants

The best practices for the MNCs
Change as global market conditions change
The yuan will rise against the dollar in a wicked slow taper
Long enough to shift re export production else where

Fortunately the system has enough endemic intrinsic conflicts to f itself up now and again
Like in 08
At least putting the total irrationality of the structure on trail

Seems once again the big guys got an extension

By the judge
while the jury watched ready todo some hangin

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.