>>14073551Pt.2
In this way, money is just a representation of energy. We trade money for energy, we trade "crystallized" energy (currency) for energy (goods and services).
Now, how do we transform the energy into monetary units (MU)? how do we know how many MU is worth 1 (1 Joule)??
Let's assume in order to produce the good you need 100 joules of energy. How much is 1 joule of energy in MU? Well, we don't really know, although we know that 2 joules will be . You could say this is where we arrive at the transformation problem and there is no way to express that energy in monetary terms.
But what if that representation of energy is just based on supply and demand for the currency?
For example, if we want to model the demand for money, we could define it as the energy consumed in some economy (GDP but instead of
being expressed in monetary terms we define it in its more "pure" form, energy consumed in 1 year).
Assume . This means that 100 joules need or demand some monetary representation. They "demand" currency.
Now, how do represent the monetary value of , ?
Say money supply . How much m is required to represent 1 unit of e ?
.
Since all joules are homogeneous they are worth the same.
There is an equal amount of monetary units chasing the same amount of energy (goods, gdp, you name it).
In this case to produce 1 unit of the good the production costs expressed in MU will be the energy required to produce it (100 J) multiplied by money supply/money demand.
Now we can also have inflation. If we increase the money supply to 200, the new price of 1 unit of energy will be .
The new price for the good will be ; Prices have doubled.
