There is one weakness of it, which I hope someone can invalidate. Suppose I'm a car-dealer and I buy 1 car for 100 BTC from my supplier. By the time I can sell it to a customer, I can only ask 95 BTC for it, because of deflation. Now everyone argues that isn't a problem, because the prices at my supplier also have dropped with the same amount, so I can buy a new one there for 95 BTC, and again have 1 car in stock, and don't suffer any losses. But if I did absolutely nothing I would still have 100 BTC, so why should I work hard as a car-dealer instead of hoarding?
I can't see why this would be good for Bitcoin. People said that it's good because it forces merchants to keep their stocks low, or produce goods only on-demand. But then you're asking merchants to change the way they have been doing business for decades, which seems unlikely to happen.
So how can Bitcoin solve this problem for merchants?
This is true if you have hyperdeflation and your business's profit margin is 0%.
Lets take a scenario where annual deflation is 5% and you take 5% cut of each car sold. You have
BTC100. First month you buy
BTC100 car and sell a month later. Car costs now
BTC99.5 due to the deflation. To take your cut you sell it for
BTC104.5.
(
BTC100- 5% / 12months)* 1.05 =
BTC104.5
Pocket the
BTC4.5 and buy another
BTC100 car. Do that for 1 year and you end up with
BTC154. If you count in the deflation you are now 58% richer.
If you didn't do anything then you are only 2% richer.