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10 Fake Scarcities


6
Diamonds
Beyonce flashes her engagement ring while watching the 2011 U.S. Open tennis championships. Reportedly the 18-carat diamond ring cost $5 million. Was that two months of Jay-Z's salary? Clive Brunskill/Getty Images
Beyonce flashes her engagement ring while watching the 2011 U.S. Open tennis championships. Reportedly the 18-carat diamond ring cost $5 million. Was that two months of Jay-Z's salary? Clive Brunskill/Getty Images

If what the television commercials say is true, there can be no shortage of diamonds on the market as every Tom, Dick, and Harry to get hitched in the last decade "went to Jared." Yet, these precious stones have long been considered largely scarce, driving the size of the huge price tags to which they are typically attached.

The short diamond supply is an illusion created by one big gem seller. As far back as the 1880s, the De Beers family of diamond companies began a practice that still affects the price of stones today when chairman Cecil Rhodes secured the rights to a large swath of South African diamond mines. The method spread to other diamond regions. De Beers and a few other companies soon controlled the vast majority of the world's diamond supply and, more importantly, the prices that could be charged for them [source: Zoellner].

These diamond hoarders want end-buyers to believe that the stones are incredibly hard to come by, and thus be willing to shell out more cash for them. The truth is that vast supplies of diamonds are under lock and key, kept off the market completely to inflate prices [source: Stossel].


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