In the post-analysis of the second London G20 summit tackling the global economic crisis we look at some of the conflicting views and analyses in the build up to the September summit in Pittsburgh. Nouriel Roubini continues to warn of a double dip recession:

There are also now two reasons why there is a rising risk of a double-dip W-shaped recession. For a start, there are risks associated with exit strategies from the massive monetary and fiscal easing: policymakers are damned if they do and damned if they don’t. If they take large fiscal deficits seriously and raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into stag-deflation (recession and deflation).

while in a paper published by the IEA, states that Obama is committing the same mistakes made by policymakers during the Great Depression. The paper states that the Obama administration is repeating many of the mistakes made during the Great Depression:

Now is a particularly bad time to enact socialistic reforms to the market for healthcare, pursue wealth-destructive cap and trade environmental programs, or force additional federal tax dollars into state and local education markets. Such policies imply higher government spending and, eventually, either higher taxes or runaway inflation, thus depleting taxpayer and business confidence in the economy…

The paper is given greater weight by the endorsement of Nobel-Prize-winning economist James M. Buchanan.

In contrast to these views the United Nations (UN) forecasts global economic recovery but flags up growing threat of deflation. The report states:

Indeed, deflation – not inflation – is the real danger. Wage deflation is the imminent and most dangerous threat in many countries today, because governments will find it much more difficult to stabilize a tumbling economy when there is a large-scale fall in wages and consumption. However, deflation will not cure itself. Therefore, the most important task is to break the spiral of falling wages, prices and demand as early as possible, and to revive the financial sector’s ability to provide credit for productive investment to stimulate real economic growth. Governments and central banks need to take rapid and strong proactive measures to boost demand and avert the risk of deflation. 

In light of the perplexing range of views and pervasive uncertainty buisnesses need to be even more sensitive to the management of their working capital. We think these reports provide insightful advice in the management of cash:

Winning in Turbulence: Cash is Not Only King, It’s Strategic by Darrell Rigby and David Sweig

Until recently, most senior executives regarded managing cash flow and liquidity as tactical functions, a mundane set of activities left to administrative managers. No more. As the global financial crisis has choked off credit, cash management has become strategic. Companies with weak operating cash flows are finding it more difficult to secure outside funding, just when flows are harder than ever to generate.

Winning in a Downturn: Managing Working Capital

Working capital is an important source of cash throughout the business cycle, but it is especially critical during a downturn, when reduced access to external funding and sharp decreases in sales can greatly limit available cash. Companies must fundamentally change their approach as demand drops, reevaluating and adjusting how they approach each of their working-capital categories—inventory, accounts receivable, and accounts payable.