In a monetary production economy, buyers and sellers set aside one or more real assets to serve the functions of money. Money is a generalized claim on all other assets. Buyers must always have money to exchange for the seller's real assets. Capital sinks include land, artifacts, antiques, precious metals, sacred cows, relics, gambling, and prostitution. The Credit Production Economy A credit production economy has real assets and financial assets.
Financial assets have no intrinsic value.
They have value in exchange, but no value in use. Borrowing and lending facilitate the movement of money from those who have it, but do not want to spend it, to those who do not have money, but want to spend it. Speculative financial activities include buying and selling the financial assets as well as buying and selling derivative financial products, such as futures and options, without putting the money back into the real sector. To induce hoarders to become lenders, borrowers must offer a return to compensate the lender for the opportunity cost of hoarding, either speculating or buying into capital sinks, and for the risks associated with lending. The higher these opportunity costs and risks, the higher the return which must be paid as compensation.