I don't get it. If someone hoards a fixed percentage of his income, the amount of money in circulation is getting smaller and smaller.
Well, maybe I could have said it better. The only reason to save money is for spending it at later date. So for every 10 (20) hoarders who do not spend right now, there's an ex-hoarder who just now spending, spending, spending. Then he will start "hoarding" again, and someone else will spend. That is what I had in mind when speaking about a "constant rate of hoarding".
No. I mean the price of the capital is being reduced and also its nominal yields (assuming the percentual capital yield remains constant).
And the problem is? While it may be only half of the old price but every coin can buy now twice as much.
Yes, in my example, the baker will buy his supplies cheaper and could also maintain his standart of living with a lower wage, but the interest he's paying for the loan stays the same. Also, if for years he only pays the interest and then sells his capital to pay the principal of the loan, his nominally devalued bakery won't pay the principal of the loan.
I'd say you should qualify your "Deflation is bad". Namely, deflation is bad for entrepreneurs/investors who heavily rely on loans, and especially those cannot learn neither from thought experiments nor experience. Also if everybody expects price deflation even a lower percent become more attractive for lenders. Especially if those are long-time savers.
Call me an optimist, but I really do think that people will learn. If a project is worth starting purely from investor savings then there is a loan percent at which it worth starting from loans. And only foolish investors... but that's obvious.
So if I hoard 200,000 bricks in my house that's going to investment?
Now, that was funny. No, that's not investment. But if you sell the bricks and keep the money, the price of bricks will go down and investors needing bricks will get them cheaper and this way you'll have more investments.
1) Not all what is saved is invested.
2) Deflation makes money-capital more desirable in relation to real capital, but money-capital doesn't produce anything if it isn't invested/lent.
1) And there's no need for it. Saving (as in "hoarding") can pull out of circulation a certain amount of money, but it will not pull out of circulation the produced goods. The one which were already sold by savers.
2) No money-capital doesn't produce anything. But... Money hold as capital (uninvested), lowers the prices of goods for money which is invested and makes the investment money more productive.
Enough, I think. The other points are either minor disagreements, or, IMHO, will add little.