Rabobank: “I Don’t Know Much About Art…”

By Michael Every of Rabobank

I Don’t Know Much About Art…

“I don’t know much about art, but I know what I like” is a British phrase mocking the supposed ill-educated confidence on complex matters found amongst the proletariat. As has been the case for some time, however, this pejorative quasi-idiom is on the other foot: it is the working-class populists who look at the ‘elite’ and point out the ill-founded confidence on complex matters they don’t understand. Like geopolitics, economics, and inflation. And, yes, art – which is reflecting life.

An Italian artist just sold an invisible 5’ x 5’ “scuplture” for $18,000, titled ‘Io Sono‘ (Italian for “I am”. Or “I am a plonker”, as White Van Man would say). As he explained:

“The vacuum is nothing more than a space full of energy, and even if we empty it and there is nothing left, according to the Heisenberg uncertainty principle, that ‘nothing’ has a weight. Therefore, it has energy that is condensed and transformed into particles, that is, into us.“

Frankly, I have heard stupider jargon from experts in other fields. I am just not sure if the joke is worth $18,000 – but someone is.

My sister-in-law, an artist herself, was obviously delighted at this news. My wife, ever the practical one, wondered why the Italian made the “sculpture” so big, and wasn’t producing a smaller range to capture the household market. My colleague at Rabo offered to sell me an invisible sculpture he handily already has for half price. Yet we have been here before and not always in boom times:

• Remember the NFT (non-fungible token, or digital ‘art’) of a man breaking wind that sold for $89 back in March? Not really ‘Winds of Change’, however, as;

• In 2019, banana(s) taped to a wall sold for $120,000. (One was eaten: the others rotted, as bananas do.) Does something non-existent selling for $18,000 vs. something of minimal value selling for $120,000 represent inflation or deflation?;

• There was Tracey Emin’s post-Asian crisis 1998 ‘Unmade Bed’ – which was, as advertised, literally her unmade bed. That sold for $3.8m in 2014. (Fresh linen and detergent not included.);

• Damian Hirst had a shark in formaldehyde in recessionary 1991. It cost £50,000 to make; like the banana, it went bad; the gallery had to skin the shark and stretch it over a fiberglass mould; and when sold for $12m in 2004, the new owner replaced the shark (“Because sharks”). There was thus a philosophical question if it was the same artwork – but the $12m said “Shhh!”; and

• What about Marcel Duchamp’s 1917 “Fountain”? Literally just a urinal with “R. Mutt” written on it, this was supposed to extract the Michael from the art establishment – but today it is priceless.

Given the surge in commodity price inflation set to flow through to ceramic goods, and soaring hourly-rates for plumbers –and it being a toilet– White Van Man perhaps likes this kind of modern art more than others. And for those who like to go to galleries, purse their lips, and nod in serious reverence at the cultural importance of it all, let me share a secret. I know a famous artist: if we ever see any art together, the first thing he does is try to work out how many screws are in it, and where, like a builder. Indeed, rather than talk about Heisenberg, we last spent a lunch together tracking the auction prices of pieces of his work being sold off from a deceased individual’s estate, as all artists now do. It’s just a day job; and one that doesn’t pay well for almost everyone in the industry, while offering as many benefits as the gig economy. Even his artist pension scheme (comprised of stored physical art) was apparently in some kind of trouble due to unspecified issues related to a take-over. Perhaps he should start breaking wind, digitally.   

With this kind of backdrop, one can perhaps understand why there is yet more excitement that Dogecoin –a Duchamp joke in currency form– has now been accepted by Coinbase –a Duchamp joke in currency form(?)– sending the price up 31% in a day. Dogecoin is now worth $54bn: how many unmade shark urinals do I get for that?

Yet just as all the bohemian creativity of the art world is ultimately propped up by not-so-bohemian central banks, there is a power behind the crypto throne that ultimately gets to say what true value is: and it’s the same people. The US SEC is circling, and so is the IRS on the taxation of crypto and record-keeping of everyone at home and abroad holding them. The ECB yesterday also stated that countries that don’t introduce digital currencies may face threats to their financial systems and monetary autonomy; and without a digital Euro, it could end up being in thrall to dominant, foreign payment-service providers. It’s true, of course. Yet once you bring in national security, things stop being bohemian and start being deadly serious – and that’s when the REAL money flows in. National digital currencies will be Great White Formaldehyde sharks.

But away from White Cubes and roll-neck black sweaters, and back to inflation proper. The ECB accidentally managed to hit 2% CPI in May. However, we are all still waiting to see whether the global status quo can hold, and so we slump back into lowflation and/or deflation –apart from for modern art– or if we will see a breakdown, portending serious inflation. And on that front, we see more partial fragments of potential leading indicators:

• Inflation: the ECB’s message on digital currency was important, because it may portend the integrated bifurcation of payment systems *and* global supply chains. It can also portend a more active central-bank role in the economy (in which case, the artists may be state-directed, as under “Soviet Realism” once the modernists like Kandinsky and Malevich were eliminated);

• Inflation: The Fed’s Beige Book talked about supply shortages all over;

• Inflation: Elon Musk tweeted: “Our biggest challenge is supply chain, especially microcontroller chips. Never seen anything like it. Fear of running out is causing every company to overorder – like the toilet paper shortage, but at epic scale. That said, it’s obv not a long-term issue.”;

• Deflation: the US Senate Parliamentarian ruled the Democrats can only use one more reconciliation bill this year, further reducing the odds of a massive US fiscal boost that would make Musk’s prediction far less clear-cut;

• Deflation: Europe has stated that while fiscal rules against overspending will remain suspended in 2021 and 2022, they will snap back in 2023. So 18 months until fresh austerity looms;

• Deflation(?): US President Biden is amending Trump’s blacklist of Chinese firms, and shifting control of the process from the Pentagon to the Treasury. It remains to be seen if this represents a watering down, or a legally-necessary clarification of the criteria firms will be judged by. Either way, the Republicans are watching closely.

Elsewhere, meme-stocks are back again: this time AMC skyrocketed. It’s not clear if it is because it is losing money, but that seems to help in these matters. And Germany is closing off its airspace to Russia in response to Russia doing the same to it after what happened with Belarus. However, Germany is still determined to link itself to Nord Stream 2 in perpetuity. German policy is thus Dadaesque – to put it politely (“I don’t know much about geopolitics, but I know what I like.”). Then again, so is a great deal else.