Diamonds Are Forever
"Diamonds are virtually worthless."
Or at least, they are worth a lot less than you might imagine. The story of how the diamond came to be viewed as the rarest and most coveted of gemstones, found on the fingers of married women worldwide, is a story of insatiable greed, ruthless strong-arming, and most of all, brilliant marketing.
Today when a woman gets engaged in most of the developed nations of the world, she expects a diamond engagement ring and most likely will also have some sort of diamond setting on her wedding ring as well. After all, the diamond is the rarest of gems, and what better way to show a women exactly how much you love her than with the gift of a diamond. Right?
But this was not always the case. In fact, as recently as 100 years ago a woman whose husband-to-be could afford one was at least as likely to wear a ruby, sapphire, or emerald on her wedding ring as a diamond. Indeed, in countries as far apart as India and England, it was the ruby, not the diamond, that was exalted as the most beautiful and rarest of gemstones, and thus it is not surprising that in India, the word "lal" means "red," "ruby," and "beloved" as well. Indeed, statistically speaking, the ruby is the rarest of the major gemstones, followed by the emerald.
The Rise of De Beers
Enter a family of South African of Afrikaner heritage who in the early 1900s owned a small but productive diamond mine - The De Beers. Through a combination of business acumen, worker exploitation, and large quantities of luck, the De Beers corporation had become one of the world's biggest producers of diamonds by the 1930s. At first openly in the 1930s and then secretly during World War II, De Beers gained a leg up on the competition by selling industrial diamonds to a desperate Adolph Hitler, with whom other more principled diamond producers refused to deal.
By the 1950s De Beers controlled a majority of the Earth's diamond supply. Over the next three decades, the company went on a massive buying spree, acquiring mines in South America, the United States, India, and the rest of Africa, asserting one of the world's largest and most successful monopolies over one of its most coveted items.
With its monopoly power, De Beers has been able to control diamond prices worldwide by dumping or withholding diamonds in its private stockpile. As a privately owned company not traded on any stock market, De Beers is not required to divulge its assets, profits, or the size of its diamond hoard, although it has been estimated that even if all diamond production were ceased tomorrow, De Beers has enough diamonds secreted away to maintain current rates of diamond consumption for 15-20 years.
This stockpile has been the key to maintaining the De Beers monopoly. Whenever a new mine was discovered or a competitor attempted to undersell De Beers' inflated prices, the company would simply flood the market with diamonds, driving prices so low that its rivals would be brought to their knees, either forced to sell out to De Beers or to sign agreements agreeing to follow De Beers' orders on pricing.
Just remember there are other investments and choices when it comes to laying down huge money for a hard mineral. I, for one, would support my local artisan, pay not nearly the amount a small round rock would cost (just because I'm supposed to and it's operated by a cartel) and give back into my artisan community.
Just think about it!