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ASolo ago

What does the CIA care about art? Nothing, clearly. But that is not the point. The point is that I do not wish to work for the CIA, helping them to sell their newspapers and magazines.

That said, the corporate/government squid does have some interest in the art market, as I have shown in recent papers. Art is a big unregulated business, worth billions a year, and so you would not expect it to be free of the corporate/government mobsters. Like everything else, the art market is controlled from the top down, and it is controlled to benefit a few rich people. It is not set up to benefit art history, much less the artist or the art lover. It is set up to benefit the speculators and the swindlers. That is why you see the obscenely inflated trade in objects of no intrinsic value or worth: it is the art analogue to the derivatives market. Modern art is not really art, it is an art derivative, a manufactured “art market instrument.”

Which leads us to an interesting diversion, and my title here. If Modern art is a derivative, what is the underlying asset? In other words, a derivative in the financial markets is defined as a contract (or bet) based on the performance of an underlying asset with real value, such as gold. But what real asset is a Modern art derivative based on? Since a work of Modern art is a big nothing, there must be something of value that is underlying the trade. What is it? It is the prestige attached to the name “art,” and the prestige attached to spending a large sum of money on something you can point to as “art.” So the real commodity in art is no longer the artifact, it is the perceived prestige attached to the sale. In a way, this is what Robert Hughes meant when he said art had become “monetized.” But I am taking the idea a lot further than Hughes did, since I am showing you that art is not just monetized, it is now based on a psychological state. Prestige is not a “tangible” asset, in the sense that you cannot touch it. Prestige is simply a feeling that a buyer has. The underlying asset in the art derivatives market is a feeling. Art has not just been monetized, it has been psychologized.

But of course this makes art like a fiat currency, since it is based on nothing but consumer confidence. Art, like a fiat currency, depends entirely upon the emotional states of those involved. Modern art is again like a fiat currency, in that it is backed by nothing but an empty guarantee. The paper dollar is backed by the guarantee of the Federal Reserve, but since the Federal Reserve is bankrupt, that guarantee is worth nothing. Likewise, the guarantee of the art market is worth nothing, since it is also bankrupt (and has been since about 1910). The art market has been existing on nothing but credit/default swaps—the art being the default—since before the First World War, and only crushing ignorance about everything to do with both art and economics has kept confidence high.

MODERN ART as a Market Derivative or Credit/Default Swap

http://mileswmathis.com/psycho.pdf