With all of the turmoil in global markets and the problems with money laundering, The Financial Times focuses its efforts in Davos on … the art market. On a panel about the global art market, economist Nouriel Roubini makes some bold claims about the art market, including money laundering. But when he tries to back them up, we get very little in way of real facts. (The money laundering issue is surely a real and serious one but it always mentioned in passing and with no discussion of controls.
Instead, Roubini trots out the usual silliness that guarantees are price manipulation:
“Whether we like it or not, art is used for tax avoidance and evasion,” said Prof Roubini, himself an art collector. “It can be used for money laundering. You can buy something for half a million, not show a passport, and ship it. Plenty of people are using it for laundering.”
Prof Roubini argued that the art market had a series of characteristics that needed regulation. “While art looks as if it is all about beauty, as a business it is full of shady stuff,” he said. “We should correct it or it will be undermined over time.”
He said these weaknesses included routine trading on inside information, price manipulation through guarantees offered by dealers on auctioned work, and tax avoidance by the transfer of paintings within families. One reason why the art market was so strong in the US was favourable tax treatment, he said.
There’s more in a second story in the FT:
“Inside information is considered standard [in the art market]. In other markets, it is thought of as being illegal,” Mr Roubini said. He added that the art market was prone to “fads, passions, manias, booms and busts,” because art works had no clear financial value and the market was opaque.
None of this should be taken to suggest that the art market is open to abuse. But much of what the financial press, especially financial bloggers like Izabella Kaminska, go on about turns out to be mis-informed assumptions. Here’s an example from FT’s Alphaville hyping the same FT panel at Davos but this time throwing in a little humor about art being better than bitcoins:
As we’ve pointed out before, who needs bitcoin when there’s a global self-issued bearer currency based on zero collateral already? The only difference with art money is that the supply isn’t controlled by computer “protocol” but art dealer “protocols” over how many new artists you can launch on an annual basis.
Art world’s shady dealings under scrutiny at Davos (Financial Times)
Roubini Vs the so-called “Art industry” (FT Alphaville)