How Contemporary Art Became a Fiat Currency for the World’s Richest | Hacker News Reader

How Contemporary Art Became a Fiat Currency for the World’s Richest

bloomberg.com

84 pointspseudolus59 comments

You know, I would much rather see the super wealthy spend mroe millions on art than buying yet another super-yacht or Gulfstream. Art probably has a much smaller carbon footprint than most other forms of conspicuous consumption.

It's not like anything is wasted either. It's just an exchange of resources. The world doesn't become poorer when someone buys a painting for 9 figures.

It does actually because they didn't pay people who will spend it with that money, as in workers. Is just rich people exchanging it.

Suppose there are two possibilities. The transaction could occur, or it could not occur. If the transaction occurs, how does the world 'actually' become poorer as you assert? What's the mechanism that takes value from other people, or otherwise harms them, when this transaction occurs?

It's about the other options for the money other then art. If they had hired people to work, the world would be richer.

They can still hire people and pay them. The situation is the same as before the translation it's just another person with 100m now and a different one with a painting. There is no waste there.

All this money kept out of circulation leads to an increase in purchasing power of all the other money in the world. A bit like when the KLF burned a million quid.

Give me 90% of your $100, it'll increase your 10 dollar's buying power

But the money didn't disappear either. Now the person that got the money can do that. If the money is kept from circulation for a long time that's obviously good for everyone else as more their purchasing power for things like homes and food increases.

An exchange of processed resources, which is where the wastage goes.

Actually its doesn’t matter as any dollar spent by the rich will filter down through the economy and ultimately end up with a near identical carbon footprint.

It would only be if the rich spent their money directly on subsiding fossil fuels would it make any difference.

Actually its doesn’t matter as any dollar spent by the rich will filter down through the economy and ultimately end up with a near identical carbon footprint.

Imagine two billionaires buying a painting from one another, and just swapping it back and forth between their mansions. How does that dollar spent leave that closed system? It doesn't. They might pay people to move their precious painting, pay for insurance, and alarms, but the painting itself is a fixed store of value. That value is never doing to trickle down.

Large amounts of wealth will never leave the pockets of rich people unless they spend on investing or buying newly created assets (like Gulfstreams). Rich people buy investment art because it keeps their money in their own pockets.

Asset tax? Why don't we have that?

Because it would necessarily involve tracking everything everyone owns?

a usecase where blockchain makes sense? what? <surprised pikachu face>

Income taxes don't require tracking income, so why would it be necessary for assets?

Or just the insured stuff, from the horse's mouth - insurance companies can spit out database reports to the tax authority.

They could even add the tax amount to the premium and collect both.

Aside from the tracking issue, many assets are extremely difficult to price at market value. Even if you could suppose the value goes up, they pay tax, then the value goes down? There would be horrendous market distortions from a scheme like this, and a flight of capital from the jurisdiction implementing it.

The Netherlands has an asset tax, and it doesn't seem to have that much difficulty with it economically. I suspect your difficulties are overstated and it's roughly no more bothersome than other forms of taxes.

Interesting, it seems to only include fairly easily valued assets which can generate an income such as property and equity. Actually art works under such a scheme would be even more attractive as stores of value, not less, which could be seen as one of the market distortions I was talking about.

Just use the insurance value. Make insurance companies report it, done.

The Billionair example is no different if it's a company stock being bought and sold back and forth, in terms of exchange of value.

Like any other investment class it's a leaky system. When a collector bought Girl With Baloon/Love is in the Bin for £1m at auction that money went to Banksy, to be spent on whatever Banksy spends money on.

When a collector bought Girl With Baloon/Love is in the Bin for £1m at auction that money went to Banksy, to be spent on whatever Banksy spends money on.

This is exactly the point I was making - when someone buys a new thing the money circulates in the economy. They (sort of, in the case of Banksy) paid for it to be made. They created work. When it's just two rich people buying existing things from one another the money doesn't leave that loop, no additional work is done, and there's no real benefit to the economy.

To be honest I'm just making a pedantic point about Daniel's post where he said every purchase trickles down eventually. That's just not true in a small number of very high value purchases like art. If you've got buckets of cash it's better for the economy to buy a shiny new yacht instead of a painting. Nice problem to have I guess.

In practice, inflation of an asset class like art always leaks out into the general economy, but let's say the dollars that go into art stay in art and never leave. This is equivalent to just pulling the dollars out of the economy which is deflationary. In an economy where new dollars can be created at will the dollars removed will be replaced by new government dollars and spent.

Don't forget, it also supports artists. I wonder if artists could sell art with a contract stipulating a royalty whenever it changed hands.

It warps and stifles artists and the art world. An artist knows that only maybe 5% of artists manage to survive financially off their work, and maybe 1% become wealthy. Knowing that there is that lottery ticket, and that the odds can be boosted by catering to the whims of the ultra-rich and engaging in their cynical high-end social politics, that's hard to resist for many who are otherwise looking at being forced out of a beloved career or living in poverty. Many take the bait without realizing they're doing so, or somehow attempt to split the difference. Either way, it eventually causes some very fundamental psychic distress, and both artist and output suffer.

Is that so different from the world of startups?

At least we in tech can easily practice our craft outside of the startup world and remain financially secure.

Startup employees largely have better working conditions (even those who let themselves get conned into unpaid overtime) and softer landings. I remember a retrospective on a photo-sharing startup did the rounds a couple of years ago: it was a failure as a business but the developers were well-paid and able to walk into fresh software jobs at a good salary.

It was founders, not employees, I had in mind. It's a massive longshot, survivor bias clouds our thinking, and you need connections.

This is part of the law in some countries. Usually it's referred to as Artist's Resale Rights.

The Artist’s Reserved Rights Transfer and Sale Agreement is a contract to do just that - for the artist to earn royalties from resale (if the price of the work has increased) and to have some control over public exhibition even after a work passes from owner to owner. See https://en.wikipedia.org/wiki/The_Artist%27s_Reserved_Rights...

It was first published in 1971. Needless to say, collectors and galleries don’t love it, but some artists continue to use it.

Not as much as you would think. Many paintings don’t gain huge value until after death, and many paintings don’t gain huge value until after the first sale (when the artist makes money).

Tell Jeff Koons that.

I'd much rather see "super-rich" spend their money on whatever than supporting the greatest contemporary marketing scam called modern "art"

Some of it does seem to express something that needs expression. But then you have bullshit artists like Damien Hirst who seems to know exactly what kinds of tacky garbage people with much more money than taste like to buy.

Sometimes I wonder how hard it would be to make a profit with art trading. I'm not that much into (looking at) art, but a little.

I would rather see tens or hundreds of millions spent on a project that employees hundreds or thousands of people for years. Buying art is just money changing hands between rich people.

I think the original article title, "How Contemporary Art Became a Fiat Currency for the World’s Richest" is actually quite informative

Agreed. There is a lot more to "the selling of contemporary art" than this article touches on, and that's not even what it's really about.

Even with a single Koons piece getting $91M in the secondary market[0][1], the vast majority of actual sales of contemporary art have nothing to do with hedge funds or the Singapore free port. In the art world it's a mistake to only follow the money.

I'm in Berlin right now and some of the most interesting works are not in the super high end galleries but in the smaller ones that sell work in a wide range of prices and actually have to make a lot of sales to stay afloat. For instance my personal favorite Berlin gallery[2] often has works available for under 1000 EUR, and sometimes for more than 60000 EUR for people your grandkids will still find in the History of German Art. That's not atypical.

That said, this article was pretty interesting if very short.

[0]: https://www.bloomberg.com/news/articles/2019-05-16/steel-rab...

[1]: I recently heard Koons described as the "Donald Trump of the Art World," which (fair or not) makes this particular sale a bit ironic.

[2]: https://www.galerie-berlin.de

"Contemporary Art" is more or less circularly defined as big-ticket artworks/projects being sold to incredibly rich collectors, corporate decorators, and headline galleries by predatory dealers.

There's plenty of other art happening, but it's of no real interest to the big dogs - who are far more concerned with ROI than anything else, and consider artistic merit a means to an end rather than an end in itself.

The kind of self licking ice cream market you describe where it’s a con and everyone’s in on the con are not stable. For an example of the collapse of one see the market for stamps and stamp collections. People used to buy stamps as investments and criminals used to treat them as reasonable currency substitutes, like bearer bonds except for much higher than face value. Now the market is flooded with the collections of the deceased and the price has collapsed so much people buy stamps so they can use interesting stamps to mail their wedding invitations.

Markets are robust to having very large portions of their demand being transactional, people who are in it to make a profit. But gallerists, curators and agents are overwhelmingly art lovers themselves. No doubt there are plenty of people who are in art to make money but there are many, many more who love art or who are buying art to gain social status (not mutually exclusive motives) than grifters. At the top of any field you’re going to find remarkably few pure grifters. It’s a lot easier to work 60 or 80 hours a week if you like or love your work. Lots of people love art and some of them even make a living at it.

Ok, we'll change it back. (It was "The Selling of Contemporary Art" for a while.)

How exactly is this by fiat? The author doesn't seem to understand what the word means.

The article does not make it clear how this is a fiat currency, or how this is more properly called a currency rather than just property. Anyone know more and would like to clarify?

Shameles Plug: My sister is a great artist, I'm sure she'd like her work to become someone's fiat currency. http://www.briannaleefineart.com

Currency is is reasonable here since its understandable that art can be used as an be a means of exchange for fiat or in barter, if they are regularly accepted and exchanged in this way.

Technically Fiat is a thing declared and enforced by the state. Art is not that, so agreed the title is an abuse of language and actually non-sense.

When people say, bartered otter furs for a donkey, were the furs a currency? Was the donkey a currency? It seems a bit of a stretch. But in any case, it was the word 'fiat' which, to me, was the biggest violation.

I'm guessing one aspect of Art is its special abilities to avoid taxation.

No, bartering with it doesn't make it a currency.

However what money is (the abstract concept) and what a currency is (the actual thing you use) is subjective. Art could be used as money and a currency, just as well as sea shells or cigarettes can.

The key is it being used as a medium of exchange, not as something you get for its own gain. So trading art, for the sole purpose to trade it for something else, is using it as a currency.

Money also requires fungibility, which art certainly is not. Typically money is also supposed to be a unit of account, which both requires fungibility and universality, something art doesn’t have. Nobody values their house in paintings, that’s ridiculous, instead the house and the art gallery are measured in the local currency.

I think realistically modern art is more of an investment vehicle than a currency.

All good points.

I'll add that art is probably used for tax avoidance and money laundering as well.

But remember that Fungibility is relative because digitally the movement of USD is traceable. And all physical USD are marketed with serial numbers. Money laundering is a huge part of the financial system where $100 will be sold for $50 for the purpose of obtaining "clean" money, or where vast amounts of artificial work is expended for the purpose of funnelling cash into the mainstream. Thus $100 is not always worth $100.

That’s a fair point, but even still there is a massive gap between the fungibility of USD and art. Assuming all your money is clean, there’s literally no difference between any two given dollars. High value art on the other hand is at most produced in limited editions, and a lot of the super high value stuff is literally unique.

Your sister’s art is lovely!

<philistine-mode>

Some years ago, when Jeff Koons was mixed up in a copyright issue--he made, or directed the making--of a sculpture that looked a lot like a photo--the NY Times ran an obituary of the inventor of the "jackalope", a stuffed jackrabbit with antlers (https://en.wikipedia.org/wiki/Jackalope). One saw them at roadside establishments out west, and perhaps still does. It occurred to me that if Mr. Herrick had chanced to grow up nearer New York City, he might have been a rich artist rather than a moderately prosperous entrepreneur.

</philistine-mode>

This has been going on forever. I think it explains why a Jeff Koonz just sold for ~$91M. It's not that the sculpture is worth that much, per se, it's more of a store of value.

Famous artist Gerhard Richter said that modern art prices have nothing to do with the art's value.

Can't remember where I read it, but a great article suggested that expensive art was often used to launder money.

Here in France, art is mostly tax-free, so it's used as a mean of tax avoidance by the rich

A lot of money is also laundered via contemporary art, because it’s an unregulated market with extremely hard to price assets.

It's all tax avoidance money laundering.

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