If you can't say anything nice, type it instead.

Jan 5th 2008, I blogged some projections for 2008 in "The housing bubble: a travel outlook" :-

• 1) 'Discretionary vacation trips will be cut back. ..Vegas will be especially vulnerable.' NOV 08 CHECK : See 1 , 2 or 3

2) 'In 2008, I expect the UK to be more slightly more attractive as a destination as the pound decreases. Since Nov 07, pound peaked at 2.11 to the greenback. It is now 1.967: a 7.5% decline in just 2 months!It is still not a steal as I remember it at 1.5 but for a frequent visitor to UK, I like the trend.' NOV 08 CHECK British pound is around 1.60 having dropped to 1.52.

3) 'I also predict the the Euro to decline in 2008 as ECB caves under pressure to help it's exporters and drop interest rates'. NOV 08 CHECK . Though Euro has dropped for different reasons and may go lower. It is now 1.27 from a high of 1.6.

4) 'Ben Bernanke in attempt to protect economy will likely drop interest rates again'. NOV 08 CHECK We are now at Greenspan post-911 rates and possibly go lower.

Seeing 4/4 predictions come true, do I consider myself a Nostrodamus ? Nope. I predicted a run up in commodities but didn't see it's decline. With hindsight, perhaps it was obvious. Commodities were just another trading vehicle and they are base inputs to an economy. Cut back on the ecomony, cut back on commodities. China's fantastic GDP rise was biased by spending on new factories, buildings etc. Things geared towards capacity increase which we may not need afterall.

So what does the future look like now 'Mr. Know it all Smarty Pants'?

I believe it is one of a DEFLATION spiral.

For the 1st world consumer driven economies, this will be a disaster. Consumers will not be consuming as credit dries up. This 'miraculous economy' was facilitated by credit. Turn off the credit faucet and we go back to a savings or cash economy. That is turn leads to less demand , less production and more unemployment which in turn leads leads to less demand.

Deflation means that all assett prices will decrease. Real Estate will go down, Stocks will go down and possibly commodities (I say possibly as they've had such a dramatic drop). Finish goods that you want but not necessarily need, will decline.

In this world, Cash will be king. If you have it, you'll hang onto it. You'll realize how difficult it will be to earn more. No more buy and hold in the stock exchange.

Open for a future next shoe to drop is Government bonds and the dollar. Asia has been a big consumer of Goverment bonds and if they go into recession, will they be able to continue to buy them? If no, look out US and the dollar.

So to come back to travel. Short term future as we knew it, will change. Oil is unlikely to spike up but less people and companies will have the disposible income to travel. If your future income stream is also potentially affected, then why would you consider a 2 week vacation?

Future bargains ? If you are financially secure for the intermediate term, you bet. Just look at Iceland. Hungary, Poland, NZ and Russia ? Add any other country to that list. All are welcoming hard currency which today is the dollar.

So according to our lame duck Nero-esque leader of the free world, the economy is strong. However, my take is that the light on the horizon is the economic future burning down.

Phileas Fogg,
(Trying to engjoy that nice sunny day in)Houston, Texas
Nov 2nd, 2008.