Please see below article from EPIC Investment Partners outlining the ‘Dutch Disease’ and giving insight into the Presidential line of succession.
We wrote in our Daily Update last week about Guyana’s record growth, which is being driven by substantial profits generated from its oil production and export sector, however, having the very real danger of being bedevilled with Dutch disease.
Dutch disease is a term that describes an economic phenomenon where the rapid growth of one sector of the economy, usually natural resources, leads to a decline in other sectors. It is often characterised by a significant appreciation of the domestic currency, which has a detrimental effect on the rest of that country’s economy, hindering exporters and, in turn, other sectors of the economy.
The term “Dutch disease” originated in 1977 when it was introduced in The Economist magazine to analyse the economic situation in the Netherlands (hence the name). This occurred after the discovery of substantial natural gas reserves in the late 50’s. While the Dutch economy benefited massively from increased revenues generated by natural gas exports, the substantial influx of capital into the sector resulted in a significant appreciation of the currency. This, in turn, led to a decline in the manufacturing industry that was not connected to oil, and higher unemployment rates.
There are various ways to mitigate Dutch disease, from actively managing your currency appreciation to economic diversification, including targeted public spending. One commonly employed method is the establishment of a sovereign wealth fund. Numerous developed and developing countries, including Norway, China, Abu Dhabi, Singapore and Qatar, have successfully implemented sovereign wealth funds to use as a counterbalance to their newfound wealth.
Sovereign wealth funds serve the purpose of stabilising capital inflows into the economy to prevent overheating and substantial currency appreciation. Excess revenues can be channelled into areas like education or infrastructure development, again facilitating economic diversification.
Elsewhere, with Kevin McCarthy’s ousting as House speaker on Tuesday, the congressional body is now without an elected leader, meaning the US is also without its second person in the presidential line of succession. The US presidential line of succession is the list of people who would assume the presidency should the sitting leader of the free world be unable to do their job, say due to death, incapacitation, or even removal from office.
After the Vice President, Kamala Harris, it’s the Speaker of the House of Representatives, followed by the President pro tempore of the Senate, Patty Murray. Murray has been promoted to second in line until the House gets a new speaker. The full list includes Cabinet secretaries in order of their agencies’ creation. So, the Secretary of State is fourth in line, while the Secretary of Homeland Security is last, at number 18.
Nine VPs have assumed the presidency mid-term. However, that’s as far as it got, as the offices of president and vice president have never been simultaneously vacant. The closest ever was one Andrew Johnson, Lincoln’s VP, who was impeached in 1868 but acquitted by the Senate.
Dick Cheney served as acting US president for a total of 4.5 hours when George W. Bush was sedated for colonoscopies in 2002 and 2007. In 2021, Kamala Harris became the first woman with presidential powers for 85 minutes during Biden’s colonoscopy.
Please check our blog content for advice, planning issues and the latest investment, market and economic updates from leading investment houses.
06/10/2023
Alex Clare