Davos cross-post: Three questions for Peter Thiel

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The PayPal co-founder, Facebook investor, and manager of the hedge fund Clarium Capital Managment had a far better year than most in 2008 (Thiel says Clarium was flat for the year). So where does he think things are headed?

What has surprised you most over the past year?

In a weird way I was most surprised by the ways in which so many of the things I expected literally happened. We had a housing crisis, finance, EM [emerging markets].  Everything blew up at once. In a way I didn’t believe my own theory. Everything happened the way we thought it theoretically should happen, and it was stunning because it happened so quickly

Then what are your concerns going forward? What’s your scenario for the next year?

I think we’re headed for a long period of deflation because there’s nothing that can really restart it. People are hoping for the government to restart things, but the challenge is it would have to do a lot more than it’s doing now, whether or not that’s desirable. It just has to do a lot more. The history of the 1930s and ‘40s where things really didn’t get restarted by government spending until the 1940s.

Then what is going to restart it or who is going to fix it?

I think if it gets fixed it gets fixed sort of on a hidden, micro level. There are lots of small businesses that somehow adapt. People figure out new things to do. And somehow there’s this very flexible adaptation that happens. I suspect there’s no easy top-down fix.

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