Art values - gold standard or more derivative rubbish?

On the day that Merrill Lynch is taken over, Lehman Brothers declare bankruptcy and banking shares take a major tumble all around the world - could somebody try and explain to me why top end art values have surged ever upward in the last 12 months?

Maritime Inversion, - Bixby Bridge, Big Sur
8" x 12", coloured pencils on Arches
copyright Katherine Tyrrell

It seems to me that bankers around the world have earned themselves big fat salaries AND massive bonuses through a combination of inappropriate lending, shifting risk and selling something called derivatives. However the golden goose has been honking and biting back for the last year or so as the credit crunch has hit home.

As a result a lot of people are losing or have lost their homes and/or their jobs and/or all confidence in their investments.

Governments have had to buy banks (Northern Rock) and mortgage houses (Fannie Mae and Freddie Mac) to avert shock waves - and yet banks continue to collapse.

Today, big investors are piling into gold and government bonds. It's that bad.

....but what about the art market?

Speaking personally, in my view the other area of the economy which looks very risky is the art market for 'high end' art. It seems to me that some collectors have behaved just about as stupidly as the bankers with speculative trading sending valuations of art to dizzy heights on what some would think are pretty dubious assumptions.

BUT Art does NOT have a value in the same way that gold has. Art valuations are rather more like real estate. They depend very much on who is giving them, what's on offer and how many buyers there are who all think they've latched on to a good thing.

Put simply getting out of investing in banks and into art isn't going to work.

So the big questions for me are

• when will art go back to being about art rather than becoming a substitution for the derivatives market (or "financial weapons of mass destruction" as Warren Buffet termed them in 2002)
  
• when will we see art valuations jumping off the cliff and taking a nose dive? (note I said 'when' not 'if')
  
• Will any nose dive necessarily impact on pricing of art further down the food chain?

Or to put it another way, does anybody really think Damien Hirst's For the Love of God was really worth £50 million?

Today and tomorrow, Damien Hirst is auctioning 223 new works for auction at Sotheby's. He's cutting out his galleries and selling straight to the collectors. Opinion varies as to how well he might do although the original estimate was that it might raise £65 million. It'll be interesting to see how he now does within the context of a banking crash which is beginning to look really rather dangerous and an art market which is already showing signs of beginning to slow.

For other comments on the economy, speculation and art values by two writers I've got a lot of time see:

• Alan Bamberger - a man who writes a lot of good sense - in Art Market Trends - Art in a weak economy (written last November)

the contemporary market for art by untested artists is precisely where a substantial percentage of recent speculative activity has occurred. A recipe for implosion? Not entirely.....As long as too many people who know too little about art have too much money, more than they know what to do with, the applecart is OK.
Alan Bamberger

• Top critic lashes out at Hirst's 'tacky' art - which includes an interesting perspective by Turner Prize winner Grayson Perry

Perry is concerned about the way the significance of artworks is skewed by the price they attain in the market. 'What has changed is that the market, fuelled by glitzy new wealth, is becoming more powerful than the connoisseurs, museum curators and art academics whose consensus used to decide what was good art. Hedge fund managers and Russian oligarchs are not necessarily known for their sophisticated good taste,' said Perry.
Vanessa Thorpe - The Guardian

• Robert Hughes - Day of the dead - (The Guardian, 13th September 2008)
  

Amid the controversy surrounding the Sotheby's auction, Robert Hughes explains why he has taken a stand against Damien Hirst's 'simple-minded' works, and an art world where prices bear no relation to talent
Robert Hughes

• Robert Hughes - next Sunday on Channel 4
  

The Mona Lisa Curse 6:30pm Channel 4
Veteran critic Robert Hughes denounces the contemporary art scene as a big-money circus that has forgotten how to treat great works. Hard-hitting and surprisingly good fun.
Radio Times

[Note - my drawing relates to my drive down Highway 1 nearly two years ago - as recorded in my summary of the trip California, Arizona & New Mexico (July 2006). In the hottest summer for years, Northern California and Big Sur were under a maritime inversion - so it's a picture of fog and a big cliff in another topsy turvy world! I thought it rather fitted the subject matter.]