File:Liquidity pyramid.jpg

English: The Liquidity Pyramid was created for visualizing the organization of asset classes in terms of risk and size. The Liquidity Pyramid was created during the time in United States, when each dollar was backed by Gold. Gold forms the small base of most reliable value, and asset classes on progressively higher levels are more risky. The larger size of asset classes at higher levels is representative of the higher total worldwide notional value of those assets. While Exter's original pyramid placed Third World debt at the top, today derivatives hold this dubious honor.

As financial risk increases, money tends to move from the more risky assets (Derivatives), to the least risky assets (to physical cash and then gold). Nothing is without risk, but risk is relative. The issue is that there is very little physical cash and even less Gold compared to the more risky assets, this makes for a crowded trade in times of high risk

when everyone wants to jump into cash and gold, pushing up the price.