Additional Information – Less Complexity, More Intellectual Honesty

Additional Information – Less Complexity, More Intellectual Honesty

By Julien B. Booth

September 14, 2022

I wanted to follow up last weeks Mini-Manifesto with a bit of background.

Original note:  Less Complexity, More Intellectual Honesty

Below you will find a quick primer on the relative size of asset markets and their relative order of risk.  This illustration is quite simplified, but I believe the visualization is helpful.

Exter’s Pyramid

 John Exter (1910-2006) is mainly known today for creating Exter’s Pyramid, which has been used for over 50 years. He is also known for being a respected American economist, a member of the Board of Governors of the United States Federal Reserve System, and the founder of the Central Bank of Sri Lanka.  

Exter’s Pyramid is a visualization organizing asset classes in terms of risk and size. In Exter’s model, gold forms the small base of the most reliable value, and asset classes on progressively higher levels get progressively riskier. Exter’s original model had Third World Debt at the top highest risk level, but today, derivatives hold this dubious honor. Exter’s Pyramid has evolved as financial innovation and economic financialization introduced more leverage than ever before into the global economy. 

Thank you for your interest.

Julien B. Booth

Chief Investment Officer – Fixed Income & Real Assets

BRC Wealth Management