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June 29, 2005
The diamond racket
My girlfriend has been my girlfriend for a long time and it might be time to do the M thing. It got me thinking about how diamonds are priced and why something that is intrinsically nearly worthless (as opposed to platinum or gold or silver, which has a lot of industrial uses) sells for so much. I found a couple of great articles about the De Beers cartel and what happens when you try to sell a diamond. The articles are long, so if you want the short version, it's this: you're lucky if you can get 1/4 of the "appraised value" should you ever want to sell.
The articles are long but fascinating. For example,
The illusion had to be created that diamonds were forever -- "forever" in the sense that they should never be resold.. The other article starts from another angle - a thief trying to to steal money and launder it through diamonds:
In the fall of 1978, a thirty-two-year-old Californian computer wizard named Stanley Mark Rifkin discovered an ingenious way to become a multimillionaire overnight. While working as a consultant for the Security Pacific National bank in Los Angeles, he had learned the secret computer code that the bank used to transfer funds to other banks telegraphically at the end of each business day. With this information and his mastery of the bank's computer, he realized that he could transfer tens of millions of dollars to any bank account in America. The problem would be withdraw the money from the system. In early October, he devised a plan for siphoning this money out of the bank and converting it into Russian diamonds.
Luckily, my girlfriend doesn'tlike diamonds, which is cool with me, but now I'm having a tough time thinking of something else "really sparkly", which is what she's asked for. Tanzanite? I read on the internet (so it must be true) that it was controlled by terrorist organizations. Sapphires? Emeralds? Won't that look too much like costume jewelry. Maybe I should just go with cubic zirconia ...
Posted by brian at June 29, 2005 05:33 AM
Comments
Your statement that diamond has no intrinsic value as compared to gold and silver is incorrect.
There are many uses for diamond in industry since it is hardest substance in nature.
Posted by: Houston at June 30, 2005 03:31 PM

