One of the great macro-economic debates is whether the rapidly growing Asian economies have decoupled from the recessionary problems of America. I have argued that they have, but Prof. Roubini has strongly suggested that we are heading into a global slowdown brought about by the U.S. credit crisis.
If the art auction held last night in Hong Kong by Sotheby’s is any indication of the mood among the wealthy in Asia, they have definitely decoupled.
Sotheby’s sold $51.77 million worth of Chinese contemporary art in three auctions in Hong Kong on Wednesday, allaying concerns that the global economic slowdown would depress the prices.
The record for a Chinese contemporary artist was set by Zhang Xiaogang’s oil, “Bloodline:Big Family No.3” (above), a somewhat ironic rendering of the Cultural Revolution. Although I have been pessimistic about the economic future, I am beginning to feel that the extraordinary moves by the Fed are inducing some liquidity into our system. Brad Delong also points out the continued attraction of U.S. Treasuries and coastal properties to foreign players.
The rise of Asia and the resulting demand by the rich and by governments for U.S. assets to hedge political risk is likely to keep savings glutting for decades. We aren’t building more superhighways, there are no major transportation improvements on the horizon, America is filling up, and so land-value gradients are on the rise. If the income distribution continues to erode, we will wind up with higher prices for scarce positional goods–chief among which is location, location, location.
A small satisfaction for those of us with a good view of the Pacific Ocean.