G-20 Mulls Sustainable Recovery

Last year when the G-20 convened in November it was billed as the Bretton Woods II. The global economy was in the throes of a banking crisis that rivaled the Great Depression of the 1930's. Central bankers and political leaders were struggling to formulate the right mix of policies to strike the proper balance of interventionist programs needed to arrest the accelerating economic decline brought on by the frozen credit markets. Most believe it worked.

Today in Pittsburgh, conferees will begin to assess weather the accommodative monetary policies, massive capital infusion programs and historic low interest rates can continue to stabilize the global banking system and bear fruit of real economic growth. Though economic growth appears to have emerged in the US and the EU, there is a concern that recovery has become too dependent on the massive government stimulus programs. The development of a stimulus exit strategy will certainly be on the G-20 agenda. How to sustain economic recovery without the massive government spending programs is the primary challenge that G-20 leaders need to address.

Global trade agreements and a consistent tax policy across G-20 domiciles will also be areas of focus for conferees. Regulatory tax arbitrage is an issue that G-20 countries are keen to address. The days of utilizing domiciles with favorable tax laws to protect assets and revenue derived from a domicile with a less accommodating tax structure is an area that all tax hungry G-20 countries want resolved. Recognizing taxable revenue streams and repatriating capital gains taxes are particularly pressing concerns considering the massive budget deficits many countries are confronted with.

Global trade issues and the East/West balance of trade continues as concern for conference participants. The fall of the dollar and China's growing reticence to continue their purchase of US government debt is an interesting backdrop to the brewing trade spat over US tariffs imposed on the importation of tires manufactured in China. China has retaliated with an examination of US trade practices and American's need to keep their fingers crossed that China continues to regularly appear at the government bond auctions with its sizable check book.

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Risk: trade, recession, political, economic