Leaving off the table (for now) that which you stated as such. Agree we're not merely talking governement debt - all debt. Happy to leave gov't debt to the side.
How will non-gov't debt be affected by the same phenomena when there is "stable deflation"? How will corporations/individuals think about obtaining loans in this environment? You can get a $100,000 loan today to buy that house you wanted but actually in the course of paying the mortgage, you pay back an amount which is actually way more valuable on the day you pay it back. $100,000 in 24 years would be able to buy 2 of the same houses in a stable 3% deflationary environment. So the environment means that either a) you can lend money to buy 1 house today but the contract states you need to pay back with money which can buy 2 houses in the future or b) wait until you can afford the house in full at its market price. Would you take out this loan? If you can't afford one now, what makes you think you can afford two in 24 years? And this math assumes that the bank will lend you money at 0% interest rate!
Concisely, a stable deflation environment incentives you NOT to purchase big ticket items now.
I would never apply for ANY loans in a deflationary environment. Hoping that other people are logical like me, what happens is non-gov't credit demand dries up. Less homes are sold, less corporations fund projects, the system grinds to a halt.
Do you agree? Or are you also saying we need to abolish debt altogether to make deflation (and BTC) work?
If you don't go into debt to buy a house, either you rent or you live on the street. Someone has to own the house, and chances are there will be some debt attached.
Just because the environment is generally deflationary doesn't mean everything goes down in price - just like in our current inflationary environment, some things don't go up in price. If you go into debt to buy a depreciating asset, or an asset that doesn't produce income, then that is bad debt - the problem with our current inflationary and debt-backed fiat environment is that such debt is outright encouraged.
Up until, what, the 20th century, money was backed by gold, which was arguably deflationary. The world worked "just fine" up until we abandoned gold. The monetary systems of the 20th century are an aberration, and future history will mark it as such. Chances are none of us reading this will be around when the matter is decided once and for all, although the success of bitcoin over the next years and decades will certainly make my assertions more likely than yours.
why did they abolish gold standard in your interpretation? What short term issues did they cite before making the change?