If you believe the auction houses, the problem facing the art market in 2009 is not a lack of demand, as most would think, but a dearth of high-quality, bankable supply. After all, who wants to sell when the market is down and buyers are running for cover? Certainly not those who acquired works in the frenzy years of 2005-2008. And you can’t call anything that’s been on the market this decade fresh, now can you? That leaves sellers who have no choice but to sell.

The Madoff scandal has already caused two deaths. Surely there will be a divorce or two that comes from the recriminations too. But the final D of the auction house troika may not be Debt in 2oo9. For many Madoff investors, the new D is disaster. Sotheby’s CEO Bill Ruprecht is quoted in the Wall Street Journal saying he’s fielded calls from Madoff’s victims:

For sellers, 2009 may be a year of lower expectations. Sellers who have a choice will likely sit on the sidelines, experts say, leaving the market to those who must sell to settle an estate, a divorce or a debt. Mr. Ruprecht says he has spoken with “lots” of collectors who had invested with Bernard L. Madoff Investment Securities, the New York firm that allegedly carried out a $50 billion Ponzi scheme. “I have clients for whom art is the sole liquid asset they own today,” he says.

With the Dreier art potentially coming to market too, there’s some hope that 2009 won’t be a total drought.

Art Imitates Crunch, with Few Exceptions (Wall Street Journal)