Extracted from one of the most brilliant pieces of writing UF has seen this year:
In fact, insofar as ownership-of, or exposure-to, the so-called generic referent is not a requirement for transacting a synthetic financial exchange – which means that neither the seller nor buyer of the synthetic asset need be the obliger, creditor, or otherwise related in any way to the preexisting generic financial exchange acting as its referent – most synthetic financial transactions are created ex nihilo. However, to the extent that the parties to the synthetic exchange do make a financial transaction, they have created a new asset, and this asset does have the very real material properties of risk and cash flow. In this respect, the act of synthetic exchange effectively creates – synthetically, yes, even virtually, yes, but no less in reality – a risk and cash flow which did not previously exist.
The synthetic asset, then, is capable of being created ex nihilo and ad infinitum. There is no transfer of private property, no concrete production by labor of any classical economic object, and whose intrinsic value is congealed therein, nor any new generic financial asset or reference obligation. And yet, through the process of synthetic exchange, because there occurs a new ex nihilo and potentially ad infinitum proliferation of the economic properties of risk and cash flow, we cannot meaningfully deny that a synthetic exchange is any less an exchange, or lacking in profound material consequences.
In fact, the peculiar materiality of the synthetic financial asset now raises the important question of whether it is either the case that we need to liberalize our prior understanding of materiality, or even that the actualization of synthetic finance already radicalizes the very concept of materialism itself?
ADDED: An interview with Élie Ayache, delving into the subtleties of market ontology.