This is not a good time for luxury goods. Demand for luxury goods has plummeted. The images of the 'blood diamond,' ransomed with human lives, have rocked the industry. The De Beers corporation, which used to rule a mighty cartel has been giving up some power, shifting the equation of demand and supply. Industry leaders have been fighting back by doing what they do best, marketing.

Fifth Avenue, with its big diamond-shaped lamps, is where it starts. The diamond district in New York's mid-town is one of the city's most colorful neighborhoods. The insular world still feels like an East European village, yet nearly every diamond sold in America passes through its streets.

The flocks of Hassidic men in flapping black frock coats and black hats push past gawkers in thigh-high skirts. And Hebrew is mingled with Spanish, Japanese, and Urdu.

Joe Schlussel, a Romanian-born dealer elbows his way through the crowd. Schlussel has 40 years in the district and explains his mental map of the district.

"This is the way to go when people talk about the diamond district or 'diamond way' they speak about the streets between 48th and 46th Street between 5th and 6th Avenue," says Schlussel. "There are many levels of the jewelry and diamond trade on this block— right now we are on the bottom — street level where the retailers are — now we call these exchanges, everybody has a booth — more like a bazaar — each has a specialty. In the bazaar, there are cubicles for the dealers, and in one building is the Gemological Institute, which trains everyone. On the higher floors, there are the diamond dealers, kind of a bourse, or exchange with its own synagogue. It's where, for a token twenty five cents, diamonds are weighed. Dealers can keep climbing higher, in search of the ultimate diamond. "If you want a real deal, " says Schlussel, "you have to go closer to the source." Schlussel is on the eighth floor, but there are some at a higher level than him.

At the moment, however, things are bad… there've been layoffs and foreclosures in the district. Worldwide, profits are expected to be down by a billion dollars. In India, four hundred thousand of the eight hundred thousand diamond cutters have lost their jobs. The diamond industry is sitting on excess merchandise it can't sell and that the banks effectively own. So the answer is to promote, promote, promote. And just ten blocks uptown, at Tiffany's, that's just what was happening at an event earlier this fall.

Tiffany's is the home of the trademark 'Blue Box.' It was Tiffany's, say its directors, who got American women hooked on the diamond. During its fashion week show, Tiffany's premiered a new line called "lace" designed to showcase the diamond in all its most powerful allure.

Next: Igniting Diamond Desires