Wednesday, November 14, 2007

Accounting for Diamonds with the GAO

According to the Government Office of Accountability, the US is EXPORTING more diamonds than it imports! This, of course, presents a fascinating problem, since the US does not have a single working diamond mine--ergo, we should logically be importing more than we export. In addition, the US is not a "cutting center"--Israel, India, and Antwerp are the main locations for cutting (so there is really no viable reason that the US should be exporting so many).
According to the GAO, in 2003, there were 3 million more carats exported than imported in the US. By 2005, the US Census reported an excess of 300,000 carats over our number of imports.
This suggests either that:
1) The US is laundering diamonds (don't think I'm being melodramatic here--the GAO suggested it first!)
2) The US's manner of accounting for diamonds is totally off
or 3) (my own idea of what's going on): since the US method of accounting for diamonds does not include the stock surplus of what is already in America, perhaps jewelers, wholesalers, etc. are EXPORTING their current stocks to make diamonds seem rarer than they actually are, in order to maintain current pricing (i.e., if the supply seems small, the demand should logically go up).


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