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In a distilled interpretation of this song, time can do two things to memories: turn coal into diamonds, or turn precious metal to rust. This seems to be a sarcastic reference to the relationship she had with Bob Dylan throughout the ’60s, saying something like: “look what you could have had? I’m the diamond.” There’s obviously a lot more to the story, but it just goes to show you how much of a great sense of humour Baez had, as well as her skill as a storyteller.
Check it out here