Rising velocity of money doesn’t require people to rush out and spend more – this is a myth. The velocity of money rises because the value of each unit of money falls and therefore each unit of money must turn over many more times in order for the same value of transactions to be conducted. You might want to read my post on “What Determines the Velocity of Money?” published 7th April 2015.

The impact of globalisation is definitely putting pressure on the value of goods and labor: this is a clear deflationary trend. However, the price level is a relative expression of both the market value of goods/labor and the market value of money. It may be the case the market value of goods/labor continue to fall, but if the market value of money falls more then inflation will result. If the market value of money collapses, then hyperinflation will be the result even if the market of goods/labor is falling, as we can seen repeatedly in countries like Zimbabwe.

I agree that the inflation statistics are not entirely accurate.

The only places where inflation is popping up is in absolute necessities like food and rental prices. Inflation in housing and rent is largely swept under the rug as the owners equivalent isnt an accurate gauge. Until there is a large increase in wages, I doubt this trend will reverse unless interest rates normalize or a currency default occurs. As most companies are still in survival mode, they will continue to cut wages and jobs whenever possible. The big push for expanding immigration and offshoring jobs via the TPP don’t bode well for domestic labor.

So, why might the market value of money fall in the economy is weak. Well, money is a proportional claim on the future output of society. A weak economy may erode confidence in the long-term economic prospects of society. If this happens, then the market value of money falls: people expect less future output and more base money.