Analyses of Inflation Dynamics as a Consequence of Monetary-Production Imbalance in Global Markets

Abstract This study proposes a physically grounded theoretical framework for the description of human activity in industrial, technological, and economic domains of knowledge. We apply ab initio principles to model human work in the environment as a thermodynamical process in which technological and industrial outcomes are equivalently mapped to mass/energy manipulation driven by the available information charge. In this paradigm, economic value is decomposed into material and informational components. Price formation emerges as a byproduct of these dynamics, arising from nonlinear interactions between supply and demand. By corollary, economic inflation, which is classically interpreted as a monetary phenomenon arising from the interaction between the money supply and aggregate demand, is shown to be generated by a simple and intuitive mechanism. A new class of monetary indices is then defined, comprising four inflation moments suitable for describing the inflationary phenomenon. We analyze the historical evolution of moments and inflation in several countries. Some discussion about sustainability and technological advances is also performed.