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June 02, 2005


Todd W.

I agree. A lot of the grousing by the "real" art crowd about the hedge fund managers and other Johnny-come-lately high rollers has a tone of envy mixed with the irritation that comes from seeing your favoriate local band hit it big and suddenly your special love isn't so special anymore.

If auctions have always been about money then how can one complain that, well, they're just about money.


Well could be. Signs of speculation abound but this in itself isn't enough to foster a breakdown. Initially I thought, the art market looked like a bubble due to burst. However as long as we do not experience a significant downturn in the world economies a serious breakdown in the art markets is not a foregone conclusion.
It may be in the cards but there is no clear evidence that it is occurring at the moment. Moreover, I am inclined to think we might see a more inflationary environment over the next fi v e to ten years. If this is the case and the inflation is modest than art prices should hold their levels. Any market can become temporarily overvalued and prices will react as the players reevaluate their risk perceptions. Although prices may fall it is n ot necessarily the start of a collapse.i


Thanks for your comment, George. I should have prefaced my remarks with the usual INAEB disclaimer - "I'm not an economist, but. . . ". I don't myself have much of an opinion on where any market is going, at least not one I can claim to justify. I simply get a little alarmed by Saltz's repeated implication that some sort of economic change will reveal the decadence of our present moment. I'm disturbed by the implication that this is something to look forward to. Especially since I agree with you that one way the art market could deflate would be through a real global downturn. I'd rather not experience that, even if it made Jerry Saltz feel better about the artworld.


I'm an artist, not an economist but I had a few more thoughts on this subject.

Since 1982 the world has seen an increase number of billionaires unparalleled since the 1890's [see: http://www.j-bradford-delong.net/Econ_Articles/billionaires.html]

In raw numbers
1982 there were 13 billionaires in the US [source http://www.mclaughlin.com/library/transcript.asp?id=188]
1996 there were 112 in the US and 423 worldwide
2005 there were 278 in the US and 691 worldwide [source Forbes.com]

I seriously doubt many observers of the artworld understand the implications of these simple statistics.
Several things seem to be occurring in the art market as a result of the rapid creation of wealth in the last decades of the 20th century.

As a result of this concentrated wealth, the demand for artworks has increased, pushing prices higher.
This increase in prices is partly a result of inflationary pressures, partly a shift away from speculation in paper assets and because there are just more rich folks with an inclination to collect art.
Unfortunately, collectors who are not fabulously wealthy may find themselves potentially priced out of part of the market.
This may account for the increasing popularity of multiples, especially "unique" photograph editions and for the sudden rush of speculation in "baby artists" still in their MFA diapers.

Saltz complains about speculation at the auctions, but participates in promoting the speculation at the entry levels.


While I didn't have these figures at hand, it was phenomena along those lines that I had in mind when I noted that the art market had done well in the midst of what is for many a middling economy (if not worse.) Simply put, it's been a fine time at the top and existing policies are geared toward ensuring it stays that way, or gets even better. Billionaires aside, I don't think there's any doubt that, whatever appeal working in multiples may have as an artistic choice, it serves a market function. Runs of different sizes and number, with differing characteristics, along a scale of price points for collectors with varying income levels. For me, that means being able to buy the book of reproductions offered, as opposed to the 46" x 46" chromogenic print. Something for everyone, you see.


This month's ARTnews has an article on the use of appreciated artworks as collateral. I don't think that it oversimplifies Galbraith too much to say that he sees leverage as a common thread in financial disasters of the past. The dependencies can't withstand a small downward correction. If lenders start adding margins, using the artist's latest auction results, say, thereby automating those dependencies, then we can really start worrying.


I haven't seen that article, I'll look for it. I take your point regarding leverage; very scary stuff.

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