In the past we’ve remarked upon the financial press’s fixation on calling the art market crash before it happens. The Daily Beast is the latest venue to get in on the action. Over the last several years, each event major auction was portrayed as the moment before the fall. And when prices continued to rise, that was seen as evidence that the fall would only be bigger next season.

Next season has finally come. And the art market has seen spectacular growth even after the emergence of serious problems in the world financial systems well over a year ago. Does the art market need a correction, retrenchment or consolidation? Most likely. No market can grow–or grow during an unstable period–without seeing both ups and downs. Will it collapse altogether? One supposes it could. Though it seems unlikely.

The problem with the art market as a market is that it only feels comfortable with one side of the market action–the rise in value. However, markets go up and down; and both directions are about distribution. Objects move from one set of hands to another based on prices. Falling prices create opportunities for buyers just as rising prices create opportunities for sellers.

That only works in markets where the participates are comfortable with a greater level of exchange than the art market has heretofore been able to countenance. Everyone fears the bursting of the bubble. By definition, the art market is always a bubble. Bubbles exist when assets are exchanged for prices un-connected to their underlying value. (Think about homes in Naples, Florida being sold and re-sold before anyone ever moves in or write a rent check. Think about shares in solar power companies that have not generated any revenues.) But art is an asset that only ever has an exchange value. There is no revenue stream, rent or cash flow. The underlying value is aesthetic, intellectual and historical; which are things that cannot be measured. So the entire art market reflects sentiment, not value. (The same can be said for the market in gold beyond its use in making jewelry.)

Back to our main point, the central concern about the art market’s growth has been a return to the 1990s when prices fell well below the boom period of the 1980s. Some indices have estimated that it took a decade or more for prices to regain their previous levels. That may happen again. But it also might not. The point is that it is too soon to tell. Auctions held in the midst of a crisis–from Damien Hirst on one end to Phillips Contemporary Art sale or Sotheby’s design sale–are not a measure of the health of a market. Only time and more events will tell where the market goes.

With all of that in mind, this article seems rather silly. It’s use of “collapse” and suggestion that a boom that began in 1998, had a retrenchment in 2001-2002, and seen two years of hyper-growth from 2007-2008 can reverse in the course of a weekend is superficial.

After an unprecedented 15 years of boom, the art market is showing the first signs of collapse. [ . . . ] the market may well, like the property bubble, have grown unrealistically. With the credit crunch and the banking crisis hitting the real economy, the boom for art may also be over. [ . . . ] Tonight Christie’s has its London sale of contemporary art [ . . . .] Art lovers will be watching to see if it, too, signals that the great contemporary art boom is finally over. [ . . . ] Closing today after five days is the Frieze contemporary art fair in Regent’s Park, London. Selling art in thousands rather than millions of pounds, business has been steady but has not shown the spectacular performance of last year.

The Independent adds to the myopia by trying to suggest that the entire art market hinges on a single picture, Lucian Freud’s unfinished portrait of Francis Bacon:

The signs are that buyers are holding back until they know what happens to the Freud portrait: it’s seen as the canary in the coalmine that could tell everyone the market is about to blow.

Art imitates life as boom shows signs of bust (Bloomberg)

Why a portrait of Francis Bacon terrifies us all (The Independent)