But still if there is only an ever shrinking supply of coins... It doesnt bode well for the longevity of bitcoins.
How so?
[Spoiler: Here come's the invalid "deflationary spiral" argument.]
The deflationary spiral is perfectly valid as an argument. Look at how many times in history a deflationary event has devastated countries. The fact of the matter is, prices are less downwardly elastic than they are upwardly elastic so deflation is a bigger problem than inflation.