Additional Information – Less Complexity, More Intellectual Honesty

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 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.