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Democracy in America is dead, according to Silicon Valley investorPeter Thiel.

No, not in the anthropological, Alexander-de-Toqueville sense. The PayPal co-foundermeans it literally.

"It's not clear we're living in anything resemblinga democracy," he told a crowd Tuesday at George Mason University. "We're living in a republic that's modified by a judicial system, that's been largely superseded by these agencies that drive the decision-making."

"Calling our society a democracy is very misleading," Thiel went on. "We're not a republic; we're not a constitutional republic.We live in a state that's dominated by these technocratic agencies."

For even the typically colorful Thiel, this is a surprisingly bluntcritique of the American political system. It fits into a much larger brand of Washington skepticism that's become characteristic of Silicon Valley in recent years. And while much of it mayring true to the casual observer, it also draws its own critics.

[Watch: Here's how entrepreneur and venture capitalist Peter Thiel thinks we should live each day]

Thiel saysthat organizations likethe Federal Reserve have been allowed to roam too far. Calling governmentagencies"deeply sclerotic and deeply nonfunctioning," Thiel pointed to the Energy Department's failed investments in Solyndra as a case study in bureaucratic mismanagement and executive overreach.

"You could use ninth grade geometry to show this was never going to be commercially viable," he scoffed in reference to Solyndra's roundsolar panels, which he argued weren't as efficient as conventional solar collectors.

Thebankrupt company aside, Thiel's bearish appraisal of the federal government is one that many share, particularlywithinthe tech industry. Washington is slow, has a penchant for gridlock and is stuffed to the gills with old, white men. All of this createsa sense of stagnation that stands in stark contrast to the dynamism of the Valley, where ideas are constantly being developed, refined and rejected. Investors such asChamath Palihapitiya, a former Facebook vice presidentand oneof the founders of lobbying group FWD.us, have said that it's now "excruciatingly, obviously clear to everyone else that where value is created is no longer in New York, it's no longer in Washington, it's no longer in L.A. It's in San Francisco and the Bay Area."

For Thiel, this trend is tied to a much broader notion about globalization. Traditional power centers like New York and Washington did really well for themselves so long as nations rose and fell on the basis of international finance or geopolitics. The process of drawing the world closer through advanced communications and trade, said Thiel, reinforced that prosperity. But the housing bust and the financial crisis marked a turning point.

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Why PayPal co-founder Peter Thiel thinks American democracy is dead