Felix Salmon

Europe goes mad over art

Felix Salmon
Dec 16, 2010 14:27 UTC

Georgina Adam has the gobsmacking story, for the Art Newspaper: according to the European Commission, works by Dan Flavin and Bill Viola are not art.

In its ruling a Flavin work is described as having “the characteristics of lighting fittings…and is therefore to be classified…as wall lighting fittings”. As for Viola, the video-sound installation, says the document, cannot be classified as a sculpture “as it is not the installation that constitutes a ‘work of art’ but the result of the operations (the light effect) carried out by it”.

It’s not just the EC which thinks this way: the ruling reinstates a decision by UK Customs, which charged Haunch of Venison £36,000 ($56,188) in taxes for importing a Flavin sculpture — four times as much as they should have done. Haunch appealed, and won, but now the appeal has been overturned by the EC.

The idiocies here are numerous — for one thing, it’s pretty obvious that no set of light fixtures would ever be worth £180,000 if it wasn’t art — and that the amount of money you get by taxing art at 5 percent is vastly greater than the amount of money you get by taxing the underlying light fixtures at 20 percent. The EC wants to have its cake and eat it here: on the one hand it’s only light fixtures, and so it’s taxable at 20 percent, but on the other hand it’s many orders of magnitude more valuable than any other set of fluorescent lamps.

On top of that, substantially all art is the result of the light effects being out by some carefully-constructed object. Try admiring a Rembrandt in the dark, if you don’t believe me.

This ruling sets the worst type of precedent, since I doubt there’s any practical way that it could conceivably be used by a customs office or anybody else to determine whether or not any given object is art. (But I haven’t seen it: can someone find a copy, or a link to it, somewhere?)

But most fundamentally, Flavin and Viola are art. Of course they’re art. We’re not in 1976 any more, when people could and did actually debate whether a Carl Andre sculpture was art. Today, neither Flavin nor Viola is remotely controversial; in fact, Viola is downright conservative in many ways, and both of them are firmly ensconced in the canon.

I hope this story gets picked up widely, and that the people responsible for the ruling get identified, and asked all the obvious questions over and over again. (Update: as well as the UK bright sparks who appealed the ruling to the EC in the first place, of course.) Meanwhile, a large portion of the European art industry is likely to be in panicky disbelief right now. The ruling can’t stand — but how is it going to be overturned?

(Via Cottrell)


Following the train of thought in my other comment, it seems to me that it does not require too much of a stretch of the imagination to see ( for eg ) Operation Barbarossa ( the German Invasion of the USSR in 1941 ) as one of erstwhile watercolour artist Adolf Hitler’s greatest works. ( Certainly it shows a distinct ability to think on a ‘large canvas’ as they say . )

And perhaps other historical figures would benefit from a similar re-appraisal * as artists * rather than ( say ) as genocidal maniacs ?

( As an example I hear there will be an article re-examining Pol Pot’s strangely beautiful ‘Enormous Pile Of Skulls’ monuments in the January Edition of Cambodian Art Monthly. And Russian Art Critic Vasily Blontoblobovitch will be delivering a lecture “Stalin’s Gulags As Spiritual Sculpture” at the Petersburg Fine Arts Institute some time early in the new year, although there is still apparently some doubt that any of these examples of modern art would actually have made it through customs. Most intriguingly, the EU is said to be setting up a commission to look into the question of mass murder as fine art , expected to report in spring 2065 . I for one can’t wait !! )

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Felix Salmon
Dec 16, 2010 06:18 UTC

Is Mary Meeker’s job these days really to sit on various tech boards? — Fortune

This payback story of an eBay scam & the “glim-dropper trick” will make you smile — Gizmodo

The inhumane conditions of Bradley Manning’s detention — Salon

A list of multi-million-dollar fines at BofA and Wachovia, 2006-2010 — Charlotte Observer

Amazing block-by-block census map of NYC — NYT


ok got it wrong about Assange alleged offences…

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Why the FCIC might release its data

Felix Salmon
Dec 16, 2010 06:10 UTC

Keith Hennessey, one of the four Republican commissioners on the Financial Crisis Inquiry Commission, has helpfully provided a copy of the Financial Crisis Primer the commissioners sent to the President and Congress. The commissioners sent the primer “to as best we can comply with the deadline in the law”, writes Hennessey in two different colors, adding:

It’s probably hopeless, but I want to encourage reporters to focus on our substance rather than our process.

Of course, this man who so values substance over process is the same person who voted against giving the FCIC more time to compile its report, on the grounds that doing so would violate “section 5(h)(1) of Public Law 111-21″.

What’s more, it’s hard to focus on any substance here when the primer is essentially 5,400 words of nothing much at all. There was a housing bubble. The US government was involved. So were the banks. There was a run on the banks. Which hurt the economy. That’s basically it. As advertised, the terms “Wall Street”, “shadow banking”, “interconnection”, and “deregulation” are nowhere to be found.

For this anodyne material, bereft of any insight, we’re paying something over $1,000 a word?

I did ask the FCIC today whether there’s any chance of them putting all their source material online; I haven’t heard back, but at this point it seems the only way to get any value at all out of the $6 million we’ve spent on this panel. A book will be published; it will be rubbished by Republicans; it will have no lasting impact. But give us that Goldman Sachs data dump, and we’ll discover so much more. Maybe not a financial-crisis smoking gun, but an unprecedented degree of access into the real inner workings of Wall Street. Now that would be valuable.

Back in November, Michael Perino said he wasn’t hopeful on this front:

Along with its report, the panel could release all the documents and interviews it has collected. The amount of material is staggering –800 witness interviews and millions of pages of documents. Making these documents available will allow independent analysts (in essence, an army of wiki-investigators) to draw their own conclusions from the data. It’s just what Angelides said he wanted the FCIC to do — lay out the facts for the American public and allow them to draw their own conclusions.

The prospects for immediate release of this material, however, seem slim.

Today, perhaps Phil Angelides has changed his mind a little. If he can’t release a definitive and bipartisan report, maybe he can go one better and release the actual facts he’s discovered instead.


Will the GS data dump be analysed by people who can count?

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Things for which we owe Larry Summers some gratitude

Felix Salmon
Dec 16, 2010 04:39 UTC

I did enjoy reading John Cassidy on Larry Summers:

There are things not to like about Summers, one of which is the fact that he appears to hold the Fourth Estate in contempt. At the same event where he failed to thank his boss, a speech to the Economic Policy Institute, a journalist asked him what he would miss most about being in the White House. “Reporters like you,” he replied with a chuckle. Doubtless, Summers thought he was being amusing. Still, reporters need to get over it. After all, we aren’t the only folks Larry considers intellectually beneath him. Such a category would include most members of President Obama’s cabinet and their top policy advisers; many of his colleagues in the White House; virtually all foreign officials; ninety per cent of the Harvard faculty; and a similar proportion, or possibly higher, of his fellow academic economists.

Cassidy goes on to criticize Summers on quite a lot of other fronts too, before saying that ultimately we have to judge him on whether he guided Barack Obama in the right policy direction. His conclusion there: Summers noticed the “glaringly obvious” fact that there was a crisis going on, and did something about it. After that, “the Obama Administration has made a series of policy errors for which Summers must share responsibility”.

Essentially, the only good thing that Cassidy can find to say about Summers is that he was “largely right” in terms of identifying and responding to the crisis. What Cassidy fails to note is that Summers had already identified the crisis and said what should be done about it before he joined the Obama team. In many ways, his crisis-related policy prescriptions, which he laid out quite pompously in the pages of the FT before getting tapped by Obama, were his very public job application — and he wound up being passed over for both of the jobs he was applying for.

Obama always knew, pretty specifically, what policies were needed to respond to the crisis — and in many cases those policies had already been enacted by the Bush administration. Summers was chosen because he believed in those policies; it’s simply not the case that the policies were enacted because Summers was chosen.

Which brings Cassidy’s list of “things for which we owe Summers some gratitude” down to absolutely nothing.


Amen. I think Cassidy is not a very good critic. But you, however, appeared to be praising him just recently:

http://blogs.reuters.com/felix-salmon/20 10/11/22/why-wall-street-wont-get-shrunk  /

Producing high-quality criticism ain’t easy, but the New Yorker would do well to hire someone like James Grant, Jeff Madrick or David Stockman to write about wall street.

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How to monetize a Broadway show

Felix Salmon
Dec 15, 2010 20:34 UTC

Catherine Rampell has an interesting post today on the economics of Spider-Man, the most expensive musical that Broadway has ever seen. Even assuming it’s a massive hit, she says, it’ll make its producers no more than $313,489.80 a week—which means it will be “about 4 years before the show even begins to make up its initial investment.”

But this calculation misses the elephant in the room: the absolutely enormous upside tail risk for a hit musical. Remember, after all, Taymor’s last foray onto Broadway:

If your reference point is The Lion King, all bets are off. Mounted at a cost of about $25 million in 1997, it has so far grossed $4.2 billion worldwide.

Of course, you can’t do that on Broadway alone: at $313,489.80 a week it would take over 250 years to gross $4.2 billion.* But a global franchise can make money in dozens of cities around the world simultaneously: once you’ve done all the initial work of putting the Broadway production together, it can become a license to print money—just ask Andrew Lloyd Webber. What’s more, Spider-Man already has a lot of the global reputation needed to get to that stage, as we’ve seen with the success of the movies.

It’s easy to see how a Spider-Man musical, especially if it has music by Bono and The Edge, could more or less sell itself in just about any global market — which means that the possible profit, here, is in the billions. Broadway is just a place to develop the concept: it’s not where the real money is made.

*Update: Thanks to Kyle Maclean, who points out that I’m confusing box-office gross with profit here. Rampell’s figures assume a gross of $1,646,991 per week, at which rate it would take a mere 49 years to gross $4.2 billion.


Good luck Andrew. Be sure to pack a lunch.

It almost seems like they would have to build their own traveling theatre if they wanted to tour this show. I can’t imagine them trying to squeeze it into all the strangely unique houses across the country.

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$190,000 a year is rich

Felix Salmon
Dec 15, 2010 19:51 UTC

I just started reading Erika Olson’s Zero-Sum Game, her account of the CBOT-CME merger. Her introduction of the CBOT’s CEO, Bernie Dan, includes this passage about his college days:

He’d often tell classmates his future goal was “to pay more in taxes than most people make.” They thought he was joking, but he wasn’t.

That seems to me to be a good baseline for what it means to be rich; it certainly felt that way to the young Bernie. And so I wondered what income that amounts to.

The national median income is $52,029; in New York state it’s $55,980; and in Manhattan (New York county) it’s $68,295. Playing around with a paycheck calculator, I reckon that in order to pay $68,295 in annual income and payroll taxes, a NYC resident with one standard allowance would have to earn about $192,000 per year. And of course if you start taking further deductions for things like children and mortgages, that number rises significantly.

It’s harder to work things out nationally, since taxes vary from state to state. But an Illinois resident with the same single deduction would have to earn about $186,500 in order to pay $52,000 a year in taxes.

In other words, using Bernie Dan’s definition, it’s reasonable to conclude that “rich” is about $190,000 a year. Which seems reasonable to me.


Income very so wildly that the definition of rich your using is a very louse one.

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The WSJ mistrusts companies which pay down debt

Felix Salmon
Dec 15, 2010 17:13 UTC

Sharon Terlep’s story on GM trying to pay down its debt is a great indicator of how the leverage-is-good meme simply refuses to die, even after the financial crisis.

What GM is doing is very simple. The main reason to carry debt is the tax advantages it gets, but GM already has all the tax advantages it will be able to use for the foreseeable future thanks to all the losses it made in previous years. Meanwhile, as GM vividly remembers, carrying a large debt load can be devastating in a cyclical downturn. So GM is trying to pay down its debt and carry as little of it as possible.

But Terlep just can’t seem to believe it’s as simple as that. And so we find:

GM, like its Detroit rivals, had long carried a large debt load to help finance the business through the industry’s periodic downturns.

This makes no sense. A large debt load is a bad thing, not a good thing, in a periodic downturn. If a car company loses money in any given year, it has to borrow that money. But borrowing money is much easier and much cheaper if you have a small debt load than if you have a large debt load.

Terlep seems desperate to find some kind of a downside here:

GM’s plan carries risks. Should the car market again fall severely, GM may not be able to keep funding new vehicles and other investments through current earnings alone.

I’m not sure that’s a risk. If the car market again falls severely, then GM’s lower debt load will make it easier to borrow money to keep funding investments in new autos. GM CFO Chris Liddell isn’t ruling out borrowing money in a crisis — he’s just announcing a baseline plan for paying down debt if there isn’t a crisis. Indeed, a few grafs later, Terlep contradicts herself:

In wiping out most debt, GM hopes to cut the tie between sales levels and its ability to invest in vehicles.

Which is it to be? Does the plan mean that GM won’t be able to invest in vehicles during a downturn, or does it mean that GM will be able to invest in vehicles during a downturn? The latter is surely the case, but Terlep does seem to want to have it both ways.

And this is surely a stretch way too far:

Anticipating GM may again borrow at least some money, Barclays Capital and Goldman Sachs on Tuesday began quoting prices for credit-default swaps for GM debt, a way for investors to insure against losses in any bonds GM may issue.

Does Terlep really think that investors are going to buy protection now against bonds which “GM may issue” some time in the future? Of course not: they’re buying protection now against bonds which are outstanding now. But more to the point, quoting CDS prices on GM in no way means that Barclays and Goldman are “anticipating GM may again borrow at least some money.” Indeed, a case can be made that the opposite is the case: if GM really is going to pay its debt down to essentially nothing, then a great way of getting free money is to write protection on GM debt now, and then just cash your insurance premiums for the next 3 or 5 years. It’s certainly a lot cheaper than buying outstanding bonds.

All of which makes me mistrust something Terlep says earlier on in the story:

“The new GM is trying to be the new GM,” said Gimme Credit analyst Kimberly Noland. Yet over the long term she sees GM needing to return to borrowing.

“Needing,” here, is a strong term: if GM is going to need to return to borrowing over the long term, that basically means it’s going to lose money over the long term. Is that really what Noland meant? Or did she just suggest that GM at some point will issue debt, on its own terms? Given the tone of the rest of this piece, I wouldn’t assume that Noland said what Terlep says she said.

(Crossposted at CJR)


No debt is an unusual choice but debt matures and must be repaid or refinanced. When it cannot be refinanced in a downward slide, a company goes bankrupt like GM did. Many companies went bankrupt due to a debt caused liquidity crisis, not because their business failed.

Presumably GM believes that it can keep large amounts of cash on hand, no or little debt and have borrowing capacity. I would guess they will have a large revolving credit facility in place for when they need cash but if it is undrawn it tends to be relatively cheap insurance.

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The FCIC falls apart

Felix Salmon
Dec 15, 2010 14:06 UTC

Shahien Nasiripour reports this morning that the Financial Crisis Inquiry Commission has, to all intents and purposes, fallen apart. The four Republicans seem set to issue their own minority report, sticking to discredited Republican talking points which blame the government and Frannie for the crisis, with especial focus on the long-standing and harmless Community Reinvestment Act. As a result, the official report will be received as some kind of equal-and-opposite Democrat view, rather than a definitive take along the lines of the 9/11 Commission report.

Given that putting this report together seems to be impossible, here’s my suggestion: it should go open-source. The FCIC’s great advantage over other narratives of the crisis is its subpoena power: it has access to enormous amounts of information no one else has seen. If it can’t collate that information into a definitive report, it should make all the information public—including everything in that notorious Goldman Sachs data dump—and let all of us have at it. Collectively, we should be able to do at least as well as the partisans in DC.

Update: You really can’t make this stuff up:

During a private commission meeting last week, all four Republicans voted in favor of banning the phrases “Wall Street” and “shadow banking” and the words “interconnection” and “deregulation” from the panel’s final report, according to a person familiar with the matter and confirmed by Brooksley E. Born, one of the six commissioners who voted against the proposal.


Yes, banning terms such as ‘Wall Street’ and ‘shadow banking’ is more than disingenuous. But Mr. Salmon does not help the effort to make the historical record clear as he once again refers to the ‘harmless Community Reinvestment Act.’ In making this claim, I am not asserting that the CRA was Enemy #1 (or that I know the possibly high value of ‘n’ for the hypothesis that it was Enemy #n). As he continuously repeats this mantra, a reasonable reader would likely conclude that, at best, he willfully ignores careful analysis such as that found in: http://www.federalreserve.gov/pubs/feds/ 2008/200861/200861abs.html

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Felix Salmon
Dec 15, 2010 05:13 UTC

“One senior defense official questioned the wisdom of blocking the newspaper sites” — WSJ

Brooklyn borough prez Marty Markowitz sings a tribute to bike lanes — YouTube

Citi Mortgage gave Phil Falcone a $22.5 million mortgage at 2.357% — WSJ

Lots of new Lucian Bebchuk papers — Harvard

Jim Ledbetter on how America is “losing the battle against the darker aspects of the military-industrial complex” — NYT