Northern Heist

Another week, another reminder that the art market is a make-up mirror reflecting the world economy–for better and worse, depending on who (and where) you are.

This Monday, Canada’s CBC News ran a story highlighting how, no doubt to Van Halen’s delight, right now is a historically opportune time for Americans to buy into a specifically northern niche of the art market: Nunavut (Inuit) carvings. The reason? As of last Friday, the Canadian dollar had plunged to its lowest value in a decade: less than 81 cents US. (In fact, it had slid even lower when I looked at the conversion calculator this morning, to under 80 cents US.)

CBC News spoke to two Canadian dealers specializing in Nunavut works, and both theorized that the recent boom in sales to American collectors they’ve experienced stems from the desire to bogart a piece of Canadian culture while the exchange rate favors the US dollar. Of course, we can’t conclusively prove this is the case. But the argument stands on a strong footing of economic logic.

There’s a larger, more important point visible when we step back from the narrow lens of this particular story, though. Canada’s currency face-plant should be just as lucrative for Canadian gallerists and dealers well outside the Nunavut niche as those within it. And it should be just as advantageous for collectors based well outside the US as inside its borders. Both ideas are true thanks to the interconnectedness of the global marketplace.

Late last year, I wrote about how the art world’s flattening threatened second (or lower) tier fine art cities like Madrid, Barcelona, and Valencia. Collectors living in or near places like these no longer have a strong incentive to spend their money on the art that happens to be physically close by. Instead, the new globalism of the art market–enabled by convenient travel, remote commerce, and the lure of joining a nomadic high net-worth social class hopping from high profile fair to major auction to hot gallery opening–increasingly encourages rich collectors to patronize premier art destinations abroad.

But the Canadian dollar’s walk of shame creates a counterpoint to that argument. In this case, the country’s paper loss should be its gallerists’ gain, precisely because collectors whose fortunes are denominated in stronger currency–Americans, Brits, Euro-zoners–understand that they can get a sizable deal if they aim that currency across international borders into Canada before the trend lines reverse.

This is as true for globally known, branded artists as for home-grown Nunavut ones. If I’m an American collector who wants, say, an Agnes Martin painting, I could now theoretically acquire the work from a dealer in any number of different countries. But at this moment, I would try Canada first. Because if I find a worthwhile piece in the great white north, the US dollar’s strength means I’ll be able to acquire it at an automatic 20 percent discount.

Admittedly, this phenomenon isn’t entirely new. The Impressionist market went berserk in the US in the late ‘80s largely thanks to Japanese speculators driven into a frenzy by their home country’s real estate bubble. The yen wasn’t brawnier than the dollar then, but the sheer volume of money being suctioned in by Japanese building magnates sent their hungry eyes searching abroad for opportunities to put those racks to use. They found one in fine art, and American Impressionist dealers reaped the rewards–until Japan’s economy imploded in 1990, and the worldwide art market with it.

The Canadian dollar is a far less extreme example working on somewhat different principles, but it circles back to the same underlying issue. Now more than ever, fine art is a global market. And as much as flipping at auction tends to take the spotlight, it’s not the only chance for arbitrage if you keep your eye on the big economic picture.