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Hey Kids--- It's Bubble Time!

The original version of this article pre-dates the housing crash and mortgage meltdown of 2007. Now in 2022 it's back, updated, and more relevant than ever...

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The contemporary art market is superheated to the point of meltdown and has been for a while now. Money pours in from everywhere-- big money, all kinds, free-flowing and infused with euphoria. Prices for art by the "right artists" and from the "right galleries" have been skyrocketing exponentially with seemingly no end in sight. Everybody wants in on the action because it's becoming increasingly clear that we're all getting very rich very fast.

Dealers are delirious; flavor-of-the-month artists can't churn out marketable product fast enough. Opportunists scour the artscape for the newest freshest hottest talents, searching for whatever's the most fashionable to flip. Galleries snatch up promising young art stars wherever they can find them (some before the ink is even dry on their MFAs), give them shows, anoint their oeuvres with accolades, market them with prophecies of honors they will inevitably amass (or so they tell you), bang up their prices, and let the speculators do the rest. Isn't this the best?

Well, yes and no. There's absolutely nothing wrong with an occasional depraved dose of art-induced intoxication, or even temporary insanity. It's all good, assuming you understand the risks of buying in, and know how to play them, because as much as you might want to believe that the Golden Age of ever-appreciating art is here to stay, it's not.

But who wants to talk about that now? Absolutely nobody. Instead, we obliviously revel in this fantasy reality where dreams rule the day, having successfully managed to relegate clear-headedness, better judgment, facts, precedent, history, and logic to the closet where we all know they belong.

So how does all this work? When galleries sell art, they need new art to replace the art they just sold. When times are good like they've been for a while, they need lots of new art. But where are they gonna get it? From young start-up galleries showing obscure young artists recently out of art school or having their first or second shows. Or if they're really smart, they get it from artists right after they graduate from art school, sometimes based on their BFA shows, preferably on their MFA shows, but before they have any actual significant gallery exhibition histories. Or if they're really really smart, they "discover" artists while they're still in art school, even before they graduate.

This phenomenon has begun to parallel the draft in professional sports. Pro teams harvest the standouts fresh out of college, or if they're shrewd, they snag 'em before they even graduate, sometimes as early as high school. Who cares if comparing art careers to sports careers is preposterous? So what if a typical sports career lasts a few years while a typical art career lasts a lifetime? So what if we have no idea whether an artist is destined for eminence until after at least a decade or two of consistently impressive production? We're talkin' money here-- and lots of it!

"Investment opportunities" abound and everyone's an augurer. Buyers can't say enough about which white-hot artists in their collections are destined for ensconcement in the world's great museums. The gloat over how little they paid before prices surged, how much their art is worth, how much more it's worth than last week (or month or whatever), how fast it's going up in value, and how much more it'll ultimately be worth. Of course many have never tested their theories by attempting to resell any of their treasures, and have no idea whether what they think it's worth is what it's actually worth.

You've probably heard this irritating expression before, haven't you? The one that starts, "When truth rears its ugly head..." Well, the truth is that it's true. This fiscal fest's not gonna last forever and on that oh-so-sad day when it ends, then comes the hangover. Fortunately for those who imbibe their art in moderation, splashdown will be solemn though survivable, but for many it ain't gonna be nearly that pretty. In the meantime, who cares? On with the art party!!

Nobody wants to do all that analytical thinking, learning about art history, doing pain-in-the-ass research, and assessing and evaluating what's happened in the past in order to determine realistic fair market values of artworks now. Boring! It's far easier to justify our actions based on hocus-pocus predictions like, "It doesn't cost anywhere near what famous art sells for now, but you just wait and see-- it's gonna be major mega mucho grande tomorrow." There's a term for acting based on future expectations rather than past performance, you know. It's called speculating, or more euphemistically, investing.

People used to buy art (and many other products) based primarily on past performance, but that's gotten all twisted up and goofy, and instead, many now buy based on future expectations. Conditions are perfect (like now) when there's little history in terms of market performance, an overabundance of hype, and all anybody wants to talk about are grandiose forecasts of what's to come. There's an excellent reason why they do this, of course-- it's really fun and oh so easy.

As for the galleries, they need new art to replace the art they just sold. But where are they gonna get it? From obscure start-up galleries showing obscure young artists recently out of art school or having their first or second shows. Or if they're really smart, they get it from artists right after they graduate from art school, sometimes based on their BFA shows, preferably on their MFA shows, but before they have any actual significant gallery exhibition histories. Or if they're really really smart, they "discover" artists while they're still in art school, even before they graduate.

This phenomenon has begun to parallel the draft in professional sports. Pro teams harvest the standouts fresh out of college, or if they're shrewd, they snag 'em before they even graduate. Who cares if comparing art careers to sports careers is preposterous? So what if a typical sports career lasts a few years while a typical art career lasts a lifetime? So what if we have no idea whether an artist is destined for eminence until after at least a decade or two of consistently impressive production? We're talkin' money here-- and lots of it! Don't be a poo-head and ruin the whole thing!

In spite of the irritating facts, galleries proceed to take their fresh peppy replacement art and price it higher than the art they just sold. The person who bought the art it replaces sees that the replacement art costs more, which means he's already made money. Then he tells his friends, his friends buy the replacement art, the replacement art gets replaced with new more expensive replacement art, the friends make money, they tell their friends, those friends buy the next round of replacements, they make money, and then they tell their friends, and those friends tell their friends, and those friends tell their friends, and then... wait... we're running out of friends. Uh-oh.

OK. Ready for a pop quiz? Of course you are. Here we go...

When was the last time large numbers of people bought based on future expectations as opposed to past performance?

Exactly! The Housing Bubble. And before that? The Dotcom Debacle of the early 2000s. If you guessed them both, give yourself a fool's-gold star on the forehead and flush your wallet down the toilet. We all remember how many get-rich-quick speculators took it in the ear on those.

But back to the matter at hand, conditions have been perfect in recent years for an inflationary artland run. Until recently, the stock market's been honking right along, interest rates have been laughably low, the housing market has gone from trouble to bubble, and hardly anyone seems to recall recessionary bumps and bruises of past economic slowdowns. But things have started to turn. Stocks are down, interest rates are up, money's not quite so easy to get a hold of as it's been, and the R-word has even entered the conversation. You see where I'm going with this?

Yes. All that art that's been screaming towards the stratosphere in value, contemporary works in particular, is becoming a wee bit vulnerable. Why? Because art has no empirically measurable or quantifiable properties. It serves no purpose. It has no function. No one needs it in order to survive. It's just mushed around paint, metal, wood, plastic, digital prints, NFTs, photosensitive surfaces, audio, video, clay, and whatever else those wacky artists can get their hands on to create with.

But people who love art for art's sake don't care (aka hardcore collectors). They buy it for intrinsic intangible reasons. They know they can't do anything with it; they don't intend to do anything with it. It just sits on display in their homes and offices looking gorgeous and enriching their lives. They could care less what they paid for it, what it's worth now, or what it might be worth tomorrow. They have no intention of selling it anyway.

Then we have the speculative sectors of the market. Those in it mainly for the money. The ones who are largely responsible for the frenzy. All they care about is what it sold for last year, six months ago, or better yet, two weeks ago-- and that today's selling prices are always higher than yesterday's. That's the only plotline these fiscal mercenaries espouse. As for the galleries, complicity can be tempting, or in other words, doing what they have to do to keep prices propped up.

But that could begin to change. The artscape's getting a little tricky. In a bull market, if a potential buyer asks a seller why prices are what they are or why dollar values seem to endlessly spiral up, they get answers like, "That's what it's worth at the moment, but tomorrow it may well be worth more." When sellers do this well, buyers go ahead and believe it. If lots of sellers say stuff like that simultaneously, then the phenomenon morphs into reality-by-consensus, and what starts out as random arbitrary price increases becomes a pervasive broad-based upsurge. In the best of economic times, this scenario seems almost plausible.

For straggling doubters who still have the temerity to question the new dawn of perpetual price hikes, savvy sellers do a simple bait-and-switch. All they have to do is name a famous high-profile artist or two, compare their prices to those of the upstart artists whose prices they're inflating, and imply that they're both basically the same, the only difference being that the upstart art has only recently embarked on inevitable trajectories to where the famous art is now.

Culminate the ruse with some recent selling prices for the famous artists, like "if this was a Jasper Johns, it would be worth $$$." Suddenly the gallery's "it is because it is" art seems like an unbelievable bargain. That's usually enough to get doubters all frothy and convinced, to pull the trigger, and buy this "bargain" art for more than it sold for yesterday (either because they're new to "collecting," have visions of riches, are consumed by greed, are flippers-in-training, or all of the above). So there you have it-- upwardly mobile prices. And we all lived happily ever after, right? Not quite.

More bubble stuff:

* Auction houses have already commoditized the art market; now they've gotten hip. How? They're auctioning newer and newer art by younger and younger artists, and using less and less secondary market data (facts), and more and more imprimatur (it is because it is) to sell it. Fans, followers, likes, hype, artists-you-should-know lists... all this is magically blended together and in the end, out comes the money.

* Art is increasingly presented as investment, positioned more and more like securities and less and less like art, which we all know has no tangible or quantifiable value.

* People who don't know much about art, but who've made money selling luxury-level real estate, cars, yachts, and the like are getting into the art business, opening galleries, or if they're collectors, presenting their collections like timeless museum treasures.

* Not enough time has passed to know which young art stars will fade and which will endure, yet they're all priced to endure. But the fact is that most don't. Pick up an early 2000s issue of any major art magazine and count the artist names you've never heard of.

* Not enough time has passed to know which young-art-star art is fad or fashion and which is classic and enduring, yet it's all priced as classic. (In extreme cases, prices for brand new art by relatively untested artists exceed those of established masters-- which makes no difference because many new "collectors", blinded by the glamour of the contemporary empire, are unaware of how much art by established masters sells for... or why it's even worth owning.)

* Selling prices for an alarming number of young artists are doubling, tripling, quadrupling, and more in alarmingly short periods of time. Hint: no substance known to man gets that valuable that fast.

* Bubble boosters like to cite Basquiat and Haring as young artists whose prices continue to rise. Well, if either were alive today-- Basquiat at 52 and Haring at 54-- do you suppose they'd be middle-aged artists with prices rising just as fast?

* More and more people who know less and less about art are getting into the market.

* In the traditional art market, prices go up because people who buy the best art by the best artists love it so much, they either never sell it or donate it to museums. In other words, SERIOUS DEDICATED COLLECTORS BUY ART TO KEEP, NOT TO SELL. In speculative art markets like the one we have now, the exact opposite is true. PEOPLE BUY ART TO SELL, NOT TO KEEP. And therein foments the implosion.

The good news is no matter what happens in the short term, great art will stand the test of time, as it always has, and will maintain or increase in value. Pretty much everything else will fade into relative degrees of obscurity. Yes, the art market is today's darling for dabblers. Some will come away winners, many won't. But they don't care because it's not about art; it's about money. When the boom busts, rest assured they'll find new rainbows to chase.

As for you artists and galleries, if you've been blessed enough to be part of the updraft, here's what you do-- you live life exactly like you did before the engorgement, shelter your windfall, stash some cash, let time take its toll, and when the dust settles, you pick right up where you left off. As for you white hot art market darlings who the trendy set just can't seem to get enough of, the same goes for you-- except in triplicate. In the meantime, savor the moment, blow off the hype, remember that reality rules, and never ever get juked to the point where you dare to speculate on yourself.

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Thanks to Robert Berman and Louis Stern for their assistance with this article.

(art by Alex Couwenberg)