Forget CPI. Inflation Is Measured With Art.

“I don’t know what money means anymore,” said Asher Edelman, an art dealer and founder of ArtAssure, an art financing company, as he exited the Rockefeller Center salesroom halfway through the [recent Christie's] auction.

In early 1990’s Canada, my classmates and I were taught the shortcomings of the USSR’s command economy: a metastatic bureaucracy, the impossibility of perfect knowledge of complex systems, and the disincentivization of hard work. We were hot on the heels of the recently fallen iron curtain, and the curricula developers were quick to incorporate current affairs into our classes. So we discussed it, we wrote tests on it, and then apparently forgot all about it. How do I know we forgot? I know we forgot because today, whenever there’s a problem in the world, those same classmates and meatpuppets just like them say “The government should do something about this!” As if Stalin’s Five Year Plans didn’t starve 7 million Ukrainians between 1932-1933.

But since Canadian Untermensch can vote just as well as land-owning, debt-free, bespectacled fellows such as myself, the government is incentivized to do exactly that: to intervene. Y’know, like in command economies. So that’s exactly what happens.

The long and the short of it is that our currencyi is the most tightly and centrally managed element of our country’s economy. The Bank of Canada, our equivalent of the Federal Reserve or the Bank of England, prints money, bails out banks,ii and diddles interest rates. Since interest rates are effectively zero and, at this exact moment, the banks don’t need any more bailouts, that leaves the BoC to print more or less money. Not surprisingly to anyone with even a passing grasp of politics and history, the incentive is print more… and more… and more… until… *poof*

Inflation!

Because the Earth is finite and dollars decreasingly so, dollars lose their purchasing power when the central bank printing presses run overtime. This lends the appearance of increasing prices of things, but this is a trompe-l’œil: it’s really a case of the decreasing value of dollars. This is what we call “inflation.” I mean, a chicken is worth a chicken, just as a Bitcoin is worth a Bitcoin. These are things, after all. Finite things. And finite things have measurable and predictable value against other finite things. Infinite things may temporarily have value against finite things, but finite things will eventually win.

Until finite things win, as they inevitably do, governments and central banks measure inflation, that is, the rate of the decreasing value of dollars, in obtuse ways and for their own benefit. Since inflation can’t be measured directly, an ever-changing basket of goods and services is used to provide an approximation in what’s called a Consumer Price Index, or CPI. In the UK, for example, out of its CPI basket of 700 items, this year saw the removal of wallpaper paste, hardwood floors, takeout coffee, after-school club fees, and gardeners’ fees, and the addition of Netflix, canvas shoes, rented clothes, plant food, and flavoured milk.iii Basically, expensive shit was replaced with cheap shit.

This is a useful tactic for masking the effect of increasingly worthless dollars, wouldn’t you say? To be sure, this is exactly how inflation is always reported to be in the range of 2-3% no matter what. This narrow range is important because it’s from this that government budgets and benefits are calculated. A narrow inflation range also lends the illusion of control, essential for a command economy. CPI is therefore one of the most central determinants of public policy. And it’s reporting is more closely managed than almost any other government statistic.

So if we want to break the mold here, and we certainly do, how can we calculate inflation more accurately?

Art, that’s how.

Unlike the CPI’s ever-changing basket of goods, Picasso and Van Gogh are dead and their canvases immutable. There will never be any more Matisses painted, nor Moores sculpted. The art market is also one of the freest markets on the planet, being subject to minimal government intervention via credits, subsidies, and other socialist machinations to muddy the price signal. A work of art, true art, therefore presents a unique opportunity to measure the decreasing value of the dollar over time.

Sure as rain, this brings us back to the quote at the start of this post, where Mr. Edelman is beside himself with this exact phenomenon: Dollars ain’t what they used to be. So let’s measure, together, exactly how much less those dollars are worth. More from Bloomberg

Gerhard Richter’s 1990 abstract painting “Abstraktes Bild (712)” fetched $29.3 million, 68 percent above its last auction in November 2012 when it sold for $17.4 million.

inflation rate since 2012: 41.5%

Warhol’s silkscreen painting depicting the 1963 race riot in Birmingham, Alabama, sold for $62.8 million to gallery owner Larry Gagosian. It was valued at about $50 million. The almost square canvas, showing the same image four times (on white, blue and red backgrounds), had once belonged to artist Robert Mapplethorpe. It last appeared at auction in 1992, selling for $627,000.

Inflation rate since 1992: 23.2%

Just as two lefts don’t make a right, two samples don’t make a science. Still, art gives us a far better feel for the magnitude of inflation and shows us that the inflation rate is increasing and under-reported. We knew this, of course, now we just have a better idea of how bad it is. And holy mother of fuck is it something else.

And if it weren’t for Bitcoin, there’d be almost no hope.

Thank Ba’al.

 

___ ___ ___

  1. The Canadian Dollar is centrally managed, just like the currency of every other country on the planet save Andorra, Vatican City, Monaco, Bahrain, Oman, UAE, Qatar, Kuwait, Bahamas, Bermuda, and the Cayman Islands. []
  2. Yes, Mr. Smug Canuck, Canada bailed out its banks to the tune of $114B between 2008-2010. In the cases of Scotiabank, BMO, and CIBC, the size of their respective bailouts met or exceeded the market cap of each respective bank, making the +ev strategy to nationalize the fucking things. []
  3. Source: lovemoney.com. []

47 thoughts on “Forget CPI. Inflation Is Measured With Art.

  1. […] Considering that the average (fiat) investment return is something like 5% before you factor in the bitch slap that is inflation, paying monthly is a bold […]

  2. […] Fairmont Hotel MacDonald, opened in 1915 with a construction cost of $2,250,000 (infinity billion in today’s dollars). On a cloudless summer day, the patio there is easily one of the peachiest spots in the city. […]

  3. […] for each $10+ bn company and at least $2 mn for each $100+ mn company. Give or take a few inflated fiats. […]

  4. […] factory in China. Not that you’d ever know it because “food” is food and you’re using CPI instead of art to measure inflation. Fucking Goodhart’s Law, […]

  5. Saifedean says:

    How are the currencies of countries in footnote i not centrally managed? Can you suggest any sources to read on this?

    • Hm. Good question. Not sure what happened to that original source, but Wikipedia (for whatever little it’s worth) lists: Andorra, Monaco, Kiribati, Tuvalu, Palau, Marshall Islands, and the Federated States of Micronesia.

  6. […] Please excuse the objectionable quality of the above graphic. The $20+ mn that the USG threw at this bunch of tater tossers was apparently insufficient for hi-res websites graphix. The dollar ain’t what she used to be!  […]

  7. […] is, of course, a fucktarded statistic no more useful and no less indoctrinating than “inflation.” As MP so aptly puts […]

  8. […] This having been said, with inhumanely scaled boulevards and buildings, car-centric urban planning, and enough coldly calculated rational idealism to choke a cat, the city is still ever so fitting in its use as the nation’s capital. What better place to make projections about GDP and inflation? […]

  9. […] Netflix, claimed to be the most expensive 10-part TV show in the history of mankind at $90 mn (what bezzle?), looks as if it’ll be littered with whispy Eastern mysticism, completely poisoning what […]

  10. […] there are always the old money avenues: commercial real estate, jewelry, and art. But those have high barriers to entry, require specialised knowledge, and the markets for them […]

  11. […] is at least related to something that can at least in theory be measured. Unlike, y’know, inflation. Or GDP. […]

  12. […] in call it 5 years. But does he really have triple the purchasing power he did 5 years ago? Art says “no!” […]

  13. […] was what made the Depression not so bad is just so much state-sponsored braindamage. Deflation bad, inflation good! Sound money bad, central banks […]

  14. […] in food prices, art prices, stock markets, movie sales, hey, how could our old friend anti-deflation not peek his head into […]

  15. […] with that information what you will. Take it to the art auction. Take it to the grocery store. Take it wherever and whenever you may choose. But that’s the […]

  16. […] lot in life, you need to be seeing a rate of return of 8% per year by some estimates and closer to 30% per year by […]

  17. […] evidence of exactly this phenomenon, look no further than the art market. […]

  18. […] Another sign of the times since 1997, much less 1967 : inflation. […]

  19. […] time, indicating that doubling your money in the past three years was more or less keeping up with inflation. Don’t believe the stock market or Hollywood ? Believe the metronome : Bitcoin. […]

  20. […] dead. There’s no coming back from the kind of beat-down that comes with standing still while inflation turns your prime rib into ground beef. The bezzle with literally make your face look like […]

  21. […] malfunction is a FASCINATING phenomenon. While older Porsches are running away with the moon, art’s on the loose, Bitcoin’s doing things that shouldn’t be possible, and even obscure rare earths are […]

  22. […] In Canada, the most commonly accepted definition of ‘poverty’ is literally the stupidest government stat out there, which is no small feat given the horrific abuse of the definition of, say, ‘inflation.’ […]

  23. […] worths in the $5-20 mn range,xv are the ones buying Patek Philippes, if not quite the ones buying inflation-proof art. The 14% class beneath the 1% is buying $10k watches, to be sure, but that and 5 bucks buys you […]

  24. […] as latter day “popular movies,” except yielding a return in dollars worth something (anything at all, really) while also leaving a high watermark in the art. Fancy that. […]

  25. […] because I stand to personally profit from it – for Bitcoin is nothing if not a hedge against USD hyperinflation, and therefore a short on the entirety of Wall Street, from its forays into SV to its […]

  26. […] tax,i liquor tax, cigarette tax, gasoline tax, “carbon” tax, GST/VAT, inheritance tax, inflation, and various sorts of menial tickets distributed wantonly for non-offenses such as poor parking and […]

  27. […] in hyperinflationary times or not, car salesmen will readily fill your earholes with peanut butter and jam about how […]

  28. […] such an appreciation in asset price isn’t unheard of in stocks, fine art, and even occasionally in housing, it’s fairly unusual in the automotive space, particularly […]

  29. […] has to keep “inflation” low, right ? Because it sure as fuck isn’t prices for tangible, durable goods. […]

  30. […] two brain cells and a few cents to rub together has been pumping every spare nickel into Porsches, art, housing, Bitcoin, or ANYTHING BUT USD. So no, Apple can’t buy Russia and the US can’t […]

  31. […] are no more useful nor trustworthy than their shameful CPI figures. And everything from the high art market to the air-cooled Porsche market to the cauliflower market gives us a pretty good indication that […]

  32. […] that beaten up units were fetching full MSRP on eBay 15 years after their initial release (net of inflation, obv.), I was completely unmoved to make a deal. He could’ve offered me 3x or 5x what I […]

  33. […] pour des fondations et des foures etait abordable. L’inflation : c’est une vrai chose. […]

  34. […] ie. 0.15 BTC) oil again any time soon. Demand is dropping faster than they care to admit even if runaway inflation nudges the “price” per barrel back up in that direction. […]

  35. […] out to be size 6 women’s, we’re all human, we all make mistakes. And so Obama said that inflation was only 1% and unemployment was only 7%, they were both closer to 25%. What of it ? Math is hard, […]

  36. […] what’s changed over the intervening decades aside from criminally low interest rates ? Well, there’s definitely that, but there’s also the declining accommodation for hot, cramped, uncomfortable, smelly old […]

  37. […] have such and such market cap only speaks to the proportion of capital fleeing $USD into anything else not the proportion of BTC held by serious players. […]

  38. […] for nothing, you know. And if “the people” can’t tell the difference between the steak their parents ate and the hamburger they’re eating, what’s to tip them off that their glitzy new Rolexx or Pattek was built by Orientals not […]

  39. […] low transaction costs depend entirely on whether you’re comparing Bitcoin to USD or to fine art. So just because Bitcoin doesn’t empower you to threaten the establishment, it doesn’t […]

  40. […] Cowboy sold for $15 mn at the Sotheby’s spring auction, a price the artist has yet to best despite the rampant inflation fuelling the contemporary (and impressionist) art markets since then. Murakami is still an […]

  41. […] it now trades hands for twice its $100`000 MSRP (aka it’s almost keeping pace with “inflation“), placing it in a considerably headier league, though I could still see myself owning […]

  42. […] at the Lebanese American University, and I first ran into each other in the comments section of these very pages, after which I searched him out on twitter (while I still had twitter), and invited him into the […]

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