Art has become an efficient instrument for hiding cash. Swiss banks are no longer a very private place. But a warehouse in Switzerland — or, for that matter, New Jersey — is nicely confidential.

And art is a way to clean up your dirty wealth. Say you sell, well, drugs. You might buy a painting for $7 million, paying $2 million in cash (helping the seller to avoid taxes), so the transaction is listed as $5 million. You put it in a warehouse for two years, let it predictably appreciate, and then sell it for $9 million. You've not only made $2 million, but you've cleaned another $2 million. Nobody the wiser.

Art, too, is a market that can be handily manipulated in a way that is likely more beautiful than art itself to financial fixers. If you own, for instance, five Warhols, you might put one up for auction, participate yourself in bidding up the price — you might even buy it yourself at a high price — thereby increasing the value of your other four paintings (which, now you can borrow against at their higher valuation).

A notable anomaly in the market is that old masters, with their limited supply, are now in less demand and are often priced more modestly than new artists, with unlimited supply. That defies economic logic — yet can be explained. Living artists print money. If you are a big buyer who helps set prices, you might be offered work at a goodly increase over an artist's last price point: $2 million, where the last sale was at $1 million. For that, you get one thrown in free, hence the deal has cost you nothing, but doubled the value for everybody else who holds the works, including the artist — leaving everybody happy.

Perhaps we need an FSA or SEC for the art market now that it has become a financial asset stored in Swiss vaults.

At least the market indicates to an economist like me that Old Masters are still valued more as art than as financial vehicles often for dodgy buyers.