Even the Master Printer himself, Mr. Greenspan, thinks the US Economy and markets are out of sync with reality. And that’s quite something.

Greenspan Says Negative Rates `Warp’ Investment Behavior

Former Federal Reserve Chairman Alan Greenspan said negative interest rates, if pursued for an extended period of time, will eventually distort saving and investment. “I wouldn’t say dangerous, but it is clearly not productive,” Greenspan, who left the Fed in 2006 after almost 20 years at its helm, said Monday in an interview with Bloomberg Radio and Television. “The big argument about excessively low interest rates for a very long period of time is that it warps the investment pattern on real investments.”

“We’re in trouble basically because productivity is dead in the water,” he said. “Real capital investment is way below average. Why? Because business people are very uncertain about the future.”

What a shocker. His conclusion is basically dead wrong. This has nothing to do with uncertainty. Uncertainty and/or risk have always been a part of any business.

Real capital investment or CAPEX is below average, and will remain so, because there is nothing to invest in. In terms of capital markets, most asset classes are extremely overpriced. Just take a look Shiller’s Adjusted S&P P/E ratio to realize we are sitting near historic highs.

In terms of CAPEX, it is the same story. Most corporates have already borrowed unlimited amounts of money at ZERO interest rates and invested in their “plant and equipment”. Now, they have no idea what to do with unlimited and nearly FREE capital available to them. Hence the massive stock buybacks over the last few years.

No Mr. Greenspan, it is not the uncertainty about the future. It is your criminal monetary policies that have distorted our capital markets to the 10th degree. Something we are just now starting to pay for.