"American males enter adulthood through a peculiar rite of passage - they spend most of their savings on a shiny piece of rock. They could invest the money in assets that will compound over time and someday provide a nest egg. Instead, they trade that money for a diamond ring, which isn’t much of an asset at all. As soon as you leave the jeweler with a diamond, it loses over 50% of its value. Americans exchange diamond rings as part of the engagement process, because in 1938 De Beers decided that they would like us to. Prior to a stunningly successful marketing campaign 1938, Americans occasionally exchanged engagement rings, but wasn’t a pervasive occurrence. Not only is the demand for diamonds a marketing invention, but diamonds aren’t actually that rare. Only by carefully restricting the supply has De Beers kept the price of a diamond high."
Ivor Tymchak said:
A great article, however, he forgot to mention the recent development of manufactured diamonds that makes the situation even crazier. I wrote about it years ago.
A thought experiment gives us a clue: Say we made diamond rings from factories, which nobody could tell from the slavery-produced ones, and told people what they were, and sold them at 20% of the price? Would anybody buy them? Nooo! And most of them would not stop buying the "real" ones either.
Which tells us: they know they are only buying status. And 2: they will rather buy very expensive status symbols than they will have food on the table.
Being able to kick sand in their neighbor's face is more important to people than an easy life.
The American economy is based on people buying things, even if “useless” and/or only for status. If you don’t have a lot of the “biggest and best” things, you are a “failure.”
ReplyDeleteWithout this drive of “consumerism” the US economy would crash.
Yet, to accumulate enough wealth to secure your retirement, and maybe leave something to the kids to give them a head start, or possibly even secure their future, you have to reject “consumerism” and live a simpler life and invest your savings, over a lifetime, for future growth.
But if everyone did this, there would be a market crash that would make the 1930’s look like a bump in the road, and your investment would become worthless. . .
As has been said (Heinlein?):
You can't win.
You can't break even.
You can't even get out of the game.
To add to Bruce's comment, today we live in a world where so much of what we need is readily available for someone on an average or below wage, that we have money to spend on things that we don't really need. So along comes marketing and tells us that we really need them. Even if things are better we need to be convinced that we should replace our already adequate purchases with something newer. Apple would like to convince me to replace my iPad Air with an iPad Air 2.
ReplyDeleteOne thing we get for buying higher priced things is the feeling that we are a person that can buy higher price things, status in other words. Even if you can't tell a Moissanite from Diamond, only Diamond gives the feeling of wealth and don't even talk about Cubic Zirconia.
Recently where I was staying there was a young guy with a Lexus. I was impressed. Then I checked the registration sticker and it was 9 years old, so was similar in value to my 3 year old Ford Focus. My car is probably better in many respects, but the luxury brand gets more respect. Would be even more respect if he had a BMW.
You both have some good points indeed.
ReplyDeleteI think though that going from iPad one to Two was a good deal. iPad Air 1 to iPad Air 2 was more doubtful, not great amounts of change.
But I think that somethings approach hysteria. The bulk of young couples have money problems. So using tens of thousands of dollars out of the gate on diamond rings and ridiculous weddings is pure insanity in my view. Those money could make their lives much much easier for years.
I know someone that has spent, 10-years ago, $35,000 on his daughters wedding. They had two actual receptions. One in her home state (Idaho) and in his (Iowa) 1275-miles apart (2052km). This is in addition to the $8,000 wedding ring the husband spent.
ReplyDeleteHe also paid in part for her college education (Masters Degree) $50,000 and the very best job she can get is a part time college teaching job with no benefits. He has a job working for a NASA subcontractor as a computer programmer and they struggle to make ends meet.
Say what you want to the American Economy works for the indebted and the very wealthy.
The worst thing is that should she get a divorce, the wedding ring is only worth maybe $5,000. As a pawnbroker, I would offer $3800 tops in order to sell it and make a profit. Think about that one as well.
I still don't *really* understand (at least emotionally) how debt can be the foundation of an economy.
ReplyDeleteBut I know that it makes for insane stress for all those carrying that debt. And worse, should they stumble, get sick or lose their job, they are so f***ing fokked, for they have no leeway, no reserves, no bumpers.
I think that if by a miracle some sanity should appear in broad, the economy *can* be converted to become based on production instead. It only has to happen over a couple decades, not overnight.
Until a decade ago, I had substantial debts from the eighties. I had some early instances of this sickness, and I had to let go of paying them for a while (which is what economists require anyway, if you're overwhelmed). After a few years, luck and work made me more affluent, and after a couple more years, I was able to offer all the creditors their money back all at once. That was a good time.
This also has the advantage that unlike if you pay continually, you don't pay all the interest. Most of my creditors only wanted the original amount, which I paid happily.
And I might point out that per Danish law, if I'd just waited a year more, I'd have been home scott free, the debt erased. But I wanted to do right by my creditors, even if they were banks, they had loaned me the money, so I paid them.
I grew up in an "old fashioned" family where debt was viewed as a failure, if not downright immoral.
ReplyDeleteSo, this attitude was imprinted on me as a child, and I have lived my life doing my best to avoid debt.
It has worked for me. I am now retired in a relatively secure financial situation, while friends my age are very worried, and can't retire.
I'd like to offer a different viewpoint. The value of a diamond ring is precisely that it's useless by any extrinsic standard.
ReplyDeleteYou give a woman a diamond ring (if you do) in order to show her how much she means to you; that you're willing to make what is normally a substantial monetary sacrifice to buy her something beautiful, but of no utilitarian value, is a powerful affirmation of your love for her.
I'm not saying there aren't other ways to say the same thing, but I do think that love and sacrifice tend to go together and buying a ring for your wife or fiancee is one form of that. (BTW, I don't work for or receive payment from the diamond or jewellery industry.)
Yes, I saw a Cracked article or video about this once.
ReplyDeleteA great article, however, he forgot to mention the recent development of manufactured diamonds that makes the situation even crazier. I wrote about it years ago:
ReplyDeletehttp://www.tymchak.com/blog/?p=484
Ah, thanks.
ReplyDeleteI came close to including a comment on that, but I didn't know they were that close.
Manufactured diamonds will make the real ones more valuable - cultured pearls are less valuable than the real ones.
ReplyDeleteJoe,
ReplyDeleteThere has actually been numerous articles in later years. I linked to one before. Several of them are even called the same "Diamonds are bullshit".
But advertising is made to seem like truth be repetition, so probably repetition is necessary to counter it.
I wasn't complaining.
ReplyDelete