Which policy is the best for tackling the Pandemic?

We are seeing some very different approaches to tackling COVID-19 which have huge implications for health and the economy.

On one side we have the US and UK.  We both persisted with the Do Nothing  strategy for a long time and have recently moved to Mitigation – which is designed to minimise the short-term economic impact

  • Initial idea of herd immunity
  • Late adoption of social distancing
  • Social distancing rules are largely sporadic guidelines
  • Low rates of testing
  • No tracking of patient contact

On the other extreme we have China and S Korea, with countries such as Spain and Italy moving in this direction –Suppression – which has more severe short-term economic implications

  • Strict social distancing rules
  • High rate of testing
  • Tracking of patients

 

How might these strategies play out?

Here my thanks to one of my readers who sent me this paper which does a far better job of explaining the ideas in my post Mar 25th.  This paper is not only well-written, but it has an optimistic take on how this can be managed long term.

https://medium.com/@tomaspueyo/coronavirus-the-hammer-and-the-dance-be9337092b56

 

  1. Do nothing

Here the paper uses the same argument as my recent post i.e. the mortality rate once we have used up the capacity of the medical system will be far higher.  He comes up with a figure far higher than mine with over 10 million deaths.

Picture 1

 

 

  1. Mitigation

He cites the Imperial model, but shows this also overwhelms the health system.  The best case below assumes that all the current guidelines were actually firm rules that were being strictly followed.

Picture 2

 

 

  1. Suppression

This has a dramatically lower death rate with fewer than 10 THOUSAND rather than 10 MILLION people dying.

But what next?

The issue with suppression of course is that it can be seen to merely delay the problem.  We cannot stay in full lockdown permanently and so surely will have to move to the mitigation strategy eventually?

NO

Buying time is extremely valuable.  It means we have time to make ventilators and makeshift hospitals, develop treatments, expand testing capacity and trial patient tracking techniques.  We will have more time to understand better how the virus spreads, and to protect ourselves perhaps with more masks and gloves.  These are all critically important and it is better to face this battle later when we are more prepared for it.

The other big problem with COVID-19 is that it is so contagious.  Every person is infecting on average 2.5 people.   The scientists call this number R – for comparison the R of normal influenza is 1.3.  The high number for COVIS-19 is causing the explosion of cases which we are currently seeing.  But if we could get the rate of infection to below 1 person, then the virus naturally dies out.

Research must now be focused on how to reduce the infection rate in ways which affect our lives and economy the least.  We can find our new normal – a way of living which is not the same as before but is not lockdown but does not involve millions of people dying.  Maybe clubs and gyms are not open, but our kids are back at school and college and most of us are back to work in some fashion. Here the article provides an illustration of what such a policy menu might look like.  We can choose to dial it up or down depending on the results.

Picture 3

 

Which policy is best?

As we see more data coming in, the path forward on policy becomes clearer.  It is the path being taken by the countries who faced the virus first and who had the most severe problems early on.  This has given the US and the UK time to learn from that experience but unfortunately I fear that the political and intellectual will to follow this path will only happen after the virus has infected a large part of our countries and has already overwhelmed our health services.

 

 

The Denial Index

The standard index and best way of measuring the volatility in the US stock market is the VIX.  (it’s an index of average implied volatility of listed options on the S&P of about 30 days expiry)

It is also known at the “Fear Index”.
But I think it should better be termed the “Denial Index”

When does VIX spike?

Volatility rises on negative shocks when stock markets drop rapidly.  This can be attributed to fear.  When the fear subsides, the stock market recovers, and the volatility drops.

This is where the index gets its name.

There are plenty of examples, take the equity market drop during 2015

Picture 1

Or the really huge drop during the financial crisis of 2008

Picture 2

The most recent sell-off also looks the same
i.e. the stock market drops and volatility rises.
So we can expect that volatility will drop again, when the market recovers.

Picture 3

If we look more closely at the examples, what we are really seeing is when there is a sharp drop in share prices, people do not believe it will last.  They do not accept that the new lower price is the correct one, and think that a rapid bounce back is likely.  What they are afraid of is that in the short term, the market will carry on going lower, but they do not expect that to last either.

In a real economic crisis, the fall in stock prices is for good reason and is here to stay.  Once the market reaches this level of acceptance, then we can have stock prices stay low, but volatility falls back to previous lower levels.  This is exactly what we saw in 2008/09.

Picture 4

If this crisis does turn out to be long lasting and real, as I currently expect, then we are still only in Stage 2  i.e. Awareness grows. Faith policy makers remains strong, even though the policy makers do not yet understand they are not in control. Markets believe it will be ok – e.g. positive reaction to Bear Sterns bail out.  (1st half of 2008)

The positive market reaction to the US stimulus package and Trump suggesting that the US be reopened is a sign that the market’s faith in policy makers remains strong.  The “Denial Index” still suggests that we expect these lower prices not to last and that a sustained recovery is imminent.  We will all find out if this faith is justified.

 

What would happen if Trump “reopened” the US?

The original strategy of the UK and it seems the current preference of Trump is that it is better to allow people to behave as normal.  There will be more deaths than the lockdown approach, but this it is argued that this is better than the alternative of a huge economic hit.

There is a similar and related idea that we might “shield” the elderly and vulnerable and allow everyone below the age of 65 to go back to work.  The economic/health trade-offs may be different at different ages.

I wanted to make some estimate of what the world might look like.  Please bear in mind that I have no expertise in this area and I very much hope I am very wrong, but my initial impression is that the results could be catastrophic.

The recent report from Imperial has been very influential in changing the UK government’s plan away from “herd immunity” (also known as “let the old people die”).

https://www.imperial.ac.uk/media/imperial-college/medicine/sph/ide/gida-fellowships/Imperial-College-COVID19-NPI-modelling-16-03-2020.pdf

A key data table is below showing that mortality rates for people below 60 are very low.  This initially supports the idea that targeted isolation could be a sensible approach.

Picture 1

Their summary of the implication of the 2 paths is below:

  1. if all patients were able to be treated, we predict there would still be in the order of 250,000 deaths in GB, and 1.1-1.2 million in the US.
  1. In an unmitigated epidemic, we would predict approximately 510,000 deaths in GB and 2.2 million in the US, not accounting for the potential negative effects of health systems being overwhelmed on mortality. 

This to me seems quite compelling and explains the shift towards the “flatten the curve” approach the rest of the world is trying.

As an aside, a paper by an Oxford academic has got a lot of attention today as it suggests that half of the UK population might already have the virus and all will be ok.  I think this should not be taken too seriously.  Looking at the paper, it is a mathematical approach to build a parametric model where we have no idea what the parameters are.  This means that you can assume pretty much anything and thus get pretty much any answer.  Their description in the paper itself summarises why we should take no notice:

“Our overall approach rests on the assumption that only a very small proportion of the population is at risk of hospitalisable illness. “

If you have a mathematical model which starts by assuming that no one gets sick, it is not too surprising that the output result is that no one gets sick.  This type of analysis reminds me of mathematical economists during the 2008 crisis.  Utterly useless.
I wanted to take a different approach and go a little further and examine the age breakdown of the deaths, and possibly how we could estimate how the mortality rate changes if we do not flatten the curve.  It is here that I found the results most surprising.

I took the recent CDC study in the US, assumed a third of the population become symptomatic, and came up with a couple of ways of thinking about mortality rates in the population

  • Total deaths – version 1 (commonly seen in the press)
    Take the distribution of population by age and multiply by the current mortality rate of around 1% plus some estimate of how many people are infected
  • Total deaths – version 2
    Instead of the current mortality rate, estimate the mortality rate we would see in a crisis with the health service being overwhelmed.  For this, I took the number of patients requiring ICU as a proxy. 

The huge assumption I make in this very simplistic model is that, if the health service is overwhelmed, no one has access to ICU and all patients that required it will die (without intubation you cannot breathe).  This is obviously overly pessimistic as some patients will still have access to ICU and intubations will be taught to many more non-ICU doctors and nurses.  One the other hand my estimate of a third of the population becoming symptomatic I do not think is extreme.  The high resulting mortality rate is not something I would expect but it provides a useful examination of a worst-case scenario and we can explore the implications.

Untitled

The number of deaths is shocking at 5.8 million

But it was the age distribution that initially surprised me because I had been fed so many numbers which are mortality RATES I had not been thinking of the absolute numbers.  Although the mortality rate of the old is much higher, the absolute number of old people is of course far lower.  Furthermore, it is the younger people who respond better to treatment (ie many more younger people are hospitalised but far fewer die.  If they cannot go to a hospital, we should not expect the same outcomes.

In this model, we have over 3 million Americans under the age of 65 dying from Coronavirus.

To be clear this is not a prediction.  This is not that sort of model.  It is an examination of the sort of impact we might see if we stop social distancing and go back to life as normal.

Stay home – stay safe

 

 

 

Is Coronavirus the new 2008?

I hope you are all staying safe at home.

I want to consider:

  • how safe are markets?
  • Is this yet another short term dip to buy?
  • A recession which we ride out with buying opportunities?
  • Or the early stages of a major crisis like 2008?

Life cycle of a major crisis – 2008

  1. Complacency and denial. (up to January 2008)
  2. Awareness grows. Faith in policy makers is strong, even though the policy makers do not yet understand they are not in control. Markets believe it will be ok – e.g. positive reaction to Bear Sterns bail out.  (1st half of 2008)
  3. Huge panic as it becomes clear that policy makers have no control (Lehman)
  4. Policy makers start to get a grip, but markets no longer believe them (late 08 early 09)
  5. Markets start to rise, albeit with a lag (Q2 2009)

Where are we in 2020?

Complacency and denial have been overwhelming until very recently.
Last 2 weeks have seen some growth in awareness (Stage 2) but there remains a lot of confidence that issues can be contained.  For the current market pricing to be correct we are either:

  1. Correctly pricing a normal recession
    OR
  2. Having a severe risk off event

Note that we are not pricing BOTH.  Perhaps we are not far from correct pricing for a recession, so there is not much leeway to argue there is an additional, large risk premium.  Therefore, I would argue we are in stage 2 (i.e. recognition that the event is real and has economic impact but no real panic)

Will we move to Stage 3?

Stage 3 is to be expected if there is contagion in financial markets (apologies that financial crises and pandemics have such similar terminology).  Examples include:

  • Major negative revenue shocks in corporates leads to credit concerns
  • Major negative revenue shock for individuals leads to credit concerns
  • The virus will last longer than expected e.g. into 2021

More broadly, what happened in 2008 was that a complex system fails in ways that cannot be predicted with precision.  Greenspan perhaps was correct that the 2008 crisis was “unforeseeable” in its exact details.  But what was obviously predictable was that the system would fail in ways that would surprise.  I do not think I had even heard of rehypothecation before 2008, but soon I had to become expert in it.  For coronavirus and its impact, we do not yet know what new things we will have to become an expert in.

My personal journey in this crisis was initially to be far more concerned than most people, but looking back still not nearly enough given how far reaching a pandemic’s impacts are.  I initially thought this would be a risk off event leading to a buying opportunity and was simply focused on preserving capital on the way down.   In hindsight this was a very tradeable event but it has unfolded far faster than the financial crisis and so you had to be very aggressive very early.

Now we have reached my original target of 2500, I feel I should not be in such a hurry to buy.  I am reminding myself that subprime did not destroy the financial system, it merely lit the fuse. Focusing too much on the details of the catalyst can blind us to the far more important second round effects.

Conversation with a Brexiteer

Thank for your explaining why you are in favour of No Deal Brexit. But I am afraid I am still rather confused. Many of your statements seem to be contradictory. Could you please explain to me how to reconcile them?

a. The EU will back down because No Deal Brexit is such an economic disaster
b. No Deal Brexit is not a problem at all

a. The EU is a danger to Parliamentary sovereignty in the UK which should be absolute
b. The UK Parliament should be ignored and bypassed if they want to stop No Deal Brexit

a. We need to be out of the customs union and reinstate our borders to control movement of people and goods
b. We do not need a border

a. The EU is a powerful superstate that will become increasingly integrated
b. The EU is fragile and will break apart

a. The EU has majority voting
b. The EU is a dual monarchy ruled by France-Germany

a. The EU is an Empire
b. The EU is a Federal state

a. It is terrible that the smaller countries are made to pay their debts – Germany should bail them out
b. It is terrible that the smaller countries will not pay their debts and will need to be bailed out

a. There is too much tax harmonisation in the EU
b. Some EU states have much higher tax burdens than others e.g. France is the highest and far higher than some others such as Ireland

a. The EU is undemocratic
b. Is it right that the UK PM is elected by Conservative party members only

a. The EU is undemocratic with no control by elected politicians
b. We should undermine the European Parliament as its elected politicians have too much power

I also have some questions for you

  1. You talk a lot about why you dislike the euro. Since the UK is not in the euro area and had a legal opt out, why is this relevant to Brexit?
  1. I get the sense that the central issue for you is that the EU is moving towards being a Federal state and that the UK will be forced to be a part of that. Apart from rhetoric of “ever closer union” could you tell me what steps the EU has made in the direction of a federal state in the past decade?It seems to me that this is a far from certain or even likely outcome and that there has been no movement in that direction in a long time. Could you please explain how the UK could be forced to be a member of this future federal state since we have an opt out on the euro and Schengen? Could you please explain why it is better to leave now when that outcome is a remote possibility rather than to wait?
  1. You point out that the EU is not perfect and seem to think that this is a winning argument for Brexit. You imply that our future state outside the EU will be much better. But you have not explained in any detail what the world after Brexit would look like. For example, we currently have Single Market access to 27 countries (45% of our exports) and trade deals with 70 other countries. Post Brexit we will have trade deals with countries accounting for a total of 5% of our exports. The other 95% will be on punitive WTO terms. But it is claimed that Brexit will improve our trade position. How is this not simply the Nirvana Fallacy? I.e. “comparing actual things with unrealistic, idealized alternatives”. https://en.wikipedia.org/wiki/Nirvana_fallacy
  1. Where do you want the border? If you want to be out of the Customs Union then that means you have a border for customs checks. They are essentially different phrases for the same thing. There are 2 logical places to have the border

a. Between NI and the Republic of Ireland which endangers peace
b. Down the Irish Sea which endangers the integrity of the UK

Which do you prefer?

  1. The economic consequences
  2. You mention that you think that the consequences so far have not been as bad as predicted. You only give one 2016 forecast (the most pessimistic) but an average of the main forecasters is actually surprisingly accurate i.e. that UK GDP is about 2% lower now than it would have been if we had voted Remain due to reduced confidence and investment.

For the forecasts the main hit to the economy is after Brexit actually happens with particularly bad and uncertain outcomes in a No Deal scenario.

Do you disagree with the negative economic impact of No Deal Brexit? Or simply view it as a price worth paying.

Brexit – The Endgame – Update

Last year I wrote some predictions about how Brexit negotiations would develop. This is a good time to see how they have held up.

https://appliedmacro.com/2018/11/13/brexit-the-endgame/

Everything has been spot on in the predictions so far and now we can reassess the rest.

Prediction 1

“We drop out of the EU into chaos”

I think useful to take another look at the key players in this drama and how they are likely to behave.

DUP:

View on Irish Border: Hard border between NI and Republic of Ireland.

View on economic impact of No Deal: Do not care

Aims: They are ultra right wing conservatives who want to isolate the North from the influence of the Republic of Ireland and ideally the rest of the modern world.

Potential for compromise or shift in position: none.

ERG:

View on Irish Border: Do not care. Hard border between NI and Republic of Ireland or border down the Irish Sea are both fine. Ireland does not matter at all.

View on economic impact of No Deal: Do not care.

Potential for compromise or shift in position: none

Boris Johnson:

View on Irish Border: does not care. But needs support of DUP for now.

View on economic impact of No Deal: does not care but would like to find someone else to blame

Potential for compromise: Unlikely given the stance of DUP and ERG.

Aim: Stay in power.

Jeremy Corbyn:

View on Irish Border: Border in the Irish Sea and move towards a united Ireland.

View on economic impact of No Deal: Would prefer not but not the highest priority issue.

Aims: Become Prime Minister. The ideal scenario is to have a No Deal Brexit that the Tories are blamed for which not only leads to Brexit but also a General Election which he wins. Use that power to make a deal with EU and advance plans for a socialist utopia away from the constraints of being inside the EU.

The rest

View on Irish Border: No hard border between NI and Republic of Ireland.

View on economic impact of No Deal: A disaster to be avoided.

Aims: Get another delay but without any clear united plan for what do with the delay. There is fragmented dissent from the ardent Remainers to people who want a Brexit with a deal.

EU

View on Irish Border: No hard border between NI and Republic of Ireland.

View on economic impact of No Deal: It’s terrible but they cannot avoid it.

Potential for compromise or shift in position: none. The simplest way to understand this is that the UK does not have a negotiating position. The UK has yet to come up with a proposal for the Irish border and so even if the EU “blinked” they have nothing to actually agree to. Even if the EU completely agreed to throw Ireland (a small member state) under the bus, the UK has no proposal that they could be confident would pass Parliament.

How does this play out before October 31st?

My read of the next few weeks is that Johnson will pretend to negotiate with the EU but in a way which is designed to lead to No Deal as he has no potential for getting the DUP or ERG to agree to a deal. His route to a victory in the coming General Election is to make the Brexit Party irrelevant by taking all their policies and have the opposition split. Corbyn being the most unpopular leader ever with less than 20% of the electorate with a favourable opinion vs 70% with an unfavourable opinion is the reason this strategy can work.

What can stop No Deal?

  1. Parliament finds a way to stop it. This requires a lot more unified opposition than currently exists. Corbyn is doing a good job of trying to impede the No Deal opposition movement by making his elevation to Prime Minister a requirement. Demanding that a Brexiteer leads the Remainer resistance to Brexit is a good way to ensure its failure.
  2. Johnson just before Oct 31st gives Parliament one last chance to pass the Withdrawal Agreement which they do to prevent No Deal. Possible but seems unlikely.

No Deal is rising significantly and is currently by far the most likely option.

Will it be chaos? Yes – I am not going to bore you with the long list of fiascos that will appear that we already know about. It is the unanticipated problems that are often the worst. A good analogy for it is the failure of Lehman in 2008. It was well anticipated and for about 2 weeks caused relatively minor disruption and market issues. It was only a little later that the repercussions of a direct break in the heart of a complex system become clearer. Brexit is similar as the UK and EU economies are deeply entwined meaning that a dramatic break is reckless in the extreme.

Screenshot_32

The US equity market was roughly unchanged in value a full 2 weeks after the Lehman bankruptcy and it was only in the 2 months following that we saw a further 38% fall. This is a perfect counterexample to anyone who says that the market is good at pricing in known events. The market failed to price Lehman a full 2 weeks AFTER it happened because people did not understand it. I think that Brexit is similarly poorly understood.

Prediction 2

“After a week of chaos, we go back to the EU and take whatever terms they offer us.”

After October 31st the game changes significantly. The EU is likely to wait for the UK to come back and agree the key features of the Withdrawal Agreement. The question is how long the UK takes to do this. The faster we do this the less damaging the economic consequences of No Deal.

How the Deal could be done quickly

There is a quick election and there is a clear majority for a party. Whichever party wins can use the chaos to explain why they had to agree the Deal and find some way to blame everyone else for it. This is very easy if the next PM is not Johnson. A possible way for Johnson to make a deal could be to change the backstop to one in which the customs border is in the Irish Sea, as long he does not need the support of the DUP. Then GB can be out of the customs union, and NI stays within Customs Union and Single Market. The EU are happy that the Good Friday Agreement is still in force although it does raise all sorts of new very difficult issues now that the DUP will feel utterly betrayed. This is the end of the UK in practical terms but the Conservative and Unionist Party do not seem to really mind that and Corbyn will be in favour too.

How it can take longer

Political paralysis continues despite growing economic damage. The main activity of politicians becomes finding ways to blame others for the chaos and suggest ways forward to give them power. The Remainers will likely stay split as some will want to do a deal quickly and others will want to find a path back to EU membership. The Brexit true believers will not have their faith dented by reality being nothing like their predictions and will continue to claim that these are “speed bumps” and that it is all for the best in the long term.

One of the big barriers to peace treaties is that it is common that the people who sign them are condemned as traitors and the people who just criticised from the sidelines claim a moral superiority and eventually political power. There are many examples such as the fate of Michael Collins in 1922 or the German “stab in the back” myth that they only lost World War I due to the traitors who made peace. It is a concern to me that the fiasco of No Deal does not lead to the demise of the far right but could perversely further bolster it as Farage/Johnson rail against the traitorous people who “colluded” with the EU to deprive the UK of its glorious independent future.

Can it go on forever?

It seems unlikely. With no withdrawal agreement there is no trade deal with the EU (half of UK exports). No trade deal with the EU in practice means no significant trade deal with anyone else as everyone needs to wait until they see the trade deal with the EU. The practical implications of the UK in a world without trade deals with anyone are economically severe and not supported by anything close to a majority of the UK. The US under Trump will attempt to keep the UK split from the EU and under its control, however I can see very little they can offer in practice that compares with an EU trade deal.

Will the EU give in? This seems very unlikely

  1. The economic consequences for the EU are far less than they are for the UK and so there is every reason for them to expect the UK to fold first. https://appliedmacro.com/2017/05/05/who-loses-more-from-brexit-the-uk-or-eu/
  2. The UK does not actually have a viable proposal for the EU to agree to. The current stance of both a border and not a border simultaneously just makes no sense. https://appliedmacro.com/2017/05/02/brexit-and-ireland/

I stand by the predictions for the next stage too. The one thing I would change is that I now think we are not as smart as the Greeks and will take a lot longer than a week to turn around and ask for a Deal.

Prediction 3

“We call Brexit a triumph”

Is there any doubt in this one?

Jo Swinson for PM in 2019?

One of the plausible paths, in the Brexit chaos, is we end up with a general election in the autumn.

Boris may simply attempt to get a mandate for No Deal (or some other fantastical invention) on the strength of his personal brand or he may lose a vote of no confidence for trying to force No Deal through. If just a couple more Tory MPs were to resign the whip, it is not even clear he has a majority in the Commons and, in that case, the Queen may not have a basis to make him PM and an election would again be inevitable.

 

Would anyone win a majority? How many seats would each party get?

This could be one of the hardest elections to predict. The four main parties in England (Con, Lab, L-D and Brexit) each polling evenly with around a quarter of the vote, tells us very little about how they would perform in an election in a first past the post system.

If their votes are spread evenly across many constituencies as the Lib-Dems often are, then they can end up with lots of votes and very few MPs. If their votes are more concentrated in fewer constituencies, they can end up with far fewer votes but lots of MPs, like the SNP in Scotland.

Let’s start with the following assumptions and then think of some scenarios:

  1. Current opinion polls show Brexit, Lib Dem, Conservatives and Labour all with similar levels of support.

  1. Current polls on voting intentions show that almost half of Conservative voters intend to vote Brexit party, and almost half of Labour voters intend to switch to Lib Dem or Green

Attempting to factor in the first-past-the-post system, if we look at every constituency individually and try to project these shifting preferences, the landscape of elected MP changes dramatically. The result of this is nicely outlined in this post https://sluggerotoole.com/2019/06/02/general-election-seat-forecasts-are-no-longer-useful/

Pretty stunning results! Not a single Conservative MP in the next Parliament!

 

Peterborough by-election results

Usefully there has been a recent by-election so we can judge how this model performed.

A real first-past-the-post, 3-way marginal thriller with Labour, Brexit and Con all on numbers of votes and Labour just winning and claiming it as an important victory.

 


Possible conclusions….

  • Does this mean that Labour will do much better in a general election than the polls suggest?
  • Is polling data is meaningless and is a general election impossible to predict?

I do not think either of these are true. If we were to add an extra filter, then the results differ from the model in a very predictable way. The filter is that Peterborough is a strong Leave constituency.

I think it is sensible to say that in Leave areas, Labour’s “nuanced” Brexit stance will help its vote hold up better than the model suggests and as a result, the Lib Dems and Greens do worse. Conversely, the simple arithmetic implies that, in Remain areas, they will lose more votes to the Remain parties. The result of both these hypotheses will be the Lib Dem vote will be far less uniform that a simple model suggests.

For example in Battersea, Labour has a large majority but an 88% Remain vote. These are likely the type of voters for whom Labour’s “nuance” looks pro-Brexit. This makes for a seat that could swing from safe Labour to Lib Dem.

In this scenario, the Lib Dems win far more seats. The simple model suggests the Lib Dems are in with a chance on 558 seats; adding a material swing for Leave/Remain, then they could win perhaps half of those, and lose the other half by larger margins. London could easily become a Lib Dem stronghold in the way the SNP takes so many Scottish seats.

Another possible boost for the Lib Dems is tactical voting as we may have seen in the European elections. The polling intentions suggest a large number of Labour voters switch to Green. Some of those may be willing to vote Lib Dem if they believe that candidate has a viable chance of winning the seat. In a race with such tight margins, a small shift here could make a massive difference to total seat count.

The post quoted above says that forecasting MPs is a “fool’s errand”, and so these are best seen as projections and scenarios rather than forecasts. But on current polling, we could easily see the Lib Dems as the largest party, followed by Brexit Party, with the Conservatives and Labour both relegated to small fringe parties, even adjusting for first-past-the-post.

Reactions

The Conservatives would likely react by emulating the Brexit party even more. Whether they succeed or not does not matter. The Conservatives will either be replaced by the Brexit party or become it.

Labour could face up to this fiasco by retreating further into ideological purity; the British Communist Party takeover of the Labour party will be completed and Labour becomes a fringe group. Or they could replace Corbyn with a centrist Remainer, aiming to recapture young, progressive voters. The first step of course would be to form a coalition with the Lib Dems to stop Brexit.

Maybe the media is covering the wrong leadership campaign if they want to examine the next Prime Minister…

Jo Swinson in Number 10 by Christmas?