Have You Ever Been Diagnosed With the Dutch Disease?

Vahid Chaychi

3 years ago

Although the Dutch Disease doesn’t create pandemics, it is not a rare disease either. If you look around carefully, you will see that it has already happened in many people and is ongoing in some others. What about you? Have you ever got this fatal disease? What should you do to avoid it, or not to allow it to recur again if you had it once?

Unfortunately, there is no vaccine, nor is there any medication for the Dutch Disease. To avoid this destructive disease, you should only be smart enough to analyze your situation and foresee the outcome of your actions in your future. Yes, I am not talking about the regular illnesses caused by germs. Those illnesses are a lot easier to manage. But, the Dutch Disease is different. Please let me tell you what it is first, and then I will explain how you can avoid it.

What Is the Dutch Disease?

Indeed, the Dutch Disease is not a physical illness. The name comes from The Economist magazine that used this name back in 1977 to describe something that had happened in the Netherlands when they had discovered vast natural gas deposits in the North Sea in 1959. They were over the moon after such an important discovery. As a result, they massively exported the discovered gas to other countries. It doesn’t look like a disaster so far because no doubt that they could make lots of money. But, there are always two sides to every story. Massive exports of one product caused the value of their currency to go up dramatically. At the same time, they made lots of money that they didn’t know what to do with.

Before this, their economy was dependent on export of a wide spectrum of different products and services. But, their currency value appreciation caused them not to receive orders from other countries anymore because their foreign customers could not afford the Netherlands’ products anymore and they preferred to order them from other countries. As a result, Netherlands’ unemployment rose from 1.1% to 5.1% because when companies cannot export their products anymore, they have to lay off their employees. Additionally, their capital investment also dropped because there is no point to invest in the industries that are not selling anything.

On other hand, their governors who had lots of money within a short time, also took lots of wrong steps that caused the country to go even lower in the swamp that wasn’t noticed yet. This is where we remember the same lousy teacher I talked about in my previous articles. Yes, I am talking about success. Those who make lots of money within a short time, will know themselves as the most successful people who will never lose. But, life is not that easy. It makes ignorant people learn the lessons the hard way. Success in some projects or in some steps of life can mislead people their whole life. When they make lots of money from a source of income, they think the money would keep coming forever. But just an event can make the income stop.

It wouldn’t create a disaster if they saved enough money, and at the same time, they used a portion of their income to make more money through creating some other sources of income (diversification and compounding interest). But, as I said at the beginning of this article, only those who are smart enough to analyze their situation and foresee the outcome of your actions, can avoid the Dutch Disease. Most people are not like that at all. The big amount of the money they suddenly start making, will cover their eyes and minds, and so they think they can spend as much as they want because their income covers their expenses. This usually doesn’t happen on the earth.

Long story short, Netherlands started too many expensive projects that needed lots of money for such a long time. They made this mistake because they thought the money they were making through exporting gas would keep coming forever, and so they could finish the projects without any problems. But, they were 100% wrong.

New competitors who had also discovered gas and oil in their lands took the market from the Netherlands. So, the huge source of income that had mesmerized the governors stopped suddenly. No need to say what happened then. You know it.

When the income stops or the expenses become higher than income, the symptoms of the Dutch Disease appear. Losing everything and getting bombarded with so many unexpected problems like unpaid loans, debts, salaries, etc. and bankruptcy are only some of the symptoms of this drastic disease that could be easily avoided.

What Lessons Are There in This Story?

Nothing lasts forever in this world. If you are making lots of money, it should not make you start huge projects based on the money you think you will make but you haven’t made yet. You should always save a portion of the money you make to have a reasonable amount of savings. At the same time, you should force a portion of the money you make, to make more money through investments and assets. This is what the rich do. That’s why they get richer, and they never get the Dutch Disease. It is the right time to read this article to learn about them more: 5 Things Everyone Must Learn from the Rich

What the rich do is also what The LuckScout Community does. We enable our members to make money for free and risk-free. We increase their income over time to enable them to earn more active income (explained more here). At the same time, we create sources of passive income for the community. As a result, our members will eventually and hopefully become financially free and even rich. We are already vaccinated against the Dutch Disease, although they don’t sell this vaccine to the public 😉

We achieve our goals, not immediately, but slowly and surely!

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