If Pablo Picasso were alive today, he would be one of the richest people on earth, a true billionaire. His current estate is a multi-billion dollar empire. A single Picasso painting sold for $179.4 million at auction.
The artist Jackson Pollock was worth about $5 million at the time of his death in 1956 according to Celebrity Net Worth. A single Jackson Pollock painting has sold for $140 million.
Jean-Michel Basquiat was worth $10 million at the time of his death in 1988. A Basquiat painting sold for $110 million in 2017. His friend, Andy Warhol had an approximate net worth of $220 million at the time of his death. A Warhol has sold for $105 million at auction.
Several contemporary living artists have amassed fortunes worth millions of dollars. Damien Hirst made millions of dollars auctioning off animals in formaldehyde, such as a calf, a sheep and a shark. Gerhard Richter has a reported net worth of $40 million, making paintings with a squeegee. Jeff Koons has amassed a net worth of $200 million. Jasper Johns, an American painter, sculptor and printmaker has a net worth of $300 million. A graffiti artist and documentary filmmaker, Banksy, is worth $50 million.
With all the money in art today, Vincent Van Gogh might wonder where all that love was when he was an artist? Who knows? If he were living today, the contemporary art market might cause him to cut off another ear and his nose.
There is a lot of money in art, millions of dollars for a masterpiece to the mundane. Why? The answer is complex. The price of high-end art increases as the disparity increases between super wealthy and the rest of the population. To understand this, we have to understand money.
Governments can tie money to precious commodities such as gold or silver, with a guaranteed exchange rate. It can also be worthless paper or something in between. If money is not backed up by precious metals, it becomes a Fiat currency. All Fiat currencies in the history of humankind have failed.
The United States dollar used to be backed up by gold or silver but President Nixon ended the gold standard for the United States currency in 1971. The United States still maintains official gold reserves but they are just not tied to the United States dollar. Now a United States hundred-dollar bill is printed for a cost of 12.3 cents. It is backed by the word of the United States Government.
Now gold and silver prices fluctuate and reflect changes in the value of a currency. This term is a floating exchange rate where currencies rise and fall determined by the open free market.
That’s where art comes into play. The super rich can hedge Fiat currencies with physical property such as real estate, gold, silver, jewels, collectibles or art. The art hedge has the added potential for price appreciation beyond inflation or free floating precious metals. That is why money loves art. Wealthy collectors can bid up an artist’s work over time to realize a sizeable return on an investment.
The business of art is not highly regulated, unlike a bank account, which could be open to the prying eyes of regulators. Art may be stored anywhere at the discretion of the owner, perhaps a residence or at a private storage facility. For example, someone could store art in a Freeport storage facility. There are several of these for profit facilities around the world but they are subject to host government restrictions.
What are the advantages of a Freeport? A full service company with several amenities: A Freeport is like an island within a country. It guarantees security and optimal storage conditions including the humidity. It can also transfer artwork within the facility between parties with full exemption from customs and taxes; this takes place outside of public purview. It is unnecessary to even physically move the artwork. These Freeports are ideal for the collector who values privacy. Customs have to be cleared on the way in and out of a Freeport.
One such facility is the Geneva Freeports in Geneva, Switzerland; however, recent Swiss Freeport laws have been passed to increase transparency. All items must clear Rigorous customs on arrival or when leaving this Freeport. Geneva also has state-of-the-art restoration services and authentication service specialists. They can also accommodate viewing arrangements in a special private venue.
Art can also be a convenient vehicle for money laundering. For example: A $1 million painting could be purchased with dirty money somewhere in the world, let’s say hypothetically South America. The painting could then be rolled up and shipped or taken in person, to let’s say New York, with a declared value of $100. After being smuggled fraudulently through customs in New York City, a bank loan could then theoretically be secured for $1 million of clean money. Laundry complete, very illegal, and if a perpetrator is caught there are severe penalties.
So we can see that art is stored in secure facilities just as gold is stored in a bullion depository. Art serves as important financial tool, a backup position for super wealthy collectors: a hedge against Fiat currencies.
Some artists feel that it is ethically and morally wrong to sentence art to solitary confinement. The sad footnote to this story is that it is possible that even the super wealthy may not exercise viewing services to enjoy the art. The world will not see these cloistered art works. They are banished away in a jail of sorts, like a simple commodity.
- New York Times. Bowley, G., Carvajal, D., May 28,2016, One of the World’s Greatest Art Collections Hides Behind This Fence.
Disclaimer: the above information is for general knowledge and does not constitute advice. Money laundering is illegal with resultant fines and penalties. Market manipulation or any other illegal activity is not condoned or suggested.