Money dies when it stops moving. If nobody is spending it or investing it it is dead money. Or maybe more accurately "UnDead" not alive but in stasis. If everyone, banks included, just parks their money then no matter how much money the Fed tries to pump into the economy there will be no inflation.

Inflation is caused by demand when there is adequate supply or it is caused by inadequate supply. Yes, psychology has a huge role in inflation and in supply. For instance the toilet paper shortage. psychology caused the perception of inadequate supply and while I did not see any reports of price gouging, in other cases of shortages prices have risen sharply.

Psychology has led people to pay down their credit cards shrinking the money supply.

The velocity of money is just as important as the amount of money when predicting inflation/deflation (currency valuation/price of goods).

https://www.investopedia.com/terms/v/velocity.asp

What is Velocity of Money?

The velocity of money is a measurement of the rate at which money is exchanged in an economy. It is the number of times that money moves from one entity to another. It also refers to how much a unit of currency is used in a given period of time. Simply put, it's the rate at which consumers and businesses in an economy collectively spend money. The velocity of money is usually measured as a ratio of gross domestic product (GDP) to a country's M1 or M2 money supply.