I’m sure you’ve seen this commercial before, especially around this time of year.
A man, a woman, and perhaps a young child, seems to be finished opening their Christmas presents. But wait, suddenly the man pulls out a slender box that was hiding just behind the tree (or maybe even in the tree for the really good commercials).
The woman does that thing where she puts her hand over her mouth as if her excitement is literally going to burst out from her stomach. The man opens the box revealing the beautiful diamond bracelet and then the pair embraces in delight. Every kiss begins with Kay.
Jewelry, diamonds in particular, are an incredibly popular holiday gift. But before you run out to ensure that the man or woman in your life has a sparkly Christmas morning consider these three facts.
1. The Prices Make No Sense
In economics, there is a concept known as intrinsic value. The term refers to the future cash a certain item can reasonably be said to generate. For example, if you buy a house you can rest relatively easy since a home’s intrinsic value is very high and should allow for you to recoup your investment and make a profit when you sell.
Diamonds do not follow this pattern. The markup on diamonds is usually between 100-200 percent. This means that the moment you but a diamond at retail you have effectively lost all the money you paid for it since it essentially has no resale value.
Diamonds are rarely sold back to jewelers because jewelers offer next to nothing for wholesale diamonds. That $3,000 rock you just purchased is essentially worthless as soon as you walk out of the store.
2. The Market Is Manipulated
Another well-known economic principle is supply and demand. For those of you that missed 5th-grade economics, supply and demand means that the more people want something the more expensive it is. It also means that the more scarce something is the more expensive it is. The diamond market exists on a severely manipulated system of supply and demand that does not accurately represent what the price of these stones should be.
Until very recently the diamond market was 100% controlled by the De Beers Corporation. This is the corporation that began the diamond trade in Africa and even though they have lost a bit of power in the past two years they are still by far the biggest game in town when it comes to these precious stones.
De Beers has huge stockpiles of diamonds, which should mean that the price goes down since they are so plentiful. However, this corporation carefully controls and limits how many diamonds are in circulation at any given time.
Most people think diamonds are expensive because they are rare and precious. But this is actually a manufactured misconception.
In reality, there are vast warehouses full of these shiny rocks just waiting to be unleashed when they can be sold for the highest falsely constructed price.
3. Conflict Diamonds Are Real
Blood Diamond is more than just the name of a Leonardo DiCaprio movie. The diamond industry is violent, unfair, and incredibly destructive in the parts of the world where these diamonds are sourced.
According to the Statistics Brain Research institute, The total number of deaths attributed to the diamond trade is around 3 million people.
In addition to the violence, the institute also reports that the average pay for a diamond worker in is only seven cents a day.
The process of acquiring diamonds is largely, disgustingly deplorable. Do you really want to support it in the form of a thousand dollar purchase?
If you really want to but that special someone a diamond this year, do some research to make sure the one you’re looking at is conflict-free. Brilliant Earth is a great resource for tracking these ethically sourced stones down, and they have plenty of links and information to keep you informed this holiday season.
Continue Reading: This Diamond Just Became The World's Most Expensive Birthday Present
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