Izabella Kaminska On the Transubstantiation Of Monet Into Moola (and vice versa, if you prefer your vice, versa)

A repost from a few years ago which is especially topical because the forecast interest rate hikes are now coming to pass and we will get to see whether the Citigroup analysis plays out in the laboratory of life.

Friday, November 13, 2015

She doesn't have time to get into it in the present post but the role of the central banks in inflating the net worth of the 200* richest people on the planet is really quite amazing.

From FT Alphaville:

Interest rate hikes are bad news for cultural rent seekers

A funny thing happened this decade. 

The fairly logical-minded world of computer science stumbled into the world of alchemical cult value by way of the cryptocurrency phenomenon, and didn’t even realise they’d taken leave of their senses. And still don’t. 

For some, the discovery has been something akin to a religious experience. Question ‘Satoshi’ and the kingdom of the eternal blockchain, and well, just see this. 

Artists, of course, have been at this game for a whole lot longer. And been way more efficient about it. 

No fancy computer servers needed for their money-printing operations, just some palette knives, some canvases and some oils. Even talent — which used to be the difficulty factor that kept their store-of-value unit scarce — has long been abandoned. 

Today it’s an informal Artist FOMC committee which both controls supply and stimulates demand via the sanctioned dealer and auction network. 

So what’s the outlook for cartel art in the lead up to a lift-off in interest rates and a contraction of in the flow of international eurodollars, especially from China?
According to Citi’s latest deep dive into the art market by way of its Global Perspectives and Solutions report, not as good as it was just a few years ago.
From the report: 

Will the robust growth of the 2000s continue? We argue that it likely won’t, or at least that a different adjective is in order: ‘solid’ instead of ‘stellar’ growth, ‘balanced’ not ‘burgeoning,’ and so on. The reason for the downgrade is that the sources of growth in the market since 2000 may not prove as durable as many observers believe.Rather, the narrative that emerges from the performance of the market since 2000 is one of structural one-offs that have given rise to considerable – though ultimately temporary – support for the market’s trajectory. 

You won’t be surprised to find out that one of those structural one-offs has of course been China, which has muscled its way into the artist FOMC system:...MORE

*# 200 gets you down to about $6.5 billion, give or take.[year end 2015]