The art market, much like the bond market, is pricing in a flight to quality. A Jackson Pollock painting has sold for $181 million at auction, a record for the artist and a clear signal that high-end assets are absorbing capital fleeing from inflation and currency risk. London galleries, notably Hauser & Wirth and Gagosian, are leading the charge, using the city's soft-pound advantage to bid aggressively against international buyers.
The sale, handled by Christie's in New York, saw the Pollock 'Number 5, 1948' go under the hammer after a tense bidding war. The final price includes the buyer's premium, but the headline number is what markets will focus on. Central banks have been printing money at a pace that would make even the most reckless trader blush.
Real assets, from prime London real estate to modern masterpieces, are absorbing that liquidity. The Pollock sale is not an outlier; it is a symptom of a broader market where fiscal discipline is absent and investors are bidding up anything with scarcity value. Gilt yields are negative in real terms, so why not park cash in a canvas that can hang on a wall and appreciate?
London's galleries are well positioned. The city remains a global hub for art dealing, despite Brexit headwinds. Strong private collections and a favourable tax regime for art imports keep the auction houses busy.
But the underlying story is one of capital flight from fiat currencies. The $181 million Pollock is a store of value, a hedge against the fiscal incontinence of governments. It is also a bet that the current monetary expansion will continue, that inflation will persist, and that the wealthy will keep seeking shelter in trophy assets.
For the rest of us, it is a reminder that the gap between the asset-owning class and the income-earning class is widening. The Bank of England's quantitative easing has inflated art prices just as it has inflated house prices and stock markets. The only surprise is that it took this long for a Pollock to break the $180 million barrier.
The market is efficient in its own way: it prices in the future devaluation of currency. So while the Bank frets about wage inflation, the art market is already voting with its wallet. The Pollock sale is a canary in the coal mine, but few in Threadneedle Street will heed its warning.
