I woke this morning to one of the most-disgusting displays I've seen in years on CNBS: Alan Greenspan.

The rough paraphrase of what I woke to was this:

"If you disregard the currency dislocation we've created, the commodity price spike we've created (with our money printing and this the currency dislocation) and the worldwide currency problems (particularly in the Euro) then the economy is very strong."

You can't make stuff like this up - it's like shooting yourself in the gut and then commenting "My health and prospects for the future are exceptionally bright.... except for this little flesh wound (which I just inflicted on myself.)"

But Greedscam does one better with his new "paper" published by the CFR, in which he lays on the table a raw excuse for lack of capital investment predicated on what he considers to all be "regulatory uncertainty."

This of course is why we have the corporate leverage index that is in the stratosphere, as I've repeatedly reported on - it's not that corporations are in debt up to their eyeballs, rather it's that corporations refuse to spend because it's all government's fault.

There's certainly plenty to blame government for.  But it's damn hard to argue that on one hand corporations won't make illiquid investments (e.g. in property, plant and equipment) because of government regulations but they will go in hock up to their eyeballs in the same environment.

Why?  Because going in hock up to your eyeballs is also an illiquid decision.  That is, to get out of hock you need both earnings and time in order to pay down the debt, and if you fail to do so you go under.  So in a sense such a decision is the same in terms of evaluative criteria as is illiquid capital investment.

Greedscam of course doesn't see it this way.  That might be because he's a central banker (retired) and throughout his tenure entirely ignored the "debt" side of every transaction - kind of like the "Deficits Don't Matter" folks.  The fraud in this sort of view of course is that balance sheets are called that because they do in fact balance.

There are academic papers that I read and chuckle at and then there are those that I read slack-jawed in awe.  The latter show a the blind spot the size of Jupiter that the writer must have, assuming that his expressed views are not intentional misdirection.

Illiquid CapEx is not dead because of government regulation.  It is dead because corporations are in debt up to their necks and it is demonstrably unsound for them to take on any more debt in the form of additional illiquid assets.  With plenty of plant and equipment to produce for today and an environment where one can offshore to China and evade any sort of labor or environmental regulation there's no reason for them to buy anything of the sort.

Of course nobody wants to raise these issues.  Nor does Greenspan want to talk about how The Fed is causing the very dislocations that are now arising.  After all, 100% price inflation in two year's time over in lands with per-capita GDP under $2,000 couldn't possibly cause riots and political dissent, could it?

I know, I know, these nations can simply "depeg" and manage their own currencies.  That's a very nice sentiment.  If it happens then we are no longer a reserve currency as the entire predicate on which this status rests is the worldwide oil production and settlement system.  China is not the issue, Saudi Arabia and the other oil producers are.  The seigniorage premium we enjoy in the United States is not a birthright and losing it is likely to cost our nation 25% of our standard of living - or more.

And by the way, if The Fed doesn't cut this crap out that's exactly what will eventually happen.  But no nation has ever devalued it's way to prosperity, nor has it borrowed its way there.  Both of those paths lead directly to ruin.  It's not "inflation" I'm concerned about in this regard it's the destruction of the wage base - and that trend is accelerating.  That destruction inevitably feeds back to government revenue which in turn collapses the ability of the government to fund itself, since the only backing that government borrowing ever has is the promise (and ability) to tax the citizens tomorrow.

There was an interesting comment made by Bernanke in his Congressional testimony related to the Gold standard.  If you remember I have often said that the gold standard is not a panacea - while it produced long-run price stability (actual stability) it did so at the cost of extreme short-term fluctuations in value.  Since people cannot plan short-term events this could and often did bankrupt people not due to bad planning or speculation but just due to plain old bad luck intersecting with these fluctuations.

But one thing Bernanke didn't get asked (and unfortunately we do not have anyone in Congress with the brains to follow-up on the line of questioning that was begun down that road) is how Bernanke can square price stability with a 2% (or 3%, which is what it has averaged) annualized inflation rate.  That sounds stable but in fact it is not - over an average 45 year working life (20 - 65) this represents an increase in prices of one hundred and forty-four percent!

The saved funds from your youth?  They're devalued by sixty percent.

How does this meet the alleged Fed mandate that Bernanke claims he is sworn to uphold - and both has and will, along with his predecessors?

All we get from Congress in following up on the essential underlying question - the one question that matters - is crickets.....

That might be because Congress is dumb, or it might be because if that discussion point were laid upon the table then this chart might come out and a squirm-fest would shortly ensue.