The U.S. Prison-Cell Economy: Opinion

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Bullion Bulls Canada) -- Every month, the U.S. propaganda machine plays the same game in the housing sector. It announces new home starts. Then a few days later it announces new home sales. But it never talks about the two numbers in the same news item.

There is a very good reason for this: the two numbers have absolutely no connection in the real world. Month after month, the U.S. government announces new home sales bouncing around a little above 300,000 units.

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However, month after month, year after year, the same propaganda machine announces new home starts at 500,000 or 600,000, and now 700,000 units per month.

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In other words, every month, year after year, the U.S. government announces that its homebuilders have commenced construction on roughly twice as many units as they sell. This alone is proof of some deceit taking place. Obviously, no business which builds double what it sells can remain in business. However this is only the beginning of the fraud with these statistics. It gets really interesting when we look at what the U.S. government is also saying about the inventories of new homes.

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So here is the question the propaganda machine will never answer: how can U.S. homebuilders be constructing twice as many homes as they sell every month, while (supposedly) inventories have plummeted lower? The answer is that there is no answer. Obviously, if U.S. homebuilders are building more homes than they sell every month, then inventories can only go higher and higher.

Before the collapse of the U.S. real estate market (after the made-in-Wall Street "bubble" burst), the U.S. propaganda machine could have argued that a significant portion of this massive statistical discrepancy might have been explained by self-owned units, i.e. (small) homebuilders building units for themselves (and thus they didn't need to sell those units to anyone). However, at that time, U.S. house prices were sky-high, but building material costs were relatively low. It made sense for people to build their own homes.

Today, that explanation cannot possibly account for more than a trivial portion of these phantom housing starts. Building material costs are relatively high, while house prices have collapsed. Even with the temporary lull in foreclosures, still a full third of all U.S. home sales are distressed sales -- where buyers can purchase units at substantial discounts. It makes no sense at all to build your own home, when buyers can purchase a house for less than the cost of the land and building materials (and avoid the free labor).

We know that we are not being told the truth here. With sales of new homes having plummeted by more than two-thirds ( and stayed at that bottom), and with the housing crash having been especially precipitous, this directly implies that two-thirds of all U.S. homebuilders should have been forced into bankruptcy.

Yet while some smaller, regional homebuilders have declared bankruptcy, none of the large, national builders have been forced out of business. They build hundreds of thousands more units than they sell -- every month -- and yet somehow manage to stay in business.

What if there was an easy/obvious explanation for this "somehow"? What if the two-party dictatorship which runs the U.S. had been told by their Oligarch masters to turn the U.S. economy into a prison-cell economy?

Suddenly there is a way for all of these apparently contradictory numbers to make sense. What are the only "housing units" which a homebuilder could build (and get paid for) without having to make a sale after construction was complete? Prison cells. This explanation accounts for how homebuilders could build hundreds of thousands of units more than they sell each month (while inventories declined). It explains how these homebuilders could have avoided bankruptcy, despite losing more than two-thirds of their market.

Moreover, we have evidence all around us that the U.S. government has willingly chosen the Dickensian "social policy" of warehousing millions of their own people in prisons. Indeed, CNN's Fareed Zakaria just referred to the U.S. as the "Incarceration Nation."

The U.S. incarcerates nearly six times as many people (760 per 100,000) as its northern neighbor, Canada (131 per 100,000). It imprisons five times as many people as the U.K., more than seven times as many as France, more than eight times as many as Germany, and more than 12 times as many as Japan.

The obvious question which Americans should be asking themselves is this. Is their own population really five times more criminal than the worst hooligan nation in Europe. Or is their own government simply five times more evil?

In the U.S., the vast preponderance of evidence suggests that "evil" is the correct answer here. First of all, in the debt-wracked United States, providing humane conditions for the 2.4 million Americans being warehoused in its prisons is no longer a consideration. Individual states (like California) are in permanent violation of their own rules on living conditions for prisoners.

To deal with that problem (or rather avoid dealing with it), virtually every state in the U.S. is turning to private prisons as the "solution" -- since these prisons-for-profit have virtually no oversight, and less regulation of their prison standards than Guantanamo Bay. The U.S. government may not want the bad publicity associated with running hundreds of modern-day Alcatraz's, but it sees nothing wrong with allowing all these private gulags to be built, shipping off millions of their own citizens into their custody, and then simply looking the other way.

The real story here is the growth in numbers -- and the inability to find any current total number of such facilities. In 1996, there were 47 private prisons in the U.S. By 2001, there were 158. By 2005, there were 416. Despite exhaustive internet searching (what passes for "research" these days), I was unable to come across even any estimates of the current number of private prisons in the U.S.

However, with the charts above suggesting that construction of private prisons didn't really get serious until after the Crash of '08, one must assume that there are now thousands of private prison facilities across the U.S. Given the statistics on "new housing units" from the charts above, there would appear to have been somewhere between 5 million and 10 million new (private) prison beds constructed in the U.S. -- just since 2008. That would be enough to roughly quadruple the total U.S. prison population, to somewhere around 10 million people (give or take a million).

How can hundreds of private prisons be constructed in the U.S. each year without any publicity, or even bare numbers on this construction explosion? Simple. In the Orwellian, 21 st century United States, any information which the government wants to keep away from the general public is simply branded a matter of national security.

Obviously there can be no national security reason to withhold information on the construction of an ordinary private prison. However, if an official from the Department of Homeland Security waves his magic wand and calls the private prison a terrorist detention facility, then suddenly any/every private prison so designated becomes a national secret.

We still haven't gotten to the most deplorable aspect of the U.S. prison-cell economy: guaranteed occupancy rates.Specifically, the U.S.'s private prison Oligarchs have decreed that in return for operating their low-budget, Alcatraz-style prison facilities that the states have to guarantee that at least 90% of those prison beds have to be filled at all times.

In other words, we now have private corporations dictating to U.S. state governments that justice no longer be dispensed based upon what is appropriate for the accused, or even in the best interests of society -- but solely on feeding enough bodies into the private prison mills.

Why are the private prison Oligarchs insisting on these prisoner quotas? Because their other means of guaranteeing full prisons proved to be somewhat controversial: buying-off U.S. judges. Note that these private prison operators aren't only interested in warehousing adults. They're also very interested in locking up youths. They're easier to control, while having lots of energy -- which makes them very good slaves.

This brings us to the final aspect of the U.S. prison-cell economy: slave labor. Having opened the floodgates to cheap, Chinese imported goods (with the manufacturing Oligarchs simply moving their plants to China), it's common knowledge that even being paid minimum wage that American workers cannot compete with (i.e. devalue their labour as low as) China. However, lock up those same workers in a private prison, and suddenly you can pay them less than one-tenth of minimum wage. Et voila! The U.S. economy becomes "competitive" again.

With apparently millions of empty, U.S. private prison beds already awaiting new occupants (and new facilities being built every day), it seems that both the private prison Oligarchs and the U.S. government have big plans for this prison-cell economy. This comes at a time when the U.S. crime rate has plummeted for most categories of crime, and violent crime rates are at a 40-year low

Each month, as we watch the propagandists play their games with U.S. "new housing" numbers, we should ponder the fact that perhaps one new prison bed is being constructed in the U.S. for every house now being built. If that doesn't make the U.S. a "prison-cell economy" today, just wait a few years.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.