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The U.S. Prison-Cell Economy

Articles & Blogs - US Commentary

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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, ever, ever 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.

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.

In other words, every month, year after year; the U.S. government announces that its home-builders have commenced construction on roughly twice as many units as they sell. This alone is proof of some massive 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.

So here is the question the propaganda machine will never answer: how can U.S. home-builders 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. home-builders 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) home-builders 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 labour).

We know that we are not being told the truth here. The question is how are we being lied to? The most obvious answer is that the “new home starts” statistic is just another U.S. fantasy-number, conjured out of thin air, and with no connection to the real world – just like the monthly U.S. jobs reports. However that explanation will not suffice.

Here’s the problem. 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 2/3 of all U.S. home-builders should have been forced into bankruptcy.

Yet while some smaller, regional home-builders have declared bankruptcy; none of the large, national builders have been forced out of business. They build 100’s 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 home-builder could build (and get paid for) without having to make a sale after construction was complete? Prison cells. This explanation accounts for how home-builders could build 100’s of thousands of units more than they sell each month (while inventories declined). It explains how these home-builders could have avoided bankruptcy, despite losing more than 2/3 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 about nearly six times as many people (760 per 100,000) as it's northern neighbour, Canada (131 per 100,000). It imprisons five times as many people as the UK, more than seven times as many as France, more than eight times as many as Germany, and more than twelve 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, 21st 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 United States 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 labour. 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 1/10th 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. Americans are committing less and less real crimes, while the U.S. government and its Oligarch masters lock-up more and more of them each year – because it’s profitable to do so.

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.

Comments (7)Add Comment
Jeff Nielson
written by Jeff Nielson, March 26, 2012
the amount of signed contracts that is constantly bandied about are somewhat of an illusion; the proof is in the next 2 month numbers that show that many appraisals didn't meet the contract price and the contract never gets executed. My next door neighbor works in the mortgage department of a TBTF. Over the last 6 months, less than 1/3 of contracts went to closing; over 70% failed because the appraisers are being extra cautious and have to take into consideration the amount of shadow inventory.

Apberusdisvet, there are actually THREE statistics for the purchases of homes in the U.S.: new home sales, existing home sales, and pending sales. I believe you're referring to that third category of transaction - and I don't even pay attention to that one when it is reported (for precisely the reasons you gave).
written by apberusdisvet, March 26, 2012
Jeff: I'm not so sure that I agree with your thesis, but I can tell you that the inflated new housing numbers on behalf of merchant builders are, to a great extent, accounting fraud as a last ditch effort to sell insider shares before the implosion. In addition, the amount of signed contracts that is constantly bandied about are somewhat of an illusion; the proof is in the next 2 month numbers that show that many appraisals didn't meet the contract price and the contract never gets executed. My next door neighbor works in the mortgage department of a TBTF. Over the last 6 months, less than 1/3 of contracts went to closing; over 70% failed because the appraisers are being extra cautious and have to take into consideration the amount of shadow inventory. It is hard to justify a new home selling at $150/sf when you can buy similar foreclosures for far less than $100/sf.
Jeff Nielson
written by Jeff Nielson, March 26, 2012
Thanks for the context Earl!

Yes, I noted when doing my research that private prisons paid their guards much less - which only ensures even MORE brutality against the prisoners. The only people who would WANT to work as prison-guards at minimum wage are sadists.

Notice also the pattern that EVERY time the Oligarchs want to "privatize" something (claiming to make it better), that "better" always means lower wages for the workers and USUALLY means inferior quality in whatever they do...
written by Earl, March 25, 2012

The US is divided by states (50) and states divided into counties. Living in the least populated part of the state, we are surrounded by prisons. In our county our "state run" prison is in the middle of a 12.3 million dollar expansion (housing for 18 to 20 year olds). The neighboring county has both state and private prisons.
The private prisons have a flashing sign (like banks with the temperature then flashing auto loan rates ect.). The private prisons flash "guards wanted" and the pay. "All shifts" available. These prisons are all in a row and have their own trailer parks for employees to live in. Very remote areas and huge facilities.
Spending most of my working life in construction, the organizations that filter the "housing" numbers are some of your largest lobbyist (HBCA,Realtors and the Chamber of Commerce). Covering local, state and national. Developers, Builders, and Realtors are a very greed driven bunch, that all eventually end up with a bankster. Throw in the glue, the Chamber of Commerce provides- I'm sure this was a very hard piece to research. Add in some lawyers and you have a "prison cell economy".

Nice title to the commentary.

Thank You
Jeff Nielson
written by Jeff Nielson, March 25, 2012
Well since all levels of government in the late U.S. can and do lie about anything and everything it seems impossible to me to infer what underlies any particular lie.Jeff could be correct in this column or dead wrong and I have no idea how to determine which it is. Maybe it comes clear in time or maybe not. Since no one level of government knows what the other levels are lying about and no one agency at a particular level knows what lies the others are telling it all becomes just a house of cards held together with silly putty

Yes Sneed Hearn, you're quite right that many aspects of this commentary are NECESSARILY speculative.


Because official U.S. economic statistics are obvious, Orwellian lies. Because getting information on what SHOULD be in the public domain (i.e. the total number of U.S. private prisons) is becoming more and difficult in our SUPPOSEDLY "free and open societies".

I would argue that readers should be more focused on the fact that it is now IMPOSSIBLE to know what the truth really is in the United States.

But if this commentary is NOT correct, then how do U.S. home-builders stay in business?

What is the real explanation for 100's of thousands of PHANTOM U.S. housing starts - month after month, year after year???
written by Sneed Hearn, March 25, 2012
Well since all levels of government in the late U.S. can and do lie about anything and everything it seems impossible to me to infer what underlies any particular lie.Jeff could be correct in this column or dead wrong and I have no idea how to determine which it is. Maybe it comes clear in time or maybe not. Since no one level of government knows what the other levels are lying about and no one agency at a particular level knows what lies the others are telling it all becomes just a house of cards held together with silly putty.
written by samix, March 25, 2012
This is preposterous, Inspite of all the exception that I take to US and it's activities, I never expected this from the US, locking people up and using them as slave labor. Disgusting. It seems slowly but steadily the US is becoming capable of committing anything evil that you can or cannot think of.

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