Have you ever tried to sell a diamond?

antiskeptic

I proposed to my wife-to-be last June, and prior to popping the question I did a bit of research into engagement rings - with a view to "hitting the nail on the head" in that department. In the process of that research, I tripped across this fascinating - not to say compelling - article, detailing from whence the idea that "diamonds are valuable/forever".

Shorter article detailing the fabrication of the diamond myth


Longer article detailing the history of the diamond industry

THE diamond invention -- the creation of the idea that diamonds are rare and valuable, and are essential signs of esteem -- is a relatively recent development in the history of the diamond trade. Until the late nineteenth century, diamonds were found only in a few riverbeds in India and in the jungles of Brazil, and the entire world production of gem diamonds amounted to a few pounds a year. In 1870, however, huge diamond mines were discovered near the Orange River, in South Africa, where diamonds were soon being scooped out by the ton.

I say "compelling" because it reads precisely in the way you would expect it to read were it the truth - especially so if you've being exposed to the various myths that were promoted in the latter years of the Celtic Tiger. Myths packaged so as to pull the wool over our eyes.


Gold is limited in supply, therefore the price it attracts is meaningfully high: limited supply tends to raise prices of whatever the commodity happens to be. So what is the intrinsic worth of a piece of carbon that is argued to be nigh on as plentiful as the sand that graces our shores? If plentiful then it is, of course, intrinsically worthless. That folk are encouraged to look through the narrow (and diamond-industry-led) lens of the oft quoted "4C's" won't alter that fact.

The question isn't whether the diamond is pretty. It's not whether it scores well or not when evaluated against the 4C's. The question is whether it is worth anything like the price you pay for it.


Do read the article the whole way through. If you are in any doubt as to it's truth then there is but one sure way to test things out. Borrow 1 x engagement ring from a friend and see how much the jewel trade is prepared to pay for it. The article suggests you won't get any buyers - except perhaps, at a ridiculously low price. And that ridiculously low price doesn't even reflect the worth of the diamond encrusted ring. It only reflects what the ring would earn in a market that is already supposing diamonds to be worth anything at all.

Except for those few stones that have been permanently lost, every diamond that has been found and cut into a gem since the beginning of time still exists today. This historic inventory, which overhangs the market, is literally in the public's hands. Some hundred million women wear diamonds on their person, while millions of others keep them in safe deposit boxes or strong boxes as family heirlooms. It is conservatively estimated that the public holds more than five hundred million carats of gem diamonds in this above-the ground inventory, which is more than fifty times the number of gem diamonds produced by the diamond cartel in any given year. Since the quantity of diamonds needed for engagement rings and other jewelry each year is satisfied by the production from the world's mines, this prodigious half billion carat overhang of diamonds must be prevented from ever being put on the market. The moment a significant portion of the public began selling diamonds from this inventory, the price of diamonds could not be sustained. For the diamond invention to survive, the public must be psychologically inhibited from ever parting with their diamonds.

The "invention" of the notion of a diamond being an item of worth isn't confined solely to engagement rings it would appear. When faced with Soviet mining of large quantities of smaller diamonds, the "eternity ring" was invented - which consists of larger quantities of tiny diamonds - and a market was devised for same. This in order to absorb this new, threatening-to-the-cartel source of diamonds.

In the 1960s, the overhang (potential oversupply) again threatened to pour onto the market when the Soviet Union began to sell its polished diamonds. De Beers and its allies now no longer controlled the diamond supply. De Beers realized that open competition with the Russians would inevitably lead to "price fluctuations," as Harry Oppenheimer gingerly put it. This, in turn, would undoubtedly weaken the public's carefully cultivated confidence in the value of diamonds. Since Oppenheimer assumed that neither party could afford risking the destruction of the diamond invention, he offered the Soviets a straightforward deal: "a single channel" for controlling the world supply of diamonds. In accepting this arrangement, the Russians became partners in the cartel, and co- protectors of the diamond invention. De Beers then devised the "eternity ring," made up of hundreds of tiny Soviet-sized diamonds, which could be sold to an entirely new market of married women. The advertising campaign designed by N. W. Ayer was based on the theme of recaptured love. Again, sentiments were born out of necessity: American wives received a snake-like ring of miniature diamonds because of the needs of a South African corporation to accommodate the Communist Russia.

Whilst the article provides fascinating insight into the creation and propagation of a cartel, the salient points for anyone considering buying an expensive diamond-based engagement ring are these:

- diamonds aren't in short supply. Indeed they are in abundant supply, but their entry into the market is controlled by a cartel so as to maintain prices at articificially high levels.

- because they are not actually in short supply, the notion that diamonds represent worth is completely illusionary. The illusion has been built up by clever and consistant marketing. Diamonds are, relatively speakng, worthless.

- various marketing ploys have been deployed by this cartel so as to expand the market for their product. The diamond engagement ring is one such example, the eternity ring is another. Both, according the advertising slogan, are intended to be (and are in fact, when you think about it) forever. This solely to ensure that your diamonds will stay in your possession - and out of the market. Forever.

- the success of these marketing ploys is rendered apparent when one considers the viewpoint of the average person on the street w.r.t. the worth diamonds. Given that the average person is going to get married it's a viewpoint well worth sustaining.