How to thrive in a recession

II: Counter-cyclicality for households

There was a break in Daily Thoughts on Thursday due to a public holiday in Finland.

From Tuomas Malinen on Geopolitics and the Economy.

Firstly, I would like to make a minor correction to my statement from Wednesday. Our forecasts are quarter-to-quarter, which means that our estimate for the annualized GDP growth was 0.4% (0.1*4). We still “won”, but with a smaller margin. When you have not constructed the model yourself, you may easily forget the details of it. ;)

Now, back to the topic. The foundational idea of managing recessions (and economic crises) and turning them into opportunities is based on the concept of counter-cyclicality. The concept originates from Keynesian economic theory, which effectively asserts the need to act against the business or market cycles. I will now explain what this means for households (followed later by explanations to investors and corporations).

Counter-cyclicality of households