I understand that, hoarding causes deflation.
Not exactly. An increase in
hoarding, ceteris paribus, will lead to price deflation. But there's absolute no reason why a
constant amount of hoarding (as, say, percentage of income) should lead to price deflation, since the amount of money in circulation stays the same.
deflation devalues real capital
I must confess, that i'm slightly puzzled. What does that exactly mean. Decreased physical output of real capital? Hardly. (And what is the *un-real* capital, for that matter). A decreased return on investment? Well, I don't know. The monetary return can be lower but the costs of operating and replacing the capital will also be lower. (As for past costs those are always sunken costs.)
and that doesn't encourage investments.
Let me put it that way. There is a current consumption fund and there is a investment fund which is equal to total production - current consumption fund. Anything which increases the investment fund encourages investments. And if you think that price deflation encourages savings and think that investments are good thing you should hail price deflation. Because it increases the investment fund. And that's, what investment's are made from.
The thing you fail to see is that money is a common. You're holding it now, but it belongs to the whole society because it is an abstract good, an agreement. The money you hold could be worth nothing overnight if society decides so.
So the way people saves should be the way that the society benefits more, and that's not hoarding.
No, I no do not see money as a common. As a tool which allows us to coordinate our activites and extend cooperation between people, yes, as something belonging to some kind of mythical Geia, no. The mythical Geia, is, well, mythical, and for exactly that reason she cannot own anything.
I can accept the "society benifits more" as a shortcut for most people want (will benefit from) more goods, and I agree that the way to having more goods is to have more (successful) investments. But there's absolutely no harm in some people just "hoarding". And I've already explained why.