The auction house Christie’s just announced that major artworks by artists such as Andy Warhol, Gerhard Richter, Jeff Koons, Francis Bacon and Jackson Pollock will go under the hammer next month in New York. These are so-called ‘blue-chip’ artists whose works are considered to be a safe and also extremely profitable investments. Christie’s is estimating a combined sale price of 200 million British Pounds, or 335 million US Dollars, for more than 30 artworks which are currently on display in London. This, in all likelihood, is a conservative estimate. For the past few years there has been talk about an art auction breaking the one billion dollar barrier and it is quite possible that this upcoming Christie’s auction will meet that expectation.
Auction houses are currently experiencing an unprecedented boom with the sale of major artworks for record breaking figures. In 2012, for instance, Sotheby’s sold Edvard Munch’s iconic painting ‘The Scream’ for a staggering $120 million which was three times higher than the starting bid. In November 2013, as I wrote in a previous blog post, Christie’s sold for $142.4 million a Francis Bacon triptych, making it the most valuable work of art ever sold at auction. These are prices that defy all logic and reason. One can only be amazed at the amount of money that is flushing around at the very top end of the art market. And from one year to the next, the prices continue to rise higher and higher and higher with no end in sight.
The Francis Bacon triptych of his friend and rival artist Lucian Freud became the most valuable work of art ever sold at auction in November 2013, fetching $142.4 million (almost £90 million) at Christie’s in New York.
The common perception of this mega boom in the art market is that it is indicative of an economy that is recovering at record pace. The prices reflect a rising stock market in the US and the might of an oligarchy that emerges in booming economies all over the world. The beauty of the auction (as opposed to the anonymous deal behind closed doors) is that it illustrates the notion that the value of the artwork is whatever anyone is willing to pay for it. In this sense, the art auction is a spectacle that does not as much focus on the artwork as it actually illustrates the growing chasm between the top 0.1% and the rest.
In this blog post I want to offer an alternative reading behind this supposed boom in the art market. Might it be possible that the value of artworks at the top end actually remains broadly speaking the same? Is it not actually the currency that is used to purchase the artworks that is worth less? In other words, rather than the value of the art work rising, is it not the value of the currency that buys the artwork that is actually falling?
The economic crash of 2007 and 2008 saw the bailout of a reckless casino-style banking industry in nearly every advanced economy in the world. Desperate to prop up a rapidly crumbling financial system, central banks flushed fresh money back into the system through a measure called quantitive easing, or QE, which is simply put the printing of money on a massive scale. In the United Kingdom this measure disproportionally benefitted the financial industry while the general public is fed propaganda on the need for austerity. While on one hand government budgets are tightened and average wages continue to fall, on the other hand, the financial industry awards multi-million Pound bonuses in banks that are, in fact, failing miserably. The inevitable conclusion is that quantitive easing has become an award for failure and that it directly contributes to a rapidly increasing income gap.
As the supply of currency is increased, the actual value of currency decreases. This government-backed devaluation of currency is a global phenomenon and is therefore not reflected in the exchange rate between currencies. However, this trend can be observed, precisely, in the rising prices in the art market as art is considered a safe storer of value in times of crisis. The American economist Jim Rickards points out that historically European dynasties survived over the centuries by dividing wealth into three tangible and physical assets: gold, property and art.
The mega boom occurring in the global art market at the moment thus has two interrelated significations. In the first instance, it clearly points to a hyperinflation with regards to the increase in value of the art work. The upcoming Christie’s auction in New York will confirm a trend that has dramatically accelerated through the access of cheap currency flushing the global economic system since 2007. In the second instance, the art market boom signifies a global economy that is not as much recovering as it is actually falling apart. The purchase of artworks in the hundreds of millions signifies a panic by the oligarchy fearing a currency system as well as a banking system that is in the process of collapsing. The value of currency is not only depreciating, bank runs in Cyprus for instance also show that it cannot be stored safely either. In this moment of crisis, where a corrupt financial system is unmasked, the acquisition of art is a desperate attempt to hold on to a hegemonic system that is unravelling.
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