NEW YORK (Reuters) - American Home Mortgage Investment Corp plans to close most operations on Friday and said nearly 7,000 employees will lose their jobs as the lender becomes one of the biggest casualties of the U.S. housing downturn.

Experts said it is likely the Melville, New York-based company will have to seek bankruptcy protection, and no later than Monday.

Read more…

"Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years." ~ Warren Buffett

As we all know (or at least should know), the United States economy became imbalanced in the late-1990s as too much speculative capital surged into the Internet and Telecom sectors of the economy. As this speculative boom expanded, rising asset prices allowed the boom to move into the broader economy. Throughout the late-’90s, speculative funds and increased leverage played a primary role in the expansion of credit throughout the economy. If someone wanted cash and had a semi-viable story as to how he would pay it back, he could procure a loan or venture funds quite easily. This process played out throughout the economy, as consumers, businesses and every level of government piled into debt in order to finance projects for current consumption, with little or no concern given to having to pay it off. Our fiat monetary system, with limitless fractional reserve banking made possible by low reserve requirements and a general lack of prudence by our questionable Federal Reserve establishment, played a significant role in creating the initial imbalance.

Read more…

Dark clouds are converging over America’s economy. Here are three scenarios on how they could develop into a serious storm that could hit you.

Fishermen and sailors must be constantly on the lookout and prepared for changing weather. Smooth sailing can quickly turn into a fight to keep one’s head above water. Likewise, today’s breadwinners must be prepared for abrupt changes in the economy. Good times can quickly turn into recession; high-flying stock markets can crash; and as history clearly shows, all bubbles eventually pop. Often, fat years are followed by lean years.

As economist James J. Puplava has said, “Economic and financial conditions never remain constant. They are as seasonal as the weather. Forecasts change depending on the patterns that emerge” (Financial Sense Online, March 15, 2001).

Financial meteorologists and prognosticators identify two looming, yet self-induced storm fronts threatening America’s economy: deflation and inflation. However, like climatologists trying to predict the weather, many disagree as to which poses the most immediate danger. Further, some identify a third and even more powerful economic storm brewing.

Although the outcomes of these coming storms are predicted to be very different, their origins are similar.

Mounting Debt Levels

Like a downdraft of dense freezing air, virtually all levels of American society have become weighted down and pressured with debt. Personal, corporate, state and federal debt levels are all at or near record highs.

U.S. consumer credit debt hit an all-time high of $2.4 trillion last September, soaring 80 percent since 2000. Similarly, the amount of household and mortgage debt as a percentage of disposable income is at its worst level in over a quarter century. For the past two years, Americans on average spent everything they made and then some. During 2006, people spent 1 percent more than they earned. The only other time in history America’s savings rate was in negative territory for a full year was during the Great Depression.

In corporate America, debt has become so endemic that there are now more companies with “junk” credit ratings than with investment-grade ratings, says credit rating agency Standard and Poor’s.

Read more…

WASHINGTON — After ending 2006 lethargically, the economy is expected to remain sluggish most of this year as businesses and consumers cope with fallout from the painful housing slump.

The broadest barometer of the country’s economic health, gross domestic product, grew at a 2.5 percent annual rate in the final three months of last year, the Commerce Department reported today.

It was a small improvement from the 2.2 percent pace estimated for the fourth quarter and a 2 percent growth rate logged in the third quarter. However, the new reading still marked a lackluster showing that reinforced economists’ predictions for similarly listless activity in the coming quarters.

"I see the economy continuing this well-entrenched, below-trend economic groove that we are in," said Stuart Hoffman, chief economist at PNC Financial Services Group.

According to various projections, GDP growth will remain mediocre, hovering at the 2 percent to 2.5 percent pace in the first half of this year. In contrast, the economy’s average, or trend, growth rate is closer to 3.25 percent, economists said. Gross domestic product measures the value of all goods and services produced in the United States.

Read more…