Must-Read: Peter Thiel: The Optimistic Thought Experiment

Must-Read: The very sharp Dan Wang sends me to the several-screws-loose Peter Thiel. He has, apparently, not marked his beliefs to market over the past eight years. He has not drawn the lesson that Ben Bernanke and company might know more than he does about some things:

Peter Thiel (2008): The Optimistic Thought Experiment: “In every possible future, all of today ’s bubbles will burst…

…their ideological scaffolding will prove to be but lint in the winds of history…. Bubbles have begun to implode across the globe, laying bare the fraudulence of ‘China,’ ‘technology,’ ‘hedge funds,’ and their like. As the world’s economy weakens, so will support for the globalist orthodoxy, the political tenability of which rests heavily on the ability of the doctrine to literally deliver the goods. Some policymakers seem to sense this already, with the most immediately obvious of these being the Fed…. [But] the Fed’s morally hazardous accommodations are best understood not as a perplexing and facile sop to bankrupt homeowners but as a desperate effort to stave off a recession that will end the debate on globalization for years to come…. The Fed’s gambit entails several potentially catastrophic trade-offs, chief among them the revival of inflation. Whatever may be said of the soundness of the Fed’s policy in the faltering United States, loose monetary conditions are not appropriate for the near-runaway economies of other nations with dollar-linked economies, notably China and much of the Middle East. The Fed’s iatrogenic policies have already caused considerable inflation in these economies and, especially disturbing for students of history, a massive spike in the price of oil. At some point, the tensions caused by wild inflation, collapsing currency accords, and expensive oil will resolve…

July 21, 2016


Brad DeLong
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