So it seems like the standard explanation on the internet for decades has been “diamonds are not rare, it is just that De Beers keeps prices high by artificially restricting the market.”
This always had me scratching my head because then where are all the diamonds being kept? If De Beers is artificially only letting a small number out, and they have been mining diamonds continuously, there ought to be a big big vault (Scrooge McDuck style) where De Beers executives dive into big piles of them. That seems like a difficult thing to keep a secret and it would need fantastic security. Is there any hint of where all these excess diamonds are?
The next thing that has me scratching my head is that the De Beers monopoly has effectively been broken by mines from Canada, Australia, and Russia. Not to mention lab diamonds. If this is so, then why have prices not gone down? Hey, I was promised cheap diamonds if there was competition!
I am not a De Beers shill, they are an awful company, but I am just trying to figure out why the common logic doesn’t seem to be matching with reality.
De Beers did keep a large pile of diamonds in vaults underneath its corporate headquarters in Charterhouse Street, London: NYT story, Bloomberg story. It doesn’t take up that much space - diamonds have a high dollar-per-cubic-inch density of value.
As to your first question, yes, at one time De Beers had a stockpile of diamonds in its headquarters at 17 Charterhouse Street in London. Rumor has it that the vault is four levels deep below the building but who knows if that is really true. Supposedly there was at one time $5 billion of diamonds there.
I’ve seen footage of the Russian diamond vault. I think it was a Bill Kurtis journalism show, so unless the Russians were pulling a Potemkin village operation on Bill, it was legitimately impressive.
This is probably a dumb question, but who decided diamonds should be so expensive? Are they that rare? I don’t thing they’re very pretty. I’d rather have a colorful gem like a ruby, sapphire or emerald.
De Beers. Really, they marketed diamonds and drove up demand. Engagement rings in general and diamond engagement rings in particular are recent phenomena, largely created by De Beers.
So what is Russia, or any other sovereign country, getting by following DeBeers lead? I mean, why aren’t countries like the United States, Saudi Arabia, North Korea, China and Russia messing with DeBeers as a political instrument as they do with oil, rare earth metals, gold and silver? Is DeBeers the Illuminati?
Multiple layers of middle men each taking their own cut?
A local jewelry store owner claims he makes a trip to Antwerp Belgium each year to visit the diamond brokers apparently to get the best prices for his customers by cutting out the middleman.
I suspect that it’s certain specific people in those countries that are getting something rather than the country as a whole. Could be straight up bribes or maybe a stake in DeBeers, which would give the decision maker an interest in keeping DeBeers profitable.
If you flood the diamond market, your diamonds are worthless now, too. The barriers to entry are high enough and the number of competitors small enough that they can act as a cartel rather than a monopoly to similar results.
I suspect that the difference between pretty diamonds and the other commodities I listed are that they are of actual use for something. It’s like pretty diamonds are the original NFT’s or Bitcoin.
As to the second question: Diamonds have long been associated with wealth in many cultures. They could certainly be cheaper than they are if competition were more open, but their high price is not entirely artificial; they’re not that cheap to produce - you have to move an awful lot of dirt to find gem-quality diamonds. In particular the large ones; their pricing is very progressive: A two carat diamond will cost far more than twice what a one carat stone costs.
To me that sounds like it’s the customers that ultimately drove the price up. It’s one of those things where people are showing off their wealth based on how much they payed for something. In other words, they’re valuable because they’re expensive, not the other way around.
One nice feature of diamonds (for the industry) is even though a diamond is forever, a big chunk of them only spend a half century or so above ground. Just think of how many millions of cut diamonds are right now wrapped around rotten meat six feet down. You want to mine diamonds? Mine graveyards.