Eight banks fined euro 1.7bn for rate-rigging; What's behind the sluggish growth; China's limited influence; Worldwide, 44m suffer dementia; India service sector shrinks

1 Eight banks fined euro 1.7bn for rate rigging (BBC) The European Commission has fined eight banks - including RBS - a total of 1.7bn euros for forming illegal cartels to rig interest rates. The cartels operated in markets for financial derivatives, which are products used to manage the risk of interest rate movements.  Two of the eight, Barclays and UBS, were excused their financial penalties for revealing the cartels' existence. UBS and Barclays stood to pay the largest fines of 2.5bn euros and 690m euros, but avoided paying anything because they assisted the investigation. 

A number of banks were engaged in the rigging of interest rate products intended to reflect the cost of interbank lending in euros, while another group fixed prices for products based on the Japanese yen. The rates are used to set the price of trillions of dollars of products, including mortgages. Aside from RBS, Barclays and UBS, the other organisations involved were Deutsche Bank, which received the biggest fine of 725.36m euros, Societe Generale, JP Morgan, Citibank and the brokers RP Martin. A handful of individuals are facing criminal charges.

http://www.bbc.co.uk/news/business-25215560

2 What's behind the sluggish growth (Kenneth Rogoff in The Guardian) At a recent International Monetary Fund (IMF) conference, former US Treasury Secretary Lawrence Summers argued that today's growth blues have deep roots that pre-date the global financial crisis. Summers placed particular emphasis on the need for more infrastructure investment, a sentiment that most economists wholeheartedly share, especially if one is referring to genuinely productive investment. Economist Jeffrey Sachs has argued that the US economy needs to confront a plethora of structural impediments to sustained growth, including offshoring, skill mismatches, and decaying infrastructure.

The internet entrepreneur Peter Thiel and the chess champion Garry Kasparov have suggested that the malaise runs even deeper, as has the economist Robert Gordon. They argue that the technology engine that has driven mankind from one economic plateau to the next over the past 200 years is running out of steam. Simply put, the internet may be cool, but it is hardly as essential as running water, electrification, or the internal combustion engine.

Summers is certainly right that productive infrastructure investment is the low-hanging fruit. Productive infrastructure investment that generates long-term growth pays for itself, so there need not be any conflict between short-term stabilisation and risks to long-term debt sustainability. With today's ultra-low interest rates and high unemployment, public investment is cheap and plenty of projects offer high returns: fixing bridges and roads, updating badly outmoded electricity grids, and improving mass-transportation systems, to take just a few notable examples.

The important point is that the case for expanding productive infrastructure investment does not rest on one narrow ideological viewpoint or economic theory. Whether Summers is right about secular stagnation in advanced economies, or whether we are still mainly suffering the aftermath of the financial crisis, it is time to break the political gridlock and restore growth.

http://www.theguardian.com/business/2013/dec/04/what-is-really-behind-sluggish-economic-growth

3 China's limited influence (Ian Bremmer in Khaleej Times) Although China’s economic influence is growing — it is now the lead trade partner for 124 countries, compared to just 76 for the US — its power to influence other nations is slight. It has achieved little of what policymakers call “capture”, a condition in which economic or security dependence of one country on another allows the more powerful to drive the other’s policy-making. Only in countries like North Korea, Cambodia and Laos does China have that kind of heft; in North Korea, for example, China provides 90 per cent of the country’s energy and 80 per cent of its consumer goods.

There are other countries where China wields extraordinary economic influence (Sudan, Angola and the Democratic Republic of Congo) or political clout (Iran, Syria and Venezuela). The former are too corrupt for many Western governments to do business with, and lousy relations with the US force the latter to look for powerful friends. In fact, the economic vulnerability and political brittleness in these countries might one day compound weaknesses inside China. As party officials undertake the reforms needed to create a dynamic economy driven by Chinese consumer purchasing power, reliance on commercial and political ties with basket-case countries can be a dangerous thing.

In today’s media-driven world, soft power is another crucial element of superpower influence. Yet, beyond the inaccessibility of China’s language for most foreigners and their indifference to its social trends, China’s political and economic systems have little appeal in other countries. Its state capitalist economic model attracts political leaders looking to build wealth and micromanage markets, but it offers little for ordinary citizens.War-weary Americans and their distracted political leaders are less interested in responsibilities overseas, creating a vacuum of international leadership. But for better and for worse, neither China nor anyone else appears ready and able to fill America’s superpower shoes.

http://khaleejtimes.com/kt-article-display-1.asp?xfile=data/opinion/2013/December/opinion_December4.xml&section=opinion

4 Worldwide, 44m suffer dementia (Straits Times) The number of people suffering from dementia has risen 22 per cent in the past three years, with 44 million people living with the disease worldwide, according to a study. The report from Alzheimer Disease International predicts that the number of people suffering from the disease will triple worldwide to 135 million by 2050.

According to the new figures, 16 million people in western Europe will be living with the condition by 2050. Mr Marc Wortmann, executive director at Alzheimer Disease International, said: "It's a global epidemic and it is only getting worse - if we look into the future the numbers of elderly people will rise dramatically.

http://www.straitstimes.com/breaking-news/world/story/44-million-now-suffer-dementia-worldwide-study-20131205\

5 India service sector shrinks (Anant Vijay Kala in The Wall Street Journal) India's services-sector activity shrank for the fifth month in November as new orders fell, heightening worries about slowing economic growth and high inflation. The seasonally adjusted HSBC Service Sector Business Activity Index, prepared by Markit, rose a tad to 47.2 in November from 47.1 in October, according to the survey. A figure below 50 indicates contraction in activity and one above indicates expansion.

Services contribute about 60% to India's gross domestic product. Authorities were hoping that the sector would drive a recovery as services have been relatively more resilient to the economic slowdown than manufacturing. But the latest reading suggested that services activity remained subdued. Inflationary pressures also hurt service-sector activity in November. Service providers passed on increased costs to their customers with average selling prices rising at the quickest rate in nine months.

India's economy has slowed sharply over the past couple of years as rising borrowing costs, decrepit infrastructure and a slow pace of reform in economic policies have badly hurt investor confidence. The South Asian economy grew a better-than-expected 4.8% in the three months to September, data from Friday showed. But this was still the fourth successive quarter of sub-5.0% growth, underscoring a marked slowdown from the 9.3% expansion it recorded in the fiscal year ended March 2011.

http://online.wsj.com/news/articles/SB10001424052702304854804579237292360858078