We will ultimately want to illustrate that artificial leverage and natural leverage are two kinds of leverage that differ in kind.
Artificial leverage is exogenously introjected into the asset (to augment the volume of gains and losses), while natural leverage is endogenous, intensive, natural, i.e. built into the exchange of the asset itself.
We wish to demonstrate that structured finance is an organic mode of production of natural leverage, which if universally distributed, could be infinite.
When we show these two things, we will be doing so in order to convey that a universal waterfall economy amounts to a phase-resetting mechanism whereby the rhythm, rate, and plastic channels to the distribution of all risk and cash flow can be hyperfungibly annihilated, modified, or altogether reset -and importantly, in a way that is nontotalitarian, nonplanned, noncapitalist, but somehow a set of “free” markets (if we are still permitted to use that term) that are fully-equitable and make all parties involved better off. No biggie.
It is true that this truth is predicated on the existence of topological invariants, singularities, and affects to the spatial timing of the nonlinear oscillators comprising financial markets (of course if one grasps the subtle but profound ontological claim made by dynamical systems theory (that Deleuze aptly labels the univocity of being) the argument has already been made, and we have no good reason to doubt the radical nomadic distributive capacities of nonadditive stimuli endemic to nonlinear systems when induced into conditions far-from-equilibrium).
This requires our reader to understand what the hell even is a waterfall economy?
To begin to answer this latter question, Lozano here at specmat (who, again, is only one specmater -he doesn’t even speak for himself, let alone anyone else) has elected to pursue the strategy of tutorials -in derivative satisfaction of the project objectives of The Lives of Concepts of Finance– on synthetic finance: he will move from ontological examinations of single-name credit default swaps, single-name total return swaps, and single-name credit derivatives (all three of which are currently available here and here and here), to then some key concepts in structured finance (e.g. tranches, CLNs, CDOs); and from there we will be an informed position to appreciate the impetus of the aformentioned claim.
We will also greatly augment our understanding of synthetic finance, which will aid our understanding of Deleuze’s Guidebook to Synthetic Finance (which will recommence shortly).