The unemployment rate in the USA is now officially under 5%. In UK much the same. According to classical economic theory both countries should be showing much stronger inflationary pressure at this level. The level in France, for instance, is about twice as high. Why is there very little inflation in US and UK? Are the figures being manipulated so that the real situation is a lot worse? Or is the recent drop off in immigration a factor? Anxiety around political events may also be at work - Trump, Brexit. However, something does not add up.
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Yes, there does seem to be some logic in the fear -> saving -> deflation model.
The whole fiduciary system is a house of cards which is fine and glorious as long as none of the key supports gives way.
classical economic theory is useful only for mainstream academics. In fact it failed to prevent (or even explaining) relevant phenomena, like the burst of the financial bubbles. At present it is reasonable to think that given a mix of factors (insane growth of the stock exchange, incredibly high public debts, political instability) all big agencies (governments, central banks, multinationals, investors) are desperately trying to keep the prices under control as a firewall against the worst scenarios (another bubble, unintended consequences of Trump's madness, etc..). On another side, people, who are even more scared than big agencies, tend to increase their saving propensity and this way largely contribute to a non-inflationary situation.
I imagine that the ecological dimension is the deepest layer of a many layered cake. If the velocity of circulation slows it is thought to be equivalent to a diminution in the money supply which would be counter-inflationary. If people keep their money rather than spending it then the money in circulation diminishes and its value goes up. The size of the debt burden is a huge issue in its own right.
The situation is very confusing for sure. There is a group of economists who insist this is a period of deflation and this is evident in many commodities. Then there is this understanding that inflation brings rising interest rates and thus the debt burden becomes too burdensome to continue. Then there is the story of the velocity of money in that it is not moving between hands very quickly as there is no confidence about. And of course there is the obvious element of manipulation. My (ongoing) explanation for economic and political events that seem nonsensical is that we have reached critical consequences from our disregard for things ecological.