JPM FICC Head: “People Have More Confidence In Gold Than In Bank Deposits Or Paper Money”

Following the biggest one-day surge in the price of gold since 2009, it is understandable that suddenly everyone who until recently was predicting the price of gold in the triple digits, or laughably explaining why “gold is doomed” wants to talk about the “pet rock.” As we showed earlier, already Goldman and Bank of America have opined with new and upwardly mobile “price targets”, while the scramble to obtain gold in a world drowning not only in negative rates but soon, cash bans, has already been unleashed.

And yet, nobody summarized the sentiment quite as well as the “Global CIO & Head, Global Fixed Income, Currency & Commodities Group” (did they forget to add something to that title) of JPMorgan Bob Michele, who earlier today was on CNBC and admitted the following stunner.

There is a serious credit contraction underway, I think [Yellen] should acknowledge that. I think she has to look at the capital base being wiped off the banks in this downdraft and equities: that’s not supposed to be happening right now. They’re supposed to be bulletproof, and oh, by the way, gold at $1,200 an ounce, what does that tell you? It tells you that in a flight to quality, in a safe haven, people have more confidence in gold than in bank deposits or paper money. I think things have gotten out of control.”

“Stunning”, because we have nothing at all to add.

Oh, and if Bob is confused why “things have gotten out of control” and suddenly everyone is rushing to gold, then this should explain it.

 

Full admission 30 seconds into the clip below.


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John Kasich Offers Hope on Criminal Justice, Police Reform

Now is John Kasich’s moment. The Ohio governor finished second in the New Hampshire Republican presidential primary, a finish he had banked on getting to propel him into upcoming primaries in South Carolina, Nevada, and beyond.

Kasich, and his opponents, know he’s fairly well poised to pivot to the center in a general election, and have come to calling him an “Obama Republican” because of his support for the Obamacare Medicaid expansion in Ohio and for Common Core’s federal education standards. Kasich insisted he supports local control of schools and that Ronald Reagan supported expanding Medicaid too. He boasts of cutting taxes by billions in Ohio and of balancing more budgets than anyone else.

Several debates ago, Kasich got a question about improving police-community relations, giving him a chance to talk about the kinds of police reforms he’s produced in Ohio, like mandating body cameras and imposing restrictions on use of force policies.

When Kasich tried to tackle the collective bargaining privileges public unions have, he didn’t exempt police unions, unlike Gov. Scott Walker in his efforts in Wisconsin. Kasich ultimately failed, but understanding that all public unions produce rules that protect bad actors, not just the ones you’re politically at odds with. Activists associated with Black Lives Matter included police union contract reforms as one of ten policies to reduce police violence, and launched a website to collect and analyze police union contracts around the country.

Democrats won’t talk about the role of police unions in creating the conditions for police violence, because while police unions may not be active supporters, other public unions are. And they work the same way—teachers unions, for example, create the conditions for substandard learning, and often work actively to prevent reform. Some Democrats talk about the link between education and crime, but not about the public unions’ role in those links. Bernie Sanders claimed police departments as an example of socialist institutions.

Kasich signed sentencing reforms into law in 2011, just months into his first term as governor. “This kind of reform legislation sat idle for 25 years, maybe. Nobody wanted to touch it,” Kasich said. “If you’re going to put your own future ahead of other people’s lives and their ability to reclaim their lives then you’re making a big mistake.” Ted Cruz, a first term senator, supported legislation for sentencing reforms but after gaining momentum in the presidential race, has walked back that support, worrying disingenuously that it would put “dangerous felons” on the street.

Kasich’s support for criminal justice and police reforms haven’t been used to paint him as an “Obama Republican” yet. The National Review‘s David French pointed out that Kasich is a (relative) darling of the left despite being something of a “theocrat” because the governor uses it to support more government, like expanding Medicaid. He once told a state legislator when he gets to heaven what he did to help the poor would be more important than what he did to keep government small. Support for things like criminal justice and police reforms are tantalizingly close to the realization that keeping government small and helping the poor is largely the same thing. And there are other such flashes too.

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Exxxotica Porn Expo Will Sue Over Banishment From Dallas Convention Center

Deep in the heart of Texas, a First Amendment battle is brewing over whether a city can arbitrarily ban groups from a public convention center.

On Wednesday, the Dallas City Council voted to ban the Exxxotica porn expo from taking place, as scheduled, at the city’s downtown convention center. Exxxotica organizer J. Handy told The Dallas Morning News after the Council vote that he and his colleagues would “walk straight out of here and into our lawyer’s office.” He plans to seek a temporary injunction by the end of the week. 

Because the convention center is owned by the city, officials can’t just ban groups from meeting there because they don’t like them. As Council Member Philip Kingston pointed out, “when you have a publicly owned convention center it’s the well-established law of the United States that you have to accept events like Exxxotica. You also have to accept events that would be far worse than Exxxotica, like … groups that have vile and negative speech.” 

But Dallas Mayor Mike Rawlings said banning the porn expo was important to protect the city’s “brand.”

Does Dallas have a brand, outside of bad television tropes? I’ve certainly never heard anyone who’s visited or come from Dallas say anything good about the place, and my own experience there was that it looked like the kind of city where dreams go to die. But if this move is representative of the Dallas brand, than I guess the city wants to be known for being big-government-promoting, public-funds-wasting, crony-capitulating prudes.

The move to ban the expo comes amid complaints from the president and CEO of the city chamber of commerce; the convention center’s namesake, Kay Bailey Hutchison; and billionaire oil and real estate tycoon Ray Hunt. In a letter sent to the City Council last weekend, Hunt insisted that allowing the Exxxotica convention would violate city regulations on sexually oriented businesses.

But not so, said City Attorney Warren Ernst—the regulations do not apply to temporary events. Additionally, Dallas Police Chief David Brown testified that there was no spike in prostitution around last year’s expo and that undercover officers found no violations of state obscenity laws or any other criminal activity taking place there. 

For city crusaders, however, it’s the principle of the matter, constitution be damned. Mayor Rawlings said he knew the ban would likely bring a lawsuit, but he thinks it’s worth the price. He went on to brag about other onerous regulations the Dallas City Council has passed knowing full well the city would be sued over them. Apparently money is no object to virtue-signaling when it’s done on the taxpayers’ dime.

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The Great Reset

Via ChicagoStockTrading.com,

In December’s article “The Yellen that Stole Christmas”, the point was to show how buyers in the SP500 were caught above 2040, and needed a Yellen rescue.  The market attempted to breakout to start December, however the rug was pulled from underneath as Yellen reiterated a rate cut later in the month.  After bluffing the market for 2 years on this rate cut, the call fell on many deaf ears. 

So it was. Buyers were left caught at higher prices, betting on a “Santa Claus Rally” only to be hoping for Yellen to save Christmas.  For the first time in 6 years and exactly 3 years from December 2012’s FOMC that placed a 6.5% target on NFP for a decision on Fed Funds rate, the FOMC reset the market and hiked the Fed Funds rate by a quarter point.  Bulls did not get what they were looking for and saw the market fall back to retest 1982 support.  The level barely held on December 18th, as the market rallied back for Christmas holiday and the “Santa Claus Rally” was actually a gift from Yellen for stuck longs above 2040 to “breakeven”, or as we like to call it “get out of jail free card”.  

The bounce back to retest the FOMC high gave these buyers their opportunity to exit at breakeven.  As new buyers failed to step in and carry the ball above the FOMC high, remaining longs that became stubborn and did not take the breakeven out, were left to close the year lower at 2035.  They say fear turns to greed at break even.  The SP500 started the year of 2016 with no holds barred as it flushed to run stops below 1982 to punish greedy and trapped buyers above 2040, giving way for the market to retest the August low and fill the gap down to 1940.  Attempt to hold this level was seen, before falling into next gap at 1875 where once again the market fought to hold.  Both levels eventually failed as the overhead supply gave way for the market to breach the 2015 low of 1831 and take out the 2014 low of 1813.  Lows of 1804 were made in the month of January, before bouncing back to retest old support at 1940 and finding the level to turn into new resistance. 

Remember it was the BOJ that stepped in October of 2014 at 1970, and again in October of 2015 at 1970 again.  The Japanese bought Yellen a year of time, and gave her a market of 2070 to hike rates.  Now that the market has fallen back to the August low, it is the BOJ who has turned their monetary policy to negative rates.  What does this tell the market? That after attempting to pump it twice above 1970, with the market at 1870 they have switched to negative rates. Sign of desperation? So far the market is not buying it.  An attempt to rally was seen, only to find old support at 1940 turn into major resistance as the market double topped.  Going forward, failure to recover above 1870, gives room for the market to push into next major support at 1750 to retest the 2014 low of 1732.  Buyers must recover through 1890 for a retest of 1940 resistance in attempt to retrace back to the failure at 1980.  Yellen is expected to testify today, and once again bulls are in trouble and looking for help.  Even if she mentions negative rates, remember it will not be the first time. It was Yellen that said “Negative rates are not on the table right now” on October 22nd which many also did not notice, was another factor in the upside squeeze.  Did the BOJ copycat the move?  What we know is our central bank has moved into a hiking position, while other central banks are trapped and have gone negative. 

This is the great reset, because 3 years ago when 6.5% was placed as a target for unemployment, the SP500 was trading at 1400, gold at 1700, and the 30 year bond at 148.  In the year of 2013 we saw the SP500 run away as it freighted toward 2100, whilst gold and the bonds dropped lower.  What have you noticed take place after this rate hike?  The SP500 has changed course lower, while gold and the 30 year bond market have reversed higher. 

Gold fell from 1700 down to 1200 from December of 2012 to January of 2014 when 6.5% NFP target was met.

With the objective met, the gold market attempted to reverse course as it rallied up to 1392.  The market failed to take out its prior high of 1434, keeping the bearish trend in control and as the market found the FOMC was not going to hike rates, this gave way for gold to wind down again.  Since these highs the market has coiled lower, making new lows for the year of 2015 in December at 1045 just before Yellen’s rate hike. After her hike, the low was retested and held, and gold has since then been in reverse as the news is being sold (in this case bought). Gold has taken out its prior high of 1191 from October 2015 to stop some shorts.  The U turn gives room for an attempt to build a base and try to target next major resistance against 1270. Gold remains in a downward trend, however the recent U turn, gives room for an attempt to build a base and target next major resistance against 1270. Pullbacks are to be defended down to 1120-1080, with stops below the year low of 1061.  A breach of the 2014 high at 1307 squeezes out the short side to give the market room to retrace back to 1550, from where the market broke down in January of 2013 from the FOMC decision.  

The bond market also front running the 6.5% objective as it traded down from 148 to 127 in January of 2014 as the 6.5% unemployment target was met. 

The bond market in contrast to gold, sp500, and the yen, called the FOMC’s bluff on not raising rates, and rallied all the way to take out the 2012 highs to make new highs up to 16627.  Since this high and pullback to the 2012 level of 148, old resistance turned into new support as the market consolidated into Yellen’s 2015 rate hike.  As we see, the bond market not only front ran this rate hike, but has continued to march higher following the decision.  The uptrend in 2016 being fueled recently by panic buying as investors see Japans negative decision as a bull trap in stocks and use bonds to hedge positions.  This panic buying, has given way to take out the 2015 high as the market has gone parabolic.  Continuation of the move sees next resistance against 171.  Failure to expand above new highs sees sell stops below 16228 for a retest of the February lows of 16015. Breach of this level is needed to trap panic buyers above to give way into 156 to test major support off the year low of 15309.  Pullbacks should be defended, and a break of the year lows is needed to create a double top. 

A rounded top and a failed breakout in December, giving way for the move down to retest August lows.

January pushed down to take out the lower vol window at 1869 before bouncing back and rejecting the 6 month pivot at 1922.  Hold below 1869, gives the market room down to next support at 1750, and ultimately a retracement of the breakout from December of 2012 down to 1420.  Recovery through 1870 will have the market working against major resistance being the 6 month pivots, with room up to 1980 to retest old support.  The “Great Reset”, gives the market room to retrace down to 1400 of where the market broke out.  One thing is that many of the bulls that were dismissive in January and laughed at the bears, are laughing no more and have actually turned bearish themselves.  This can give way for the continued bear market rips we have seen, as well as panic selling as the perma bulls are forced to come to the realization that the party is over.  Once again however, bull awaiting Yellen to save the day…


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The Crash In US Bank Stocks Is Only Half-Way Through

It appears by the total lack of coverage that the utter collapse of Europe’s banking system is entirely irrelevant to the “fortress-like” balance sheets of US banks… but it is not. Once again today, US financials saw bonds dumped across the senior and subordinated segments…

 

…and while US financial stocks have fallen hard year-to-date, if credit is right – and it usually is on a cyclical basis – US bank stocks have a long way to go (as believe in book values is battered).

 

Of course, the CEOs will all tell investors there is nothing to worry about – just as David Stockman warned

“in my experience is that when the crunch comes, bank CEOs lie”


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Despite Huge Tail And Sliding Bid To Cover, 30Y Treasury Prices At Lowest Yield Since January 2015

After yesterday’s strong 10Y auction few were expecting ugliness in today’s final for this week 30Y issuance: after all with markets crashing, the flight to safety and duration surely would mean strong demand for the long-end of the curve.  Only that wasn’t the case.

Yes, the high yield of 2.50% (allotted 37.52% at the high) was the lowest since January 2015, but this came at a huge concession to the 2.467% When Issued, which resulted in a whopping 3.3 bps tail, the biggest in over three years. Furthermore, the Bid to Cover, plunged to just 2.092, down from the 2.288 last month, and the lowest going back to May 2014, as well as one of the lowest on record.

Perhaps the saving grace was that both Directs and Indirects took down a comparable amount of the final allotment as they did last month, at 10.3% and 31.7% respectively. This means that despite the weakness on the top, the Indirects ended up with a very strong 58%, which as can be seen in the red bar on the chart below, was quite respectable despite the overall poor tone to the auction.

All that said, if indeed the Fed proceeds to unleash NIRP, a yield of 2.50% will seem like an unprecedented bargin in one year, when the same CUSIP will likely be trading in the low to mid 1% range, if not lower.


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Bernie Sanders and Donald Trump Are Both Peddling Myths About Money In Politics

One of the most effective moments in Bernie Sanders’ lengthy speech following his primary victory in New Hampshire was his call for donations.

After a characteristic  denunciation of tax breaks for billionaires and proposals to cut to social services funded by wealthy special interests, Sanders, who has made campaign finance reform a defining issue for his campaign and who has repeatedly described money in politics as a kind of rot at the heart of American democracy, declared himself to be independent of such financial influence.

“I do not have a Super PAC, and I do not want a Super PAC,” he said, before touting both the record 3.7 million individual contributions his campaign has received so far and the average contribution amount of $27. And he urged people to go to his website and donate. “I’m going to hold a fundraiser right here, right now, across America,” he said on national television. “My request is please go to BernieSanders.com and contribute. Please help us raise the funds we need, whether it’s 10 bucks, 20 bucks, or 50 bucks. Help us raise the money we need to take the fight to Nevada, South Carolina and the states on Super Tuesday.”

Sanders wasn’t just asking for financial support, like politicians always ask for financial support. He was asking for people to participate in an alternative to the system to which his campaign stands opposed. He wasn’t just saying he believed that special interest money in politics was a problem, he was showing them how he would solve it—and how his supporters, through the unification of their individual efforts, could become part of that solution.

It’s a clever pitch, and apparently very effective too. His campaign claims to have processed 2,689 donations in a single minute at one point that evening, and raised $6 million by Wednesday evening.

The problem with this pitch, however, is that Bernie Sanders is not exactly free from the financial backing of interest groups either.

Although there is no explicit Bernie Sanders SuperPac, The New York Times reported at the end of January that “more super PAC money has been spent so far in express support of Mr. Sanders than for either of his Democratic rivals, including Hillary Clinton, according to Federal Election Commission records.” Much of that money comes from labor groups, in particular, the National Nurses Union, whose political division had spent more than half a million dollars on Sanders by last December, even while insisting that their support is distinct from big-money support by true SuperPACs.

It’s not. Just as Citizens United, the Supreme Court decision that Sanders rails against in his speeches, gave corporations the right to spend money in support of candidates, it also gave the same right to labor groups. And they have used it. As The New York Times also noted, unions gave more than $200 million to super PACs in 2012 and 2014, more than half of which ended up in the hands of union-controlled groups that funded advertisements and other media.

Sanders’ opposition to big money in politics, and his simultaneous quiet acceptance of labor backing, makes sense for a democratic socialist leading what amounts to a progressive-populist uprising within the Democratic party.

Clearly there is something powerful and compelling about the idea of financial independence for politicians, especially those who cast themselves as outsiders and revolutionaries, and just as clearly there is a broad suspicion about the influence of money in politics, and the ways it both influences and advantages political candidates.

What’s especially interesting, though, is that Donald Trump is making a version of the same pitch too. Over and over again on the campaign trail, Trump has described his campaign as self-funded, and insisted that this means he cannot be bought.

The problem, of course, is that it’s not really self-funded.

In October, The Washington Post revealed the existence of a pro-Trump Super PAC with multiple links to Trump and his campaign, though Trump’s campaign claimed it was unsanctioned, and the PAC was quickly shut down. Either way, however, the majority of Trump’s campaign is paid for by donations, and Trump is risking rather little of his own money in his presidential bid. Indeed, it’s possible that sales of Trump merchandise may end up paying him back for the entirety of his personal investment in the race, according to The New York Times. 

Yet it’s also true that both Trump and Sanders are operating campaigns without the same sort of hefty quasi-institutional backing that has gone to more traditional establishment candidates like, say, Jeb Bush and Hillary Clinton. That complicates the Trump/Sanders message too. Because in that sense, the success of both Trump and Sanders is self-refuting—proof that big money in politics is not as powerful as they might have you believe.

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What To Do About Flint? Evacuate The Residents And Turn it Into a Landfill for Liberal Good Intentions

Private companies had as much to do with Flint’s lead poisoning as Adam Smith had to do with the bread lines in the former Soviet Union. In fact, as I have noted before, Flint was a government-made disaster from top to bottom. Flint Water PollutionPrivate companies didn’t run the system or profit from it. Government officials switched Flint from the Detroit Water and Sewage Department (a government-owned-and-operated system) to the more — not less — expensive Karegnondi Water Authority (another government-owned-and-operated system). Why? Because it would create union jobs and boost the local economy. In other words, this wasn’t an austerity cost-cutting effort but a stimulus move, as I noted previously.

But since KWA wasn’t going to be ready in time, government officials decided to reopen a local mothballed plant that drew water from the polluted Flint River. That’s what caused the poisoning. Authorities certainly thought that ditching Detroit would save them money. But given that KWA was going to cost $800 million more over 30 years, it is really hard to argue that the interim arrangement was driven by austerity concerns.

However, liberals have a story and they are sticking to it, facts be damned, as my colleague Robby Soave noted. So if they can’t pin the debacle on private companies, then “private sector ideology” will do just fine. Thank you, very much!

Among the first to identify this ideology as the real culprit was Washington Post’s Dana Milbank. And now The Nation’s Michelle Chen in a piece entitled “Water Privatizers Have Their Eye on Flint’s Lead Crisis” rails: “The cruel calculation of risking public health to choose ‘cheaper’ source of water is less a product of bureaucratic incompetence than that of a corporate mindset that monetizes human welfare.”

If only! Indeed, had Flint “monetized human welfare,” it wouldn’t be in so much trouble.

Let’s review the facts: Flint has been under a state-appointed emergency manager since 2011 because it failed to “balance its books” — a euphemistic way of saying that it was spending its citizens’ blind. Why? There are many reasons, but one is that the city’s public unions for decades extracted lavish benefits for their employees while saddling taxpayers with the costs. Indeed, Flint’s unfunded pension liabilities right now exceed $1 billion — about 20 times the city’s $51 million annual budget. What’s more, Flint charged its water customers — indeed, still does — on average $140 monthly, far more than many other cities in the county and elsewhere.

Now consider what would have happened if Chen’s rapacious profiteers had been in control in Flint and had run up its credit card to overpay its employees and then overcharged its customers to pay its credit card. Shareholders would have pulled out, regulators would have been on its ass, customers would have gone elsewhere, and the company would have collapsed.

What happened to Flint? It simply became ripe for a state takeover, which didn’t mean substituting competent managers for incompetent managers as might have happened with a private company. No. It meant having it run by two sets of incompetent managers.

Although, technically the tragic decision to switch the city to the local Flint River plant rather than have it stick with Detroit happened on the state emergency manager’s watch, there is reason to believe that the emergency manager was doing the local politicos bidding (not the least because the Detroit emergency manager was accused of being too much of a hard ass and insufficiently cooperative with Mayor David Bing or the city council). This is not in any way meant to absolve Gov. Rick Snyder or Flint’s emergency managers of blame. Hey, they had a hand in breaking Flint, so they own it. That means, state taxpayers should be on the hook for fixing the mess — and Gov. Snyder — and his Republican cronies — ought to pay the political price for it.

But of course Gov. Snyder, after saying that the “buck stops with him,” is trying to hit up federal taxpayers for a buck – or a few million. So far President Obama has only put funny money in his tin cup. May be Obama will eventually be shamed into throwing in some real cash, but it’s inconceivable it’ll come anywhere close to fully compensating Flint’s 100,000 or so residents, who are effectively imprisoned in a town where there are no jobs in homes they can’t sell — at least not without swallowing a huge loss given the renewed hit to their already cratering property values.

As if that’s not bad enough, unlike a private company, they can’t sue the government for full damages because of the doctrine of sovereign immunity. This is not disaster capitalism, as Chen rails, it is disaster socialism.

And the problem with disaster socialism (is there any other kind, btw?) is not just that you eventually run out of other people’s money, as Margaret Thatcher famously said, you also run out of the next level of government to kick the can to. If Chen has a plan to convince the United Nations to stick poor Third Worlders with the bill of rescuing relatively better off Flint residents, she should share pronto.

In truth, privatizing Flint’s water system was always even less on the cards than a UN rescue plan. Indeed, efforts to privatize even DWSD, Flint’s old supplier, run up against the intractable problem that private companies would have a hard time getting permission to charge the rates necessary from the city’s ever-shrinking population base to pay off the system’s existing debt while investing in future infrastructure upgrades. And these cities are hardly alone. So much as “privateers” like me and Adrian Moore would like to privatize water utilities to establish some modicum of consumer accountability, the reality is that the government has mucked things up too much for that to be an attractive option everywhere. Hence, Chen can relax a little.

So what should be done? IMHO, if liberals were truly interested in helping Flint residents rather than simply sacrificing them to the altar of the God of Beneficent Government, they should approach private philanthropists for donations to buy out the houses of Flint’s residents and let them flee to better climes where jobs are more plentiful and the government less intrusive. (Houston, anyone?) Giving each Flint resident $10,000 — or $40,000 to a family of four — will require about $4 billion, which is hardly beyond the means of the wealthy trinity of Bill Gates, Warren Buffet and Mark Zuckerberg. And surely there are others’ whose help liberals will allow Flint victims to accept!

And what about the city of Flint? Indeed, if liberals were really as caring as they claim to be, they would shift their focus from saving geographical areas to saving living, breathing human beings.

But if they really, really want to do something about it, they should hand it to private developers to turn it into a giant landfill to bury liberal good intentions. The sheer volume that folks like Chen keep generating will guarantee good profits.

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Felony Charge for Selling a Wisconsin Beer In Minnesota: Americans, This is Where We Live

Complete f-ing insanity from the outskirts of the Land of the Free, as reported by Minnesota Star-Tribune, about a former pair of publicans from Minnesota who will be going to court in March facing felony charges for selling Spotted Cow beer at the Maple Tavern in Maple Grove, Minnesota.

The former owner and manager (the bar is under new management now with a new liquor license) Brandon Hlavka and David Lantos face a felony charge for transporting alcohol into Minnesota for resale without the requisite license to do that. 

The beer, New Glaurus Spotted Cow, is from Wisconsin and since its manfacturer is not licensed to sell in Minnesota, it is against the law to sell it in the state.

The barmen bought some kegs of it retail in Wisconsin and moved it across state lines to sell to their microbrew-thirsty customers.

America has an unnamed “anonymous tipster” to Wisconsin’s Department of Revenue, who then squealed to Minnesota’s Department of Public Safety, to thank for this most American of felony prosecutions. Take a bow, you anonymous patriot! 

As City Pages reports, agents went in and were served the illegal beer, before they then seized three kegs and the prosecution began.

A New York bar faced the same nonsensical prosecution over the same beer in 2009.

Jesse Walker on the craft beer revolution, not yet gone far enough.

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The Rise, Fall, and Rise Again of Solitary Confinement

To read Reason's special issue on mass incarceration, click the pic.Jean Casella and James Ridgeway have published an interesting history of solitary confinement at Longreads (*). Established in late-18th-century America by jailers who saw it as “a kinder and more effective alternative to more viscerally cruel punishments,” solitary grew increasingly popular in the antebellum reform era of the mid 19th century. But the practice attracted harsh criticism as its psychological effects became clear, and by the 20th century it was far less common. Its comeback began with the U.S. Penitentiary in Marion, Illinois, which opened in 1963, developed a “Long-Term Control Unit” where prisoners were held in isolation, and in 1983 became the country’s first “supermax” prison, where solitary confinement is the norm.

As mass incarceration took off, so did the Marion approach to punishment. “Throughout the 1980s and 1990s,” Casella and Ridgeway write, “the idea of units or whole prisons designed for ‘total control’ rapidly gained traction.” Soon, most the country’s prisons and jails had

developed a solitary confinement unit of some kind. In the five-year period from 1995 to 2000 alone, the number of individuals held in solitary increased by 40 percent, and by 2005—the most recent year for which figures are available—a U.S. Bureau of Justice Statistics census of state and federal prisoners found more than 81,622 people held in “restricted housing.” The census figures do not include individuals in solitary confinement in juvenile facilities, immigrant detention centers, or local jails; if they did, the numbers would certainly be higher, likely exceeding one hundred thousand….

Far from a measure of last resort reserved for the “worst of the worst,” as many proponents claim, solitary confinement has become a control strategy of first resort in most prisons and jails. Today, incarcerated people can be placed in complete isolation for months or years not only for violent acts but for possessing contraband—including excess quantities of pencils or postage stamps—testing positive for drug use, or using profanity. In New York, about 85 percent of the thirteen thousand terms in disciplinary segregation handed down each year are for nonviolent misbehavior. The system is arbitrary, largely unmonitored, and ripe for abuse; individuals have been sent to solitary for filing complaints about their treatment or for reporting rape or brutality by guards.

Sometimes solitary confinement represents a sort of institutionalized paranoia:

About half of the people held in California SHUs [“Secure Housing Units”] may have committed no offense at all; instead, they are held in solitary because of the gang “validation” process, in which anyone deemed an active gang member is sent to an initial six-year term in the SHU, which can be extended to decades. Gang validation can take place based in large part on anonymous accusations. Commonly, these anonymous charges come from validated individuals in the SHU, for whom the only hope for early release has been summarized as “parole, snitch, or die.” People have also been suspected of gang membership simply by possessing the book The Art of War or making reference to prison activist George Jackson.

Read the whole thing here.

(* The website describes the article as both a “longread” and a “brief history,” but I don’t think you should blame the authors for that.)

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