Since I made this thread I get asked often: "what should we do?". (Lockdown? Close schools? Protect the elderly? Nothing?) Usually, there's a strong political or moral angle to the question and I’m lucky I don’t have to make the choices. But I believe there’s another way.
Thread
Some have been discussing ways to reduce R since the beginning of the pandemic (@AdamJKucharski or @gianlucac1 - follow them!) and I believe they are right. This is where we can make progress.
How?
With no public intervention, R is around 3.4. What can we do from there?
I’d like to share two major ideas:
The 1st is Adam’s model on social contacts and attack rates which is a very good approach to estimate how social rules and trace/test/isolate strategies impact R
The 2nd is what happened in Wuhan.
Let’s start with Wuhan: they brought R to 0.3 thanks to this strategy:
Before that, R went down but nothing like the effect they got after implementing that approach, as these estimates show.
And believe me, what they did is nothing like the Western approach to trace/test/isolate. It's an entirely different approach.
We are in a mild social distancing/testing/isolating approach. If you look at Adam’s model, you’ll see that in the best-case scenario, with more work from home (30%) and an OK-ish tracing strategy you get to 0.8-ish R.
But I played with the parameters in Adam's model and as soon as tracing becomes shitty, (e.g. 50% efficiency) then R goes above 1, as high as 1.2.
In an email I sent at work back in MAY, I said R would go back to 1.21 after the lockdown… we’re at 1.2.
The thing that works particularly well in the Chinese strategy is that you isolate people BEFORE you test them and tracing is mandatory with significant fines if you don’t follow the rules. Those two extra days make a HUGE difference when you model R.
Those so-called hospitals built in one week (remember, they made us laugh) were not proper hospitals. They were isolation centers. With this approach, the model suggests R would go to 0.5, with no lockdown and schools open.
THIS is what we need (or a vaccine).
Yes, the strategy is an infringement of our liberties and yes it stinks.
But if the other choices are having an entire generation of children not going to school or the elderly locked down for months, or even worse (high mortality), the choice is easy.
So please, give up on your digital scare and "I don't want the government to have my data" mantra and go for it.
Last thing: most of you believe the Chinese cook the data and that’s why they don’t have Covid anymore.
The uncomfortable truth might be that they have a strategy that works but we’re too dumb to implement.
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How long are we going to stay in Lockdown? Macron said at least early December but that doesn't mean anything. More important he said the metric was going down to 5000 cases a day. When will that be? A quick thread to estimate the lockdown duration.
My first estimate is highly scientific: the first lockdown was 2 months, assuming the handling of the disease is a bit better but we started the lockdown a bit later and it's winter soon, 2 months sounds like a decent benchmark again.
The second estimate: let's reverse the incidence curve and see when we were at 5K. The incidence curve is so horrible now that it's hard to see the number, but 5k was basically the end of august, so 2 months again
Last Friday, Macron floated the idea of a new general lockdown in France. Ouch. And because I’m fed up with reading so much garbage and contradictory stuff on Covid, I decided to have a hard look at the French data. A (long but important) thread.
The questions I want to answer:
How bad is the 2nd wave?
How fast is it growing?
Does it affect only young people as some claim?
Is Covid really treated better?
Is the fatality rate really going down?
Can the government stop the 2nd wave quickly enough?
All important questions.
BTW this is French data but I suspect the data looks the same all over Western Europe, with time lags.
Something weird is happening on Metro Bank. They just announced a 20.2% capital + MREL ratio, which is below requirement but we kind of knew they would be below requirements.
So that's not what is odd. The CET1 capital ratio is much more intriguing. Quick thread
They did not disclose their Q3 CET1 ratio. But in Q2 their MREL ratio was 21.3% so it went down 110bps. Afaik there was no repayment of Tier 2 or SNP debt (I wish!) and RWAs are fairly stable. So the only logical conclusion is that CET1 went down 110bps QoQ - would be a big drop
How is it possible? It would imply a big loss. Always possible, but in only one Q? And not mentioning it in the trading update, which only says that "The macroeconomic scenarios applied to the measurement of ECL at H1 remain appropriate", would be reckless.
It may sound geeky stuff but the current debate around the usability of banks' capital buffer is maybe one of the most important macro debate currently- with very concrete and far reaching consequences
It's not a coincidence that recently the BoE, the ECB, the BIS, all the big shots have written extensively about it. It's also a fascinating debate about central planning vs. individual behaviours, collective vs. individual targets, the role (or absence of) of risk in econ models
Credibility of a central bank on non monetary policy matters, etc.
Really if you have time and are interested in macro stuff, have a look at it.
Of course the mainstream view (of CB) is that buffers should be used and banks "forced" to lend - based on toy models