In the 1960s, the Netherlands discovered deposits of natural gas in the North Sea. As a result of this discovery, the export of this resource increased, causing the Dutch currency to appreciate considerably, thus making its entire economy rich, since now a large quantity of goods and services produced in other countries could be imported.
Due to this, the import increased as the export of natural gas increased. The result of this process led to the Dutch industry not being able to compete with the international industry. However, once the international price of natural gas declined, Holland could no longer export goods and services, and its domestic industry had gone bankrupt.
This phenomenon is known as the Dutch disease.
It occurs because the inflow of capital received by a single product, usually some raw material, is greater than that received by the rest of the economic sectors, then, the people and industries that were previously engaged in producing a certain variety of goods and services, stop doing so, to dedicate themselves to satisfy the demands generated by the booming sector, so when this sector falls, all the others as well.
Think that you are in a very poor country, which needs the export of coffee and sugar cane to be able to import food, but one day, one day, they find a huge oil field. Foreign companies arrive, install their machines, bring their specialized workers, extract the oil and export it. Of course, they pay taxes to the State, so now this can pay for public services for the first time, now citizens will have access to education and a health system, and in fact, you will also benefit, now you can stop work in the field, and you can go to the city, maybe be a doctor or professor, after all, now the State is offering those jobs that did not exist before, or maybe you prefer to work for a foreign entrepreneur who decided to found a bar in the outskirts of the oil plant to sell workers a little liquor when the day ends.
Soon the fields of coffee and sugar cane are desolate, there is no one who works in them, everyone wants a bit of oil money.
Everything is going well, until finally it does not. The oil price in the international market is below the operating costs of the extraction company, so it stops paying taxes to the State and has to let go of many of its workers, as a consequence of that, the schools and hospitals should also do the same, and of course, the bar owner should fire you or make you work for a lower salary than you had when you worked in the field, because now there are fewer clients, and also, with less money. If the price does not rise soon, schools and hospitals will have to close, and the bar too, however, the fields have been left empty and the harvest has not been harnessed.
Thus, all activity that had real value ceases to exist because it has been subordinated to the passenger.
How does that affect Steemit?
You see, as we all know, at some time last year, the cryptocurrency market experienced a sudden and impetuous price rise, the Bitcoin reached a price limit of more than $20,000 per unit, beating month after month, week after week, day after day, hour after hour, the historical maximums. As a result of this, the rest of cryptocurrencies benefited a lot because money flowed in one direction, from outside to inside.
Day after day the demand for cryptocurrencies increased, and when that happens, a scenario is created in which various entrepreneurs, and in this case many scammers, can increase the supply of cryptocurrencies, as they did, by filling the market with, literally, garbage. As a result of this, many cryptocurrencies that until then were functioning normally and were supported by relatively reliable and solid projects began to suffer severe distortions.
The objectives, which at first were clear, were no longer there, the money flowed in great quantity and with great speed, so the purpose was no longer to reach the ultimate goal for which the cryptocurrency was designed, whatever it was, but the only thing that mattered was the price.
Thus, tens of thousands of people began to join the market, not because they supported any particular project, but because money was flowing. A couple of posts in Steemit could give juicy profits, and a considerable investment in SP, taking into account that the SBD was at a very high price, could effectively make the investor get a good return.
But when the supply exceeds the demand, which was what happened, the price starts to fall, and when that happens, many of the people who joined the market only to obtain immediate profits, begin to withdraw their investment, as a result of this, there is a domino effect in which the supply increases much more than it normally did, because as with companies shares, cryptocurrencies are not consumed, they simply change owners, and if someone or something it emits more units at a faster rate than the demand grows, what will happen is that at a certain moment the supply exceeds demand, causing the price to go down, and that owners began to sell, increasing the fall even more. That is, when the price falls, and you or I withdraw our SP to sell it for that reason, the only thing we do is increase the supply even more and help the negative trend to continue.
In this sense, this situation is devastating, because although we might think that it only affects unsolids projects, it is just the opposite, what happens when the Dutch disease occurs is that solid projects are the first to be harmed, because in the first instance they did not need the injection of capital to continue existing, because they already had a stable growth rate, consolidated and based on their own activity.
As with the coffee and sugarcane fields, today Steemit's activity is below the level it had even before prices went up, and as a result, the price of Steem is also lower.
What is the cure for this disease?
There is only one; return to the field, or in our case, to the keyboard.
Image Source: 1a, 1b, 1c, 1d, 1e, 2, 3
