Submitted by Pater Tenebrarum of Acting Man blog [6],
Modern Art Goes Bananas As the Money Supply Inflates
We don't want to discuss the artistic merits of modern art, except to say that we are not averse to it at all. In other words, we personally like quite a bit of modern art, regardless of the field. Paintings, sculptures, literature, music, we find stuff that speaks to us everywhere. Of course we are not completely uncritical, we merely want to point out that art doesn't end sometime in the 19th century for us. We even like quite a bit of that modern 'classical' scratchy music that is on the receiving end of much contempt elsewhere. As it were, de gustibus non est disputandum.
Jeff Koons – 'Balloon Dog (Orange)'
However, we differ with many supporters of such art insofar that we do not believe it should be in any way subsidized by the State. We also believe the habit of sometimes forcing concert goers to listen to, say, Helmut Lachenmann's works by sandwiching them between pieces by Mozart and Beethoven is a slightly questionable practice – even though we like it personally. We are well aware though that most Mozart fans are probably only clapping perfunctorily when confronted with something like this [7].
However, our focus here is actually on how the money supply inflation of recent years has been mirrored in the prices paid for modern art, which are becoming ever more absurd. A first wave of record prices was paid in the 2003-2008 bubble, but these records have been shattered over the past few years, especially in sculpture. A few examples are shown below.
The First Bubble Wave (2005-2008)
If you are a sculptor, you're a real winner if your name is Alberto Giacometti. Regardless of the phase of the giant bubble we are in, your works will fetch record prices.
'Grande femme debout II', by Alberto Giacometti – sold for $27.4 million in 2008
'Tête de femme (Dora Maar)' by Pablo Picasso, sold for $29.1 million in 2007
Prices for sculptures really only went 'off the charts' in the 2009-2013 phase of the great bubble. Paintings are generally fetching even higher prices, and in the early bubble phase they beat the prices for sculptures noticeably.
Jackson Pollock's 'Nr. 5, 1948' – sold for $140 million in 2006
Willem de Kooning's 'Woman 3' – sold for $137 million in 2006
Pablo Picasso's 'Dora Maar au chat', sold for $95 million in 2006. Several other works by Picasso also sold at very high prices in this stage of the bubble, the first one was 'Garçon à la pipe', which sold for $104 million in 2004.
Kazimir Malevich's 'Suprematist Composition', sold for $60 million in 2008
Gustav Klimt's 'Portrait of Adele Bloch-Bauer I' sold for $135 million in 2006, making it the highest priced modern painting sold in this phase of the bubble ('Adele Bloch-Bauer II' incidentally sold for roughly $88 million the same year).
The Second Bubble Wave (2009-2013)
Things became even more interesting in the second wave of the bubble, especially in the field of modern sculpture, where an enormous jump in prices was recorded. Numerous paintings were also sold at jaw-dropping prices, but the differences to the first bubble phase were not that great (with one notable exception, see further below). This time, Giacometti really became the center of attention.
The most expensive sculpture ever sold was a version of his 'L'homme qui marche' (there exist several versions of most of his sculptures). Several other Giacometti sculptures also fetched record prices, including two versions of the same work ('Grande Tête Mince') selling in 2010 and 2013 at very similar prices.
Alberto Giacometti's 'L'homme qui marche I', sold for $104 million in 2010
Giacometti's 'Grande Tête Mince' – sold in 2010 for $53 million, while another version of the same work sold in 2013 for $50 million (it actually looks exactly the same, so there is no point in depicting both)
Amedeo Modigliani's 'Tête' sold in 2010 for $52.6 million
'Balloon Dog (Orange)' by Jeff Koons, sold for $58.4 million in November 2013
With regards to Jeff Koons' 'Balloon Dog' selling for more than $58 million, we can only repeat, 'de gustibus non est disputandum'.
Next come a few paintings that were sold at very high prices fairly recently. We already mentioned the Lucian Freud triptych by Francis Bacon on another occasion. Edvard Munch's 'The Scream' is a well known painting – what is perhaps not so well known is that countless versions of it exist. One of the 'four most important versions' was auctioned for almost $120 million in 2012.
Francis Bacon's 'Three Studies of Lucian Freud' – sold for $142 million in 2013
The version of Edvard Munch's 'The Scream' that was sold for $119.9 million in 2012
Pablo Picasso also struck gold again in the current bubble phase, by setting a fresh record of his own earlier this year.
Pablo Picasso's 'Le Rêve', which sold for the princely sum of $155 million in March of 2013.
And finally, Andy Warhol continues to attract big money as well. His painting 'Silver Car Crash' fetched $105 million this year.
Andy Warhol's 'Silver Car Crash (Double Disaster)' sold for $105 million in 2013.
Conclusion:
The effects of the massive monetary inflation of recent years are so far mainly reflected in asset prices. Modern art has become a major magnet for investors, whereby one gets the impression that this is truly a gargantuan bubble by now. Works of art are unique (well, modern works are only 'sort of' unique, since in many cases the works exist in more than one version as noted above), so there is really no yardstick by which one could make sensible comparisons regarding their valuations, except to note that prices today are at multiples of the prices paid in the not-too-distant past. When a Japanese insurance company bought van Gogh's 'Vase with Fifteen Sunflowers' for $39.7 million in 1987, the world was shocked that anyone would shell out so much money for a single painting. It was rightly seen as an outgrowth of Japan's bubble excesses of the 1980s at the time. Today it actually looks like they made a great investment. No-one bats an eyebrow anymore at anything that is not sold for more than $100 million.
So if you ever wonder whether there is really an inflationary bubble underway, the answer is clearly, yes, there is. As an aside, we have not mentioned Cezanne's 'Card Players' (it fell just outside our range of 'modern' art, as it was painted in the late 19th century and we only wanted to include 20th and 21st century art). The painting was sold for over $259 million in 2011, making it the most expensive painting ever – so far, that is. It is undoubtedly a great painting, although we could think of a number of paintings we personally like better. But $259 million? Really? That does strike us as somewhat excessive.
Cezanne's 'Card Players' – sold for $259 million in 2011. Sure, it looks nice, but $259 million?