Quote from: bubblesort on March 24, 2013, 10:04:44 PM

deflation is always bad

I hope I'm not alone in not buying this whole "deflation is bad" argument. By your logic, Samsung should be broke because the SGS3 that used to retail for $800 is now available for $350. And by the same logic, I will never buy a computer because in a month's time it will always be cheaper than buying today.

Any business that borrows money to make/sell widgets needs to do price/expense/cash flow management to decide if the venture is profitable and sustainable. The cash flow implications of falling sale prices over time is no different to falling sales volume over time (ie. saturating the market), or any other rising input cost.

Just because a business agrees to pay back +X% over a 12 month loan when they know the price they can sell their goods at will fall by Y% per month doesn't mean they'll necessarily go broke - and if they do, it's because their outgoings are more than their incomings. That their outgoings are falling slower than their incomings (due to deflation) doesn't make deflation bad in and of itself. It just means they didn't do their sums.

If it costs BTCX to make a widget, then you better sell that widget for more than BTCX, inflationary, stable or deflationary environment. If that means you can't drop the selling price of your widget as much as your competitors, then you don't deserve to be in business any more.

And as for assertions that:

Quote from: Puppet on March 24, 2013, 11:02:33 PM

A purely deflationary currency provides no incentive for investment or economic activity

Again, I don't buy it. Deflation just raises the bar for what is deemed an acceptable return on your funds. If you can make X% through deflation, then any investment must make >X%. Some could argue that inflation lowers the bar too far, allowing malinvestment to consume valuable resources that would be better deployed elsewhere.

And for the person who asked

Quote from: johnyj on March 24, 2013, 03:03:31 AM

Where is that 0.1 BTC coming from?

The loan and repayment of borrowings are part of the capital stock of the currency (I may be muddling my words here). Interest payments comes from the flow of money through the system. The amount of money in the system hasn't changed - what changes is the distribution.