Daily Archives: September 17, 2008

I am a huge admirer of Damien Hirst. Not of the art, which is rubbish, but of the sheer productivity and exuberance he brings to his life’s work of fleecing rich idiots. “Oh Damien, you’re a genius. Screw me over again.” “Why not,” he says, munching a bacon butty.

Global financiers, concerned about the markets and their stressed portfolios, can be relied upon to keep springing for yet another dead animal in formaldehyde, or some spots or butterflies or buckets of medicine bottles. The remorseless brainless repetition is surely part of Hirst’s joke. Nothing cheered me up this week so much as reading about how well his auction of more than 200 works, each of them painstakingly produced in factories occasionally visited by the artist, had gone. Nearly $200m for this stuff? It’s wonderful. I don’t begrudge him a cent.

Best of all is the lack of deceit or embarrassment over what is going on. The man invites journalists to his factories. They look around, then talk of his stature as an artist without laughing: I’m not whether sure they are in on the joke, or the butt of it.

In London Mr Hirst presides over two large industrial units producing the butterfly-wing pictures and his photo-realist paintings. In the Gloucestershire countryside he leases two wartime aircraft hangers for the manufacture of the spot paintings, the spin works and the formaldehyde tanks. He also has a large workshop and an exhibition studio. More than 180 people work for him, creating Damien Hirsts. Two specialists oversee the formaldehyde unit, which on a visit in July contained four dead ponies, a wild boar, an upended cow and, in good “Godfather” style, a horse’s head in a plastic bag.

In the workshop three women were talking about the “Hedgehog”, a device attached to a Hoover. It is a small plastic tube with 20 holes cut into it in which are inserted cut-down cigarettes, some ringed with lipstick. Switch on the Hoover and, hey presto, instant cigarette butts for lot 134 (top estimate, £300,000). In another workshop, three fabricators were painting precisely measured round circles at regular intervals on a white background. These are the famed spot paintings that Mr Hirst says were inspired by playing snooker. The fabricators choose which colour each spot is to be, and use ordinary household paint to apply the shades. The butterfly pictures are made by fabricators who are given the dimensions needed, but are otherwise left to themselves to choose the colours and designs they want. Having given his final approval—sometimes, one fabricator says, only by looking at a photograph—Mr Hirst signs and dates the back of the work.

I love it that the fabricators choose the spots’ colours. (Could they not also choose the shapes? This would only add to Mr Hirst’s stature, and the market value of the work.) He is selling batches of autographs at $200m a throw–with the added pleasure of knowing that a dead cow will soon be stinking out some plutocrat’s palace. Please do not suspect me of sarcasm. I offer him my sincerest congratulations.

Not long ago, as this financial crisis continued to worsen, I criticised the Fed at one point for seeming to panic (when it cut interest rates further and faster than expected) and the Treasury for attempting to delay the inevitable (over Fannie Mae and Freddie Mac). Today I owe both of them a commendation for acting prudently and decisively.

In an astonishing sequence of events, the government has nationalised Fannie and Freddie; has let Lehman go to the wall; showed it was willing to see Merrill Lynch go the same way; has all but nationalised AIG; and has held firm, for the moment, on interest rates. Without knowing what the Fed and the Treasury knew—especially about the systemic consequences of an AIG bankruptcy—it is impossible for an outsider to be sure, but all of these, I think, were good calls.

The bravest thing was to stand aside and watch Lehman crash. This was necessary not so much to draw a line in the sand, as some analysts put it—after all, one day later, the AIG intervention stepped over that line—but to affirm in the starkest possible way the government’s reluctance to put taxpayers’ funds at risk. Because of Lehman, and AIG notwithstanding, the Treasury and the Fed can credibly say that shocking financial collapses will be allowed to happen so long as the systemic consequences can be contained. If there is to be any hope even of mitigating the moral hazard unleashed by the current phase of unavoidable crisis management, this was a crucial message to send.

Denying Wall Street an immediate further cut in interest rates was brave too; and this also made sense. Before much longer, the Fed might be glad that it conserved a while longer what little powder remains in its arsenal.

We will see what the markets make of the AIG intervention in due course—but the immediate verdict on Lehman and interest rates was encouraging. Monday’s fall in share prices was bad but by no means terrifying, and the market rallied the next day. The dismantling of Lehman’s business had not caused instant paralysis, and was proceeding in orderly fashion. The authorities were surely braced for a far worse response, and are bound to think that they got off lightly.

All this, and a presidential election too. The bewildered candidates are doing what they must: trying to give the impression that they understand what is going on (something that eludes the people in the middle of it all) while mocking the proposals of the other side (which in practical terms are indistinguishable from their own). John McCain is so far seen as the loser in this, partly because his statement that the economy is “fundamentally strong” is seen as a gaffe, and partly because Barack Obama is a little more trusted by voters on economic issues. Bad economic news is thought to be to the Democrat’s advantage.

I doubt this should be taken for granted, and not just because Mr Obama’s lead on economic competence has diminished, oddly enough, of late. Attacking Mr McCain’s comparative optimism should not be taken too far: voters look to a leader for reassurance. Also, there is a germ of truth in the claim that the economy is fundamentally strong: who would have believed that the past year’s financial stresses could have failed, as yet, to drive the economy deep into recession? In its own way, this is remarkable.

When it comes to short-term remedies, I see little or no disagreement between the campaigns. Neither has attempted to second-guess this week’s initiatives. The Obama campaign is leaning heavily, and with much justification, on blaming the Bush administration for what has happened. But Mr McCain’s new “change Washington” strategy may have put enough distance between him and the White House to blunt this attack.

So far as the future is concerned, both campaigns agree that financial regulation will need to be tightened up. And whoever is president will confront a fiscal outlook (an undeniable legacy of the Bush administration’s incontinence) that is quickly going from bad to much, much worse. Neither campaign has come close to acknowledging the limits to the government’s ability to socialise the losses of its crippled new acquisitions while simultaneously priming the Keynesian pump with tax cuts and enormous new programmes of public works—all from a base of chronic fiscal indiscipline. If you were wondering what turn the crisis might take next, that would be one place to look.

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

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