Surveillance: Vaccines With Germany's Scholz

some plans to gradually reopen the economy. I'm pleased to say that still with us is our colleague, Bloomberg's Mat Miller, and I'm very happy to say the German finance minister joins us. Now all have Scholtz, Minister, fantastic to catch up with you, sir. I just want to start with the vaccine strategy in Europe, which you've reportedly called, and forgive me for my language, sir, a real pile of crap.

It's that a fair characterization of how you see things and how you've seen things play out in Europe over the last several months. I think there was a problem in ordering enough vaccines in the last year, but now anyone is working very hard to work that we will have enough vaccines to bring it to the people, and this is what is organized in all the countries, also in Germany. What went wrong, Minister, it's just the one sentence.

I already said. There could should have been more. There should have been more activity to organize more vaccines, and especially if you understand that most of the important developments for modern vaccines have been made in Europe, and two of the three big companies that develop new vaccines Moderna and que Vac and BioNTech are from Germany. So this

is a good basis for doing the right things. But in the end, I think we are now on the wreck right track, and anyone is working very hard in all the countries, and we are now fascinating the people, and we are organizing that this will happen as fast as possible, and there will be in a short time millions of people that got the ability to have their vaccine. Minister Shultz, considering that those companies are German, why didn't the government act to get them first, those vaccines out

to the German people right away. I think it is absolutely clear that this is something that should be organized in Europe together and it's also clear that this is something that should be part of an international collaboration which

is working necessarily for saving the world. And as you know, we are already working very hard on international and global initiatives supporting those countries who have not the means to to organize the vaccines for themselves, because if we want to fight so successfully against the pandemy, it will be necessary that we give the chance to all the people on the globe. Coming back to Europe, coming back to Germany,

I think we will make it well. You're responsible for dealing with the damage done now by extended lockdowns to the German economy. Our reporter Berge yain and found that the government is considering as much as fifty billion euros in additional debt spending and supplemental debt spending in order to deal with the deeper damage from the extended lockdown. Can you confirm that we will do extra activities. Yes, this is true and we are able to do so. As you know, we were in Europe the first to

fight against the pandemic with fiscal means. In the last year, we developed the first a very strong recovery program, and we managed the political activity that made it possible that the whole European Union is answering together to this crisis. The effect on the German economy is obvious. We are having a very good situation at the labor market and it is much better than anyone expected the last year.

We have a very good situation in the economy, and if you compare the development of the German economy to other countries in the world, you see we are between the best fighting against the economic consequences of the crisis. Can I just push a little bit harder to get a figure here in terms of the additional spending that's necessary, Mr Minister, is fifty billion euros in additional spending necessary?

Or somewhere in that ball ballpark. Your colleagues from Germany asked the same question to me, and I always gave them the same answer. You will see, I didn't expect a new answer. Just follow up on. The election is coming up later this year. You're running against Chancellor Mercle's party. You have to find some kind of daylight between her and yourself on the pandemic? Where is the daylight? What would you have done differently that wasn't done? Fighting against

the pandemic? Is a common task of the whole government, and I think we have to be very hard and fighting against the health crisis which is linked to the pandemic, and save the the and save the people, and this is what we do. And so I think it is not a good idea to do campaigns on this question. But obviously I think we need something which is a

plan for coming out of this situation. And this is why I urged anyone to be very very concrete on the question of testing and on the question of fascinating the people. And I was also very strict in the question we discus. Asked in the beginning that there should have been more activity in Europe about producing and buying the scenes and people are seking very hard. This will be a single issue election this year. There is no

other discussion in the global economy. Right now, you're saying there's no difference between yourself and the c DU on the biggest issue of the last several decades in the global economy. There is no difference in how you would handle this crisis, on how you would reopen this economy.

There is no day like whatsoever. There are differences that are discussed, but to be very clear, it is a common task and I am very much urging anyone not to do party politics and the question which is responsible, in the question which is important for the life of our people. This is something no one would accept. And there is something which is different to other countries. Noble doubted that there is really a problem with the pandemic and the Corona virus, and no one doubted that it

was necessary to fight against it. So there is a consensus on this question also, not not just within the parties of the government, but also with the most of the opposition parties. And so this consensus is helpful for doing the right things now and being a very honest politician. I think doing your task is the first thing if you're running for ruling the country. And this is the

task we have now. And yes, we are the one fighting for the idea that this must be done, saving the economy, working on social cohesion, looking at the people who are suffering most and supporting them, and fighting against the health prices. And this is what we have to do. They are honorable goal. Sir. Let me finish with this one, because there's a big problem in Europe developing on acceptance

of the vaccine. Have you had the vaccines. I haven't been vaccined because there has been uh an agreement on who will be the first and who will be the last, and the leading politicians are not in the first role. But any one of us said and I do the same that when we are at the stage where we will be fascinated, have the chance to get the vest scene,

we will take it. And I will take the one which is offered to me, and I will not choose one of the different ones, because there are a lot of very successful the scenes on the Marketisa, thanks for time today. We appreciate an important conversation on some really difficult issues. So thank you for your understanding. The German finance minister, there all have shelves right now, John, this is a joy, joy joy. The answer is we only have David Blanchelow of Dartmouth and after Cardiff football wins

turn in a row. They haven't lost in ten games, which is absolutely extraordinary. So Professor blanch Blanche Flowers people have allowed him to come on air. He is definitive on the job economy, from the wage curve of decades ago to not working, where have all the good jobs gone? Danny Blanche Flower to the right and the left owns a high ground. He joins us now from Dartmouth College, Hanover, New Hampshire. Danny, you have a chapter in Not Working where you say where is the wage growth or the

lack of it? With the government induced inflation, we're going to see, well that give us a legitimate wage growth in the good feeling from it? Well in a while. Obviously the big reality was the wage growth was very weak. The Fed really didn't interpret it correctly, didn't have an explanation for it. A big story going for it will be what happens to wage growth. But we have a puzzle right now because during the doing two thousand twenty and coming in to two one, wage growth has jumped.

It's jumped to about seven or eight percent, but not credible because that's because the dropping of the lower end of the labor market to be like so it's just a batting average effect. So watching wages is going to

be really important. Measuring it's going to be very hard, but in some sense that I think, yeah, you're right you said a minute ago, look at g d P. But I think the big deal will be look at wage growth, look at what happens um and see if it sustains itself in a way that it that it hasn't. And and then the major reason in a sense for that is the people at the lower end have got to be lifted. They've been impacted hard by the pandemic. They didn't see really strong wage growth in the last

decade or so. So I think wages, they're really central toward this. Within wages being central to it, it is about jump start in the economy. What is the character of six or seven percent g d P. What kind of economy will that be? Well, it'll be it'll be a pretty good economy. I mean, we have we have to put all of this in context, Jenny. Is it an economy for the elites the bottom line? That's exactly the concern. I mean, the K shaped recovery, strong recovery

for some, no recovery for others. And I think that's really the concern. I mean. The great thing in a sense of that Biden and stuff is he's focused on it. He has two really strong appointees in Treasury and at the Council, Janet Yelling and cc Rousse, who said in the in their nomination speeches, this is what we're going to focus on. But the reality of that is it's really hard. It's really hard to bring everybody along together. And look at look at the stock market. We've looked,

we've seen that that's doing pretty well. Wall streets doing fine, You've been talking about it. But the issue in some sets around the world is what happens to main street? And because main street has not done that well, this is, in a sense of the explanation of populism. It's the explormation in the US of a of a push to Trump is an explanation in the UK pushed to Brexit. So this is central to what happens in this recovery. Do you bring everybody along in the UK? Does the

British Prime Minister? Is he able to do things for the fifty constituencies that used to be labor that went to him to vote for Brexit. You've got to deliver and the question is are you going to be able to? I mean, the question is what is power going to say about those people who are who are at the lower who've been furloughed and potentially their firms won't what

won't kick started again? Danny, There's a lot there. Let's unpack a little bit of it this idea of you know, people come on this show and they say that the markets outperformed and did really well even though main Street lagged behind for a long time. Now we're entering a new paradigm where main Street can perhaps do better and the and markets may perhaps underperform a bit. Are you saying that's hogwash, that that's not true and that's not the trajectory that we're on. Well, I mean, I see that.

The central part of what we're seeing is that the Fed is going to do in the bank of eing them. They're going to do quantitative easing. They're going to keep doing that. That's going to push our asset prices. The question then is how does that quantitative easing, How does that help people at the lower end. The answer is

relatively so, it doesn't. So the focus on the Biden package is actually about jobs, helping people at the lower end, and restoring employment to those who are furlowed, those who have been taking these unemployment betters. I should just go back. So when the unemployment rate rises, we have never as of last April, we have met to we have never seen wage growth rise dramatically. So why is that the bottom ten percent or so of the wage distribution dropped out.

They're not working, they're furloughed. And the question is if are the firms that are furloughed actually going to reopen? And if they're not, we're in really big trouble. The government's going to have to do something about that, um and we know that we've never seen anything quite like that. The reality is that this is a big problem. I gotta jump in, sir, and we've gotta go back to

your time in the Bank of England. You're at the Bank of England at that really crucial time oh six o nine, right before the crisis, coming out of the crisis as well, when you sat there with Governor King, did you tell him you don't like the idea of QUI because you thought this would happen. Was it anticipated at the time when this grand experiment really got going. Absolutely not. I mean, I think the reality was that this central banks were basically unprepared, unprepared for having to

do this. But I think the biggest thing, John was that two things. Nobody really had a clue about the transmission mechanism and how it was going to work. And nobody had a clue how about this thing would ever end? And of course it hasn't ended and it continues. So I think the answer is no. I mean that's the other part of it is think of the debate going on at the Bank of England. The committee is now arguing in public about whether they think they should go

to negative rates. I mean I remember being told then that half a percent was the lower bound. You couldn't go lower than a half. So the answer is this is this is an unheard of territory John. You know we will see, um what what what assets? Will they continue to buy? What will the Bank of England do? Will the US go to negative rates? I mean, I think pals made all the right noises, but the question is do they have any ability really to impact them?

And does a hundred billion of QUEI today are its effects the same as it was in two thousand monements? How do we have a proper conversation about this? Because I know from sources that when you were at the Bank of England, Governor King told you guys not to go out there and say quie won't work. Once you decided to do it, that was it. You all had to get on the same page. You don't have to tell me right now on the record whether that was true or not, because I know from talking to people

it happened. So Danny, when are we going to have a proper conversation about whether this works or not and not be dictated by just a couple of people who have made some big decisions. Oh, I think the answer was a thing. Eventually, by around November two thousand and eight, it was clear that you couldn't cut rates enough and that you had You know, you can't cut the price that cut the price of money, so you raise the quantity.

I think it's go back to your earlier question. I mean the answer is it's unclear what QUI has done. I mean, I think what you just asked me, what has QUI done? But it has to be in combination with zero or zero or someplaces negative rates, and so the attempts to work out what it's done are difficult. I mean, I take the view actually is that if we haven't done it, unemployment rates would have been That's

the Blancie line. So I think certainly in two thousand eight nine it worked, probably diminishing return set in, but it certainly seems to me to have had positive effects on stock markets. Why else is the stock market rising because there's this buyer of assets that's out there. So I agree with you, um, and we're I'm looking back. Basically we had no idea what to buy, to think, do you buy ten years fifteen five? So the Bank of England bought pretty pretty long stuff that didn't mature

very quickly. Um. So it's not just what it q do, but what should you buy? What are its impact? What you know? What duration stuff do you buy? So all of that's still in the air, and the answer is that when you're floundering, you have to do everything. So I think and Powell has been cautious, and I I don't think sensible, more sensible and cautious than people at the Bank of eng and how they instid inflation is going

to take off based on no evidence. So I think you know the story out of the Fed looking back saying they've got it. They got got two eighteen rong, which I said on your program, I think every month for three and a half years. So so I'm hopeful, but these are tough time, Danny. Good to see you, always good to catch up. Downmouth Carlige, Professor of Economics, let's get this back on track, Chrisma Rank your Belly Funds co Chief investment of Chris. We're not going to

do London Derbys and all of that stuff. Let's talk about the markets. Do I position for better growth? Do I position for higher inflation? And what's the difference between the two? Yeah, I think your position for both. Listen, Goldilocks died probably a year ago. UM. The era of low inflation and low rates UH and good growth is probably over, and you know were it might be likely to see much higher inflation going forward. The question is

how much why are we getting inflation? Is a good inflation? Meaning is it because everybody wants to go on vacation in August? Or is it because OPEC is squeezing us? And is it structural? Um? And you know, those are all questions we think about. UM. The market obviously is it's very focused on the interplay between rates and inflation, and that has fed the rotation into value stacks, which has started, you know, six months ago and has benefited

people like us. Chris. We have a conversation with the leadership of x on today here at Bloomberg. Give us your update on hydro carbon's Gabelle is is ancient for a love of industrial companies where Mario was ween your thoughts, I'm big oil. Yeah, so listen. One of the one of the big themes coming out of this earning season has been E s G Environmental social governance. Everybody's talking about it, everybody's gonna write about it in their annual

report um. And the irony, of course is that over the last several months it's been these big dirty companies like Excellent who who have done much better. Again, longer term, we'll see how that plays out. We actually just launched a sustainability fund, our first sustainability fund called Love Our Planet and People. It's our first ETF, and you know, we we think there's a bright future for companies who are trying to uh go green, and particularly big industrial

companies that are trying to pivot to green. And you've seen that with GM and data and air products and to a certain extent Excen, who's interestingly focused on carbon capture and sequestration as opposed to some of the other things that the other in gradets are focused on. Chris, I want to go back to something that you said, Goldilocks died a year ago. And this speaks to the it's not too hot, not too cold, not to the very character Well, I mean, honestly, see how it could

get pretty morbid. I am curious though, going forward what that means. Who loses? Because in everything is perfect kind of world with nothing is too hot and too cold, everything can kind of rise. At the same time, who suffers when Goldilocks dies? Yeah, well, I think you're seeing

it in what's happening with the nastac. You know, this is a perfect environment for the big growth companies, um, big internet companies in particular that I don't have to show profits in the near term um and whose profits in the future are being discounted at very low rates

but by the market. So I think there's going to be more of an impetus to to be profitable, to have rational economic models, and that you know, should favor the traditional incumbent companies, which now include probably many of the thing which are you know, enormously profitable and have very strong market positions. Much a bit of child and shooting into this show this morning. See the founder of the bomber. That's great. What is this you accidentally put

on Bloomberg? It's gonna Nurst the children because they're in tears, Like, so, what is this Chris las guess serious on So honestly, this is something that people have been talking about. Yes, look, we don't want to talk about Goldilocks. But at the same time, not too hot, not too cold is a question? Is at dead? I mean you'd say these are some of the key questions and investing all of that good stuff, Chris, active management. Now do you think you've got a stronger

argument for that this year? I think we do. Um. You know, I'm reminded we're talking about commodities. The cure for high prices is more high prices in the case of passive the cure for passive in the eyes of active managers is more passive. Um. You know, we've seen you know, mindless flows driving the market over the last ten years or more. Uh. And to the extent that we can do price discovery and add alpha that benefits us, I think now is the time to do it, because

the playing field is changed Goldilocks. If Goldilocks is in fact dead, that everybody's gonna go up. We're in the three or four accounting statements. Is the alpha general water or is it even dies? It distinctions of cash flow. What's the line that matters to the Gabelle shop. It's clearly the cashalist statement. You know, cash is king. It always has been. Um, it's not about a revenue multiple.

And so that's why we're looking. Chris always got to say, Sir christmin Rank, give out a fund Colley, Chief Investment Officer, thank you. What we've tried to do now, pushing on a year and evermore, is the medicine of this pandemic. Giving us original leadership in February of last year was Peter Hotez. He's dean of the National School of Tropical Medicine at the Baylor College of Medicine. He has been ubiquitous.

I would suggest, you know, it's almost like Dr Fauci. Peter, you have been everywhere giving us wisdom on the vaccine. Have you spoken to the governor of your Texas I've not. I've not had the opportunity to speak with the governor or his staff. Of course, I'd always welcome that opportunity, and I have in the past, but not not over this latest issue. If well, over the latest issue, it's important. I'm hearing anecdotally of people just literally trying to leave

the state. They're so furious about this. And yes there's people in support of the governor. What would be your counsel to the governor right now of the differential equations of more vaccinations, better vaccinations, better statistics against his political philosophy. Well, there are two reasons not to dial back masks and social distancing at this point. One is we've got this

terrible United Kingdom variant as some people call it. I call it the B one one seven variant that first a rose out of southern England in September, and now the data showing it's much more aggressive in terms of its ability to be transmitted. And also now the UK government, although the second part is not being peer reviewed, if the UK government's put it up on their website, looks pretty compelled that the death rates higher. So this is a bad actor and it's racing through the country at

a high rate, really really bad. In Florida right now, maybe ten of the isolates virus isolates are this B one one seven variant from the UK. And so that's so we can even know the number of cass been going down pretty steadily, it's not plateaued. And now many of us think that's going to start going back up to be a fourth wave. That's issue one. And then second, Um, you know, vaccines are not here yet. Um. Now that's been disappointing. Operation Warp speed promised vaccines upon emergency use

authorization for the J and J vaccine that's not delivering. Um, they will come. The President two days ago committed to having every American wants to be vaccinated. Can't be vaccinated by late spring, early summer. So that's good news. So hold off, you know, don't don't dial back the masks and social distancing right now. This is the very worst

time to do it. Dr Hotez, This may be premature, but looking forward, based on where we are in the inoculation schedule as well as a technology that's been discovered through this process, are we closer to the next pandemic or further away? Well, I think we're we're closer to vaccinating our way out of this current one. And and I say that because there's some exciting news that came out of Israel last week published in the New England

Journal of Medicine. We've known that that that two doses of the Visor vaccine and likely the Madarina vaccine as well, can uh can stop symptomatic illness and keep you out of the hospital or the intensive care unit. Reduction, But the data from Israel shows a reduction also an asymptomatic transmission, meaning people who become PCR positive. So that's a game changer.

It means that you can enough people get vaccinated, and if the other vaccines have a similar performance, which I think they will, it means that we can halt transmission, and that means that we can vaccinate our way out of this epidemic. In the United States. It means uh, get I don't know that things will go completely back to normal, but I would have a much more optimistic outlook, maybe even mass coming off later in the summer fall.

So a lot to look forward to it now. It's not the time to screw it up by relaxing measures. You don't want people losing their lives before all the good things to come. And I guess that Dr Hotels looking forward to the next pandemic, the post covid era, We're still dealing with the different coronavirus is that could be out there, and frankly, based on some estimates, it's kind of amazing. We haven't had a pandemic like this

until now. Do we feel prepared to deal with it in a better way than we deal dealt with this one, which by many accounts really could have been handled a lot better. Yeah, you know, with one of the things that I always point out that things have gotten better with each pandemic, we do learn something. After Stars in two thousand three, we put an International Health Regulations i h R two thousand five after H one and one the Global Health Security Agenda, and stepped up influenza surveillance.

After after Ebola and Zeke at Davos, to successive Davos meetings, the Coalition for Epidemic Preparedness Innovation SEPPI was launched. So each time we do learn something, we make incremental advances. This one, I think we'll have more far reaching effects because of how it's devastated that the economy globally and how it's become a global security issue. Dr Hotez, As you know, there's always a kink in the smooth curves.

If you take the wonderful smooth curve of the vaccinations success of people like you, it's a curve down through the years, where is the kink for you, or we can say all clear. Is it it fifty years old? Is it forty eight years old? Do you have in your head forty two years old? Where is that tipping point as we moved to young adults, Well, and there's

no Well, it's it's really a gradual, uh, gradual, gradual slope. Um. But you know, one of the things we've learned also is that even younger individuals of comorbid conditions can get pretty serious illness. You know. The thing that worries me the most, quite quite honestly, is I think the US is other than the spring, which is going to be rough. I think the US is going to manage its way.

We'll probably see a third immunization with the Fiser and Madarina vaccine, maybe tailored to the variants, maybe a second dose of the Johnson and Johnson vaccine. Don't be surprised if you see that happening. The thing I'm worried about is other parts of the world. Africa is scaring me right now because you have that's what's called the South African variant to be one three five one. Now it's accelerating into Malawi and Mozambique and into Tanzania, and we

don't have a lot to offer. Those two mRNA vaccines are still pretty fussy in their ability to scale up production in the freezer chain requirements. I don't think they're going to have a big role in helping Africa. The astra Zenica vaccine is a good vaccine for the UK variant, it looks like it's not working against the South African variant. The murk is out, so when you know, go down the list. We don't have a lot to offer the

freaking continent. We're trying to scale up aggressively our recombinant protein vaccine, but I'm really worried about the destabilization of Africa right now. I told that you have touched on the issue I think, and we appreciate your time and let's continue the conversation in the ways to come. Dontor Peter hot that's that Dan of the National School of Tropical Medicine Bailor College of Medicine. This is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from

seven to ten am Eastern. I'm Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course, on the terminal. I'm Tom Keene, and this is Bloomberg.