Are diamonds evil?

Diamonds have been under a lot of controversy lately. Is everything bad that’s said about them true? Let’s explore each of the accusations.

Why diamonds are so expensive

Our first lesson in economics taught us about supply and demand. The lower the supply, the higher the price. This makes sense with diamonds because they are scarce, right? Not exactly. Let’s have a history lesson.

When diamonds were first discovered in the late 1800’s, they flooded the market. In doing so, they also became cheap. The major investors of these diamond minds realized the only way they could make this worthwhile was to combine power and form an entity that consolidated all resources, thus controlling supply. This organization was called DeBeers (seen their “A diamond is forever” commercials?).

De-Beers-Logo

DeBeers quickly learned that they could make more money if they also controlled the demand. In the 1940’s they started a massive US advertising campaign, creating a new image for diamonds equating them with love. This marketing effort was huge, and lasted several years, and their work paid off. Diamonds became synonymous with a measure of true love and happiness (“Diamonds are a girls best friend!”), and brides demanded them. Since men needed to make their women happy, diamonds were sold like hotcakes.

In America it had made quite a difference. The next generation of future brides and grooms had grown up with the idea that a diamond ring is considered a necessity to engagements. With its proven success, DeBeers made the campaign international starting in the 1960’s. When the international campaign began in 1967, less than 5 percent of engaged Japanese women received a diamond engagement ring. By 1981, over 60 percent of Japanese brides wore (and expected) diamonds.

Resale value of diamonds

You just bought a $5,000 diamond ring (actually more considering tax and protection plans). It’s worth $5,000, right? Wrong. Diamonds suffer from “used car syndrome.” Just like a brand new car loses much value the second you drive it off the dealer’s lot, diamonds do too.

Diamonds are only worth what people will pay for them, and who wants a diamond ring that belonged to someone else first? Just check any pawn shop or ebay for second hand diamonds and you’ll see you only get a fraction of what people paid for them. As I’m writing this article right now a 3/4 carat diamond ring on ebay that was bought for $3,000 just sold for under $500. That’s 16% of its original value!

Now I’m not saying that moissanite is a better investment – it isn’t. Engagement rings simply can’t be looked at as investments. However, moissanite doesn’t have the high price tag that diamonds have. With a diamond you could “lose” thousands of dollars. With moissanite only a couple hundred.

Conflict diamonds

Ever heard of the term “blood diamond”? A conflict diamond (also named a blood diamond or war diamond) is a diamond mined in a war zone and sold in order to fund an insurgent or invading army’s war efforts. Profits from blood diamonds are used to finance warlords in Angola, Sierra Leone, and Liberia, who use their weapons to kill and injure innocent people. Now that’s romantic!

blood_diamond_movie

Conflict diamonds used to be big news. When this was brought to the public’s attention people were outraged, and something called the Kimberly Process was organized. This was established in 2003 to prevent these conflict diamonds from entering the market and being sold to consumers. In short, it requires shipments of rough diamonds crossing an international border to be sealed in a tamper-resident container, and trade of those containers not to occur between sketchy areas. Each container has a Kimberly Certificate which is supposed to be hard to forge.

I had concerns about the enforcement of this Kimberly Process, hearing that it’s hard to enforce and cannot be trusted even if a company says they use the Kimberly Process. I called a few retailers to have them address this issue. Two of them said “Oh, no, Kimberly Process is perfect. No conflict diamonds sold here,” which I know is a lie. The third one admitted, “Yes, conflict diamonds do exist and some fall through the cracks into retail. But those ones are the tiny side diamonds, and rarely the bigger center stones. The bigger the diamond, the more scrutiny it falls under.” Good to know, I liked their honesty.

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