If all dependent expressions were adjacent some variety of immediate constituent analysis would suffice for grammar, but syntactic and semantic mismatches are characteristic of natural language; indeed this is a, or the, central problem in grammar. Logical categorial grammar reduces grammar to logic: an expression is well-formed if and only if an associated sequent is a theorem of a categorial logic. The paradigmatic categorial logic is the Lambek calculus, but being a logic of concatenation the Lambek calculus can only capture (...) discontinuous dependencies when they are peripheral. In this paper we present the displacement calculus, which is a logic of intercalation as well as concatenation and which subsumes the Lambek calculus. On the empirical side, we apply the new calculus to discontinuous idioms, quantification, VP ellipsis, medial extraction, pied-piping, appositive relativisation, parentheticals, gapping, comparative subdeletion, cross-serial dependencies, reflexivization, anaphora, dative alternation, and particle shift. On the technical side, we prove that the calculus enjoys Cut-elimination. (shrink)