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daily 08/07/2016

    • Until the late nineteenth century, diamonds were found only in a few riverbeds in India and in the jungles of Brazil
    • The British financiers who had organized the South African mines quickly realized that their investment was endangered; diamonds had little intrinsic value
    • . In Israel, it was known as “The Syndicate
    • Indeed, the cartel seemed so superbly in control of prices — and unassailable — that, in the late 1970s, even speculators began buying diamonds as a guard against the vagaries of inflation and recession
      • Because no third party would want to depend on a monopolist
    • The illusion had to be created that diamonds were forever — “forever” in the sense that they should never be resold.
    • In Germany, Austria, Italy, and Spain, the notion of giving a diamond ring to commemorate an engagement had never taken hold
    • , N. W. Ayer would be the exclusive agents for the placement of newspaper and radio advertisements in the United States
    • Specifically, the Ayer study stressed the need to strengthen the association in the public’s mind of diamonds with romance
    • Movie idols, the paragons of romance for the mass audience, would be given diamonds to use as their symbols of indestructible love.
    • Stories would stress the size of diamonds that celebrities presented to their loved ones, and photographs would conspicuously show the glittering stone on the hand of a well-known woman
    • Queen Elizabeth later went on a well-publicized trip to several South African diamond mines, and she accepted a diamond from Oppenheimer.
    • The advertisements were intended to convey the idea that diamonds, like paintings, were unique works of art.
    • which has been widely imitated ever since. There was no direct sale to be made. There was no brand name to be impressed on the public mind. There was simply an idea — the eternal emotional value surrounding the diamond
      • Did this happen?
    • N. W. Ayer outlined a subtle program that included arranging for lecturers to visit high schools across the country.
    • The idea was to create prestigious “role models” for the poorer middle-class wage-earners
    • Even though diamonds can in fact be shattered, chipped, discolored, or incinerated to ash, the concept of eternity perfectly captured the magical qualities that the advertising agency wanted to attribute to diamonds.
    • Among the more prosperous, there is the sophisticated urge to be different as a means of being smar
    • lower-income groups would like to show more for the money than they can find in the diamond they can afford..
    • It is essential that these pressures be met by the constant publicity to show that only the diamond is everywhere accepted and recognized as the symbol of betrothal.”
    • We work hard to keep ourselves known throughout the publishing world as the source of information on diamonds,” N. W. Ayer commented in a memorandum to De Beers, and added: “Because we have done it successfully, we have opportunities to help with articles originated by others.”
    • Promote the diamond as one material object which can reflect, in a very personal way, a man’s … success in life.
    • The message had been so successfully impressed on the minds of this generation that those who could not afford to buy a diamond at the time of their marriage would “defer the purchase” rather than forgo it.
    • In a mere fourteen years, the 1,500-year Japanese tradition had been radically revised
    • Oppenheimer, assuming that neither party could afford risking the destruction of the diamond invention, offered the Soviets a straightforward deal—”a single channel” for controlling the world supply of diamonds. In accepting this arrangement, the Soviets became partners in the cartel, and co-protectors of the diamond invention.
    • A “strategy for small diamond sales” was outlined, stressing the “importance of quality, color and cut” over size.
    • The news releases also made clear that women should think of diamonds, regardless of size, as objects of perfection: a small diamond could be as perfect as a large diamond.
    • Again, sentiments were born out of necessity: older American women received a ring of miniature diamonds because of the needs of a South African corporation to accommodate the Soviet Union.
    • By paying the high cost involved in absorbing this flood of Soviet diamonds each year, De Beers prevented — at least temporarily — the Soviet Union from taking any precipitous actions that might cause diamonds to start glutting the market.
    • However, a deeper, more important reason lies behind this desire…. “freedom from guilt.”
    • their practical nature would come to the fore and they would be compelled to object to the purchase.
    • The woman seemed to believe there was something improper about receiving a diamond gift.
    • Buried in the negative attitudes … lies what is probably the primary driving force for acquiring them.
    • The element of surprise, even if it is feigned, plays the same role of accommodating dissonance in accepting a diamond gift as it does in prime sexual seductions: it permits the woman to pretend that she has not actively participated in the decision. She thus retains both her innocence—and the diamond.
    • Since the quantity of diamonds needed for engagement rings and other jewelry each year is satisfied by the production from the world’s mines, this half-billion-carat supply of diamonds must be prevented from ever being put on the market.
    • For the diamond invention to survive, the public must be inhibited from ever parting with its diamonds.
      • a luxury item can’t have price fluctuation
    • fluctuations
    • cutting back the distribution of diamonds at its London “sights,” where, ten times a year, it allots the world’s supply of diamonds to about 300 hand-chosen dealers,
    • The underlying assumption is that as long as the general public never sees the price of diamonds fall, it will not become nervous and begin selling its diamonds
    • he found that neither jewelry stores nor wholesale dealers in London’s Hatton Garden district would pay anywhere near that price for the diamonds. Most of the stores refused to pay any cash for them; the highest bid Watts received was £500, which amounted to a profit of only £100 in over eight years, or less than 3 percent at a compound rate of interest.
    • Tiffany had “a strict policy against repurchasing diamonds.”
    • One store offered to swap it for another jewel, and two other jewelers offered to accept the diamond “on consignment” and pay her a percentage of what they sold it for, but none of the half-dozen jewelers she visited offered her cash for her $100,000 diamond. She finally gave up and kept the diamond.
    • The “keystone,” or markup, on a diamond and its setting may range from 100 to 200 percent, depending on the policy of the store; if it bought diamonds back from customers, it would have to buy them back at wholesale prices. Most jewelers would
    • Moreover, since retailers generally receive their diamonds from wholesalers on consignment, and need not pay for them until they are sold, they would not readily risk their own cash to buy diamonds from customers
    • We usually can’t pay more than a maximum of 90 percent of the current wholesale price,
    • When thieves bring diamonds to underworld “fences,” they usually get only a pittance for them.
    • stories in gossip columns suggest that diamonds are resold at enormous profits.
    • A serious threat to the stability of the diamond invention came in the late 1970s from the sale of “investment” diamonds to speculators in the United States.
    • The sealed packets distributed at these seminars and through the mail included certificates guaranteeing the quality of the diamonds—as long as the packets remained sealed.
    • De Beers’s modest move into the investment-diamond business caused a tremor of concern in the trade.
    • It soon became apparent in the Diamond Exchange in New York that selling unmounted diamonds to investors was far more profitable than selling them to jewelry shops.
      • Not liquid assets
    • diamonds
      • How has this been avoided
    • Most of the people in this pipeline are Jewish, and virtually all are closely interconnected, through family ties or long-standing business relationships.
    • Israeli buyers also moved into Africa and began buying directly from smugglers.
      • Why st is Israel fund the diamond industry
    • After the Israeli dealers purchased the diamonds, either from De Beers clients or from smugglers, they received 80 percent of the amount they had paid in the form of a loan from Israeli banks.
    • If Israel controlled such an enormous quantity of diamonds, the cartel could no longer fix the price of diamonds with impunity.
    • The cartel decided that it had no alternative but to force liquidation of the Israeli stockpile
      • Reduce secondary demand by increasing cost of capital
    • Moreover, instead of lending money based on what Israeli dealers paid for diamonds, the banks began basing their loans on the official De Beers price for diamonds. If a dealer paid more than the De Beers price for diamonds—and most Israeli dealers were paying at least double the price—he would have to finance the increment with his own funds.
    • Hundreds of Israeli dealers, unable to meet their commitments, went bankrupt as prices continued to plunge. The banks inherited the diamonds.
    • The only alternative to dumping their diamonds on the market was reselling them to De Beers itself.
    • When the Israeli banks approached De Beers about the possibility of buying back the diamonds, De Beers, possibly for the first time since the depression of the 1930s, found itself severely strapped for cash.
    • The crisis had to be resolved either by selling the diamonds that had been put up as collateral, which might precipitate a worldwide selling panic, or by some sort of outside assistance from the Israeli government or De Beers or both.
      • Cooy the Russia deal
    • Instead, Northern Mining leaked the terms of the deal to a leading Australian newspaper, which reported that De Beers planned to pay the Australian consortium 80 percent less than the existing market price for the diamonds. This led to a furor in Australia. The opposition
    • Prime Minister Malcolm Fraser, faced with a storm of public protest, said that he saw no advantage in “arrangements in which Australian diamond discoveries only serve to strengthen a South African monopoly.
    • control over the diamond mines in Zaire (then called the Belgian Congo) was the key to the cartel’s control of world production

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