Since last week, $2.1 billion worth of artworks have changed hands at Christie’s and Sotheby’s in New York. “Les Femmes d’Alger (Version ‘O’)” by Pablo Picasso sold for $179.4 million, highest price ever paid for a painting at an auction. The bronze, “L’Homme au Doigt,” by Swiss artiest Alberto Giacometti went for $141.3 million, a record for a sculpture.
There was Mark Rothko’s abstract painting “No. 10,” for $81.9 million, another Picasso, a Van Gogh, Lucian Freud’s “Benefits Supervisor Resting,” for $56.2 million, an Andy Warhol, Claude Monet’s “Nympheas” for $54 million, a Francis Bacon for $47.8 million, Rothko’s “Untitled (Yellow and Blue),” which describes it perfectly, for $46.5 million. It was an international feast of money: At Christie’s, there were bidders from 35 countries, at Sotheby’s from over 40 countries.
These sales will goose second quarter GDP by over $2 billion, not counting the money spent on luxury hotels, restaurants, parties, transportation, gifts, and the like. This is how the “wealth effect” is supposed to work – cranking up the real economy. Central banks, and particularly the Fed, which instigated it, have been saying this for years. We grudgingly admit the “wealth effect” worked. This side of the economy is hopping.
It so happens that the St. Louis Fed, which apparently hasn’t gotten the memo, reported that “the middle class may be under more pressure than you think.” It determined that the “middle class,” as defined in the report, has seen its median income fall by 16% between 1989 and 2013.