By New York Post (Opinion) | Created at 2024-12-01 11:09:26 | Updated at 2024-12-04 07:55:59
2 days ago
Sometimes a banana is just a banana — but not last month, when Sotheby’s resold a specimen of the fruit as artwork for $6.2 million, complete with duct tape for affixing to your wall.
The banana’s creator, Italian sculptor Maurizio Cattelan, considers the artwork, called “Comedian,” a joke — but the joke is on us: We’re stuck in an economy fueled by speculation, with the price of everything from stocks to real estate barely this side of nonsensical.
The banana shows how a price can have no relation to value. You might pay decent money for a Monet, for two reasons: You love the artwork, and you can’t recreate the original.
It’s likely to increase its value while you’re enjoying it, because other people will someday want the artwork.
Neither of those reasons holds up in the banana case.
If you love the idea of a banana as art, you can go get a banana — wholesale price of this one, 35 cents — and tape it to your living-room wall.
There’s no certain prospect that this thing, even with a replacement banana, will retain value, because it’s a commentary on our own times.
Cattelan first presented the banana in 2019 as a “satirical jab” at art-world speculation, as The New York Times reported. The banana’s sale price was “only” $120,000 then.
Where does the ensuing art-world speculation come from? Cheap money sloshing around the economy, unable to find a sturdy use to soak it up.
Collectively (if not individually!), we are awash in cash.
One measure of the money supply, or cash available for purchases and investments, rose from $14.4 trillion in early 2019, before COVID-19 era government bailouts, to $21.7 trillion by early 2022, a 50.1% increase in barely two years.
It’s fallen a little, as the Federal Reserve over the past two years has tried to tighten the money supply and push down inflation by increasing interest rates.
But it’s still $21.3 trillion as of October.
It’s easy to blame Biden-era policies for this huge increase in the money supply, and partly accurate: His $2 trillion-plus stimulus packages were the biggest ever.
But Biden was the culmination of 40 years of US policy, including Trump Term One: Fuel consumption through deficit spending, both government and household borrowing.
For that to work, the Fed must keep interest rates low, and thus create money out of thin air.
Even today’s higher base interest rate, at 4.8%, hasn’t been enough to mop up the excess money created by a near-decade of near-zero interest rates after the 2008 financial crisis.
This cheap money means investors can get better profits speculating on values than investing in productive assets.
So the stock market is at untethered highs.
The tech-heavy NASDAQ index has more than doubled since 2019, even as there’s no sign that AI, the next big thing, will have much value beyond the massive amount of electricity it consumes.
House prices, too, are up more than 50% since 2019.
Consider the entities involved in the banana sale, Sotheby’s (the auction house) and Justin Sun (the buyer).
Sotheby’s is itself the victim of cheap money: Its owner, a foreign telecom entrepreneur, nearly doubled its debt, to close to $2 billion, since purchasing it in 2019, The Wall Street Journal reported.
In October, Sotheby’s needed a $1 billion rescue from a Mideast government.
So Sotheby’s banana-hawking is more an act of desperate marketing — a distraction — than a sign of sound business.
As for Sun, he’s a Chinese-born crypto king, charged by US market regulators with fraud and asset-price manipulation; in the same case, the SEC charged Lindsay Lohan, that financial-markets expert, for hawking crypto without disclosing that Sun’s company was paying her.
Sun, then, has a motive to spend on distractions. The self-branding that he is rich enough to buy something that is worthless — the banana — may lure new people to “invest” in crypto, which also has no intrinsic value (crypto is neither a currency nor a physical asset).
On Black Friday, America’s famous credit-card-fueled shopping day, Sun, in Chinese-controlled Hong Kong, ate his week-old banana before it rotted.
Let’s hope the rest of the economy, under President-elect Donald Trump and his contradictory impulses — on one hand, obsessed with American manufacturing, on the other, enamored himself by crypto — fares better.
Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.
