M 2 V 2 P 2 Q 2 Capital sinks include land, objets d'art, sacred cows, relics, and underground activities like prostitution, drugs, and gambling. Capital sinks do not create income and employment. They are simply asset transfers. They drain money from its circulation in the production economy. The Credit Production Economy A credit production economy has real assets and financial assets.
Financial assets have no intrinsic value.
Their value is determined by the amount printed on them. They have value in exchange, but no value in use. In a credit production economy, money balances are borrowed and loaned in anticipation of spending. 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.