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Low Inflation? Not in Prison

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Behind bars, the economy is strong.

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The core inflation rate -- which strips out food and energy prices -- slid to an annual rate of 1.4% in the third quarter from 2% in the second quarter. Low inflation, courtesy of a weak economy, gives the Fed some latitude to keep interest rates down for an "extended period," in the words of Federal Reserve Chairman Ben Bernanke.

However, for the roughly two million people currently incarcerated in US prisons, inflation is skyrocketing.

Bucks County, Pennsylvania, inmates Ryan Barrie and Ryan Kerwin have filed grievances citing a "price fixing/monopoly scandal" that revolves around the prices they paid for Chick-O-Stick candy at the prison commissary.

The peanut butter and coconut-flavored treats sold for $0.40 but the price was raised to "an unbelievable $0.90 overnight," according to the complaint.

Barrie and Kerwin are also upset about the cost of a three-ounce package of Maruchan Ramen noodle soup, which sells for $0.18 in other prisons but goes for $0.95 in their lockup.

In California, inmate James Godoy and a group of fellow prisoners recently hired attorney Herman Franck to file a complaint after the price of an eight-ounce jar of Folgers (SJM) instant coffee jumped from $6.40 to $7.50. Godoy claims that the prison system is price-gouging in order to help fund its operations.

But long-term "guests" of the great state of Florida seem to be the most outraged of all, over the cost of their beloved Honey Buns.

Old price? $0.66.

New Price? $0.99.

And, heaven help you if your tastes tend toward the exotic -- a chocolate Honey Bun now sets the incarcerated back $1.49, as opposed to the $0.61 they were accustomed to paying.

Now, the going rate for a pack of cigarettes in state lockups where smoking is still allowed is a whopping 25 Honey Buns -- enough to put a cramp in any jailhouse gourmand's style. Inmates have an average of $22 in their commissary accounts, which is deposited by family and friends on the outside, and augmented by income from each convict's work assignments, which pay between $0.12 and $0.14 an hour.

Should you be unlucky enough to land yourself in a federal pen, and you smoke, an 18-wheeler filled with Honey Buns won't help satisfy your nicotine jones. In 2004, smoking was banned in all federal institutions, and cigarettes, which were the de facto currency until then, were replaced by…are you ready for this?

Mackerel.

Ed Bales, a prison consultant, says mackerel has become the currency of choice in smoke-free institutions.

A haircut goes for two "macks", which are small pouches of the fish, at about $1 each.

A "Fiend Book", or a pornographic magazine, goes for as few as 40 macks (if it's out-of-date and stained …use your imagination) and as many as 100 (if it's reasonably up-to-date and bodily fluid-free).

Craving a bit of heroin? Be prepared to fork over 50 macks.

And, if it's a cellphone you're after, that'll be 400 macks, please.

In an interview with the Wall Street Journal, Mark Muntz, president of supplier Global Source, said his company unloaded about $1 million worth of mackerel to commissaries in federal penitentiaries last year, though it's not particularly popular elsewhere.

"We've even tried 99-cent stores," he said. "It never has done very well at all, regardless of the retailer, but it's very popular in the prisons."

While inmates are spending more money on the inside, their keepers are looking for new sources of funds.

Prisons have always put their inmates to work on jobs like grounds keeping, food service, painting, and plumbing. But The Nation reports that, over the past two decades, inmates have also been hired to stitch Victoria's Secret (LTD) lingerie and assemble Nintendo Game Boys and mouses from Microsoft (MSFT). The companies award the contracts to prisons for the low-priced labor, and the wardens put the prisoners to work for even lower wages.

The labor possibilities are endless. To quote the UNICOR Federal Prison Industries website's "Contact Center" section: "Imagine ... All the benefits of domestic outsourcing at offshore prices. It's the best kept secret in outsourcing!"

New York State seems to be in on the secret. If you've called the Department of Motor Vehicles to inquire about a registration issue or renew your license, there's a chance you were helped by an inmate at Staten Island's Arthur Kill Correctional Facility.

The program saves the state about $2 million a year, with inmates fielding between 3,000 and 4,000 calls a day. At a few cents an hour for each operator, routing inquiries to India suddenly looks mighty expensive.

All told, commissary prices may be high and offenders' wages low, but prison life seems to suit some given their options on the outside.

Al Wright, superintendent of the Rockingham County, New Hampshire, House of Corrections, said he recently received requests from two inmates that they be kept behind bars even after serving out their sentences.

"My take on it is the economy is dumping so far that jail isn't looking as bad," Wright said.

Even if you do have to pay $0.90 for a lousy Chick-O-Stick.
No positions in stocks mentioned.
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