Did any of you catch the BBC Radio 4 interview featuring Steve Keen? He's gaining something of a cult following for having debunked prevailing economic theories. Unfortunately, he thinks Britain's financial situation is in an extremely perilous position with a high likelihood of defaulting on its debt within the next year. It appears Britain's level of private debt is staggering and dwarfs the level of its much talked about government debt.

I don't want to be a doomsayer, but I'd be interested to know whether people moving back to the UK have considered Britain's economic prospects in their decision to go back. Or do you think the economy will sort itself out, or do you not care?

You can catch the interview here:

http://www.bbc.co.uk/iplayer/episode...omics_Is_Bunk/

I know of him, but personally don't put too much store by what he says. He has a point of view and an agenda, and those people tend to see everything as supporting their POV. In his case, it's not one I share. My economist of choice is Paul Krugman and the two couldn't be further apart. (I respect Krugman because he predicted the mess we're in now long ago: hint: it has nothing to do with govt. debt).

I moved back from the US regardless because (a) I think the the world economies are all linked now (b) I believe in myself and will succeed no matter what the economy (c) the Tories won't be in power forever and hopefully we'll get off the disastrous austerity bandwagon in time to save the country.

We have considered the UK economy but as I have previously admitted to, have a limited understanding of the situation, the theories, the possibilities. Whatever I read leads me to more and more opinions, studies, predictions and I get overwhelmed. I'm not proud of that, just being honest.

I am petrified of the UK situation, but the situation in Australia is becoming less rosy as time goes on, and the work I do is partially reliant on income from the UK and Ireland (although a lot is not, to be fair) so the effects would be felt here for me, if things do go to pot. We have now booked flights home (one way for me, return for OH as he is coming back to pack up) for December and I wobble almost every day. However, we are young-ish and have no kids (nor will we in the future) so I guess I just cling on to the idea that if it doesn't work out in the UK, it's easy enough for us to come back to Melbourne, or go somewhere else.

If we look back through history (which we're supposed to learn from but never do!) we've always had periods of economic unrest but then it passes. Right now the world (not just the UK) is in turmoil. It will pass. I can't base a life decision on something that changes every day.

I think more people should believe in themselves and approach where they want to live accordingly. I would never move somewhere just because I thought it had the best economic prospects. For me that is precisely the point, I want/ am intending to move back to the UK to be around like minded folk, friends and family. As we always used to say about the French, remove the Americans from the USA and it would be a wonderful place. The geography, topography is amazing. Its just try as I might I cannot continue to put up with the current incumbents. Believe me I have tried, and often feel quite annoyed at myself that I cannot seem to assimilate fully. To all outward appearances I probably do, but inside me its like wearing a horsehair shirt everyday

I thought Steve Keen was the manager of Blackburn Rovers..was kinda disappointing it wasn't him..but yes i dont see any improvement in the UK economy in the next 2 years at least...i think job prospects are far worse now than they were 12 months ago...and they were crap then!

Since returning to the UK, I am astonished at the amount of people I meet who have second homes, especially in places such as Spain. Most of them are not paid for and are bought with borrowed money thrown at them by irresponsible banks due to equally irresponsible government policies. With self-assessed and 100% plus mortgages it was a disaster waiting to happen. The economy (and people's personal financial ambitions) were based on the fact that house prices would continue to rise. Not that the UK is alone in this, when I lived in Canada, personal debt levels were high there also.

At the moment, these debt levels are manageable because of the prevailing low interest rates but if interest rates were to rise, it could be a different story. For every percentage increase in mortage rates, there is a significant amount of people that lose their homes. How much the government can control mortgage rates remains to be seen. While the BoE rate has remained low, mortgage rates have been showing a slight increase recently.

Steve Keen is famous because he was one of the few economist to predict the GFC a couple of years before it occured. Mainstream economists, including Krugman support the notion that private debt doesn't matter because it's a zero sum game where a lender lends money to a borrower but there is no net increase in purchasing power - money is merely shifted from one person to another. However, this is not how the real economy works where banks are actually able to create their own money through the reserve system.

Incredible as it may seem, mainstream economic models ignore the existence banks, debt and money. They model the economy as if it was a closed barter system.

Keen is treated as a maverick, but the mainstream economists who shun him are rapidly losing their credibility as the economic crisis they failed to predict and don't understand continues and threatens to deepen.

You have made a very pertinent observation. Banks lent billions (make that trillions) of dollars to ordinary people to buy property. Borrowers saw it as a get rich quick scheme, banks made huge profits from the loans and the result was a massive over-supply of housing - and the massive debt burden of British households and companies. Spain has hundreds of thousands of empty properties which have collpased in value. This sums up the giant ponzi scheme and resulting assett price bubbles that the banks have created through their ability to create money out of thin air, increase the money supply and pump up debt and asset prices.

Now western leaders are desperate to bail out these very banks which caused this mess in the first place - they do it under the guise of bailing out governments (Greece, Spain etc), but what they're really scared of is the impact on the banks if any of these countries default on their loans.

Steve Keen's analysis of why this has happened and what we can do to fix it, is fascinating.

It takes two sides for home loans to happen - lenders and borrowers. If the banks were irresponsible for lending the amounts they did, then the people borrowing the money are equally irresponsible.

The housing bubble happened, along with "toxic loans", because people were willing to pay ever increasing amounts of money they couldn't afford to borrow - and they didn't understand the loan requirements then they should have sought advice independent from the lender. I blame both the banks and the borrowers who behaved irresponsibly.

You are quite right. I think many people were influenced by the property programs on television. Even today, if you watch the pre-2008 programs, just before the collapse, the presenters are telling people what a great buy many of the properties are and how much they increased in the past. As we now know, the past is not always representative of the future.

Sure it takes two to tango, but I think the banks were much more to blame. Their whole business model is based on rising debt levels - that's how they make money. People need to live somewhere and if house prices are twice as high as they should be, then what's the alternative when rents are also inflated? People need housing to survive.

I remember a financial "advisor" working for my bank in 2007 desperately trying to convince me to take out a loan to buy shares. He was very convincing and while I didn't fall for it (thank God!) I could easily see how other less informed or educated people could have been sucked into it. I just had a gut instinct that what he was saying didn't sound right, but it's only human nature to be sucked up in the euphoria of rising markets.

The banks have some extremely intelligent people who knew full well before 2008 that their business model was unsustainable and that it amounted to a ponzi scheme. Banking, as an industry, shares much blame for what is happening to the world economy.

Or a government clutching at straws and doing the only thing they knew to boost the ecoonomy, that is, flooding the market with cheap money which just about anyone could access. It seems they have run out of ideas, all they know is the same old, same old, i.e. print more money and reduce interest rates. I suspect many of our problems may have started way back in the 1980s.

Steve Keen thinks our current problems actually started way back in the 50s and 60s. WWII, Roosevelt's New Deal and the Marshall Plan re-booted the world economy after the last big credit crunch in the 30s. Ever since then private debt has been steadily increasing until we reached a debt to GDP ratio in 2008 about 50% greater than in 1929. Greenspan's low interest rates after 2001 merely accelerated debt accumulation. Ironically, Greenspan called this period "the great moderation". The current low interest rate policies are an entirely futile attempt to stop the bubble bursting.

I can agree with most of this. Many people in the UK forget (or never knew) that not so far back, in the 1980s, the BoE rate was 17%. Imagine if it were to swing back to these rates and do the government really have the power to control market forces and stop it? They are incapable of introducing a simple tax on Cornish pasties (last budget) without botching it up.