I'm mean specifically hoarding the medium of exchange. Hoarding other liquid assets or canned food doesn't hurt the economy in any way.
Assuming the proportion of your income that you hoard is unchanged, absent transaction costs, the decision on what instrument to use for hoarding is irrelevant from aggregate point of view, as logically that which you do not hoard you need to spend and vice versa.
This kind of price deflation (and credit/debt deflation too, just excluding "growth deflation") hurts the economy because it hurts merchants, investors (well any borrower in general) and destroys the credit/debt, thus destroying the financial market. It destroys businesses that would be profitable otherwise and that springs unemployment no matter how predictable the deflationary bust is. Give me a business plan that takes into accounts for example, 20% predictable price deflation.
This is simply wrong. For my paper on Bitcoin economics (to be published soon), I did a simulation of business plan profitability in a falling price level, and even at 50% price deflation (i.e. halving of prices within a year) the simulated merchant was still profitable. While he only had a 0.11% RoI, he obviously had more than double the capital at the end of the year. And this is with legal tender laws being a different currency and after taxation. The other merchant which was using legal trender for trades had higher nominal RoI, but less capital at the end of the year. They both were using the same markup (i.e. selling and buying at the same market price).
As one of the papers I mentioned earlier explains (the one at mises.cz by Krupa), the point is that a businessman's income needs to be higher than his costs. As long as he predicts the price development correctly, he can make a profit irrespective of which direction the prices go.
It was you who bring the term "shortage of money", not me. That's kind of Keynesian. It's not about quantity, what's important is velocity.
I disagree again. Velocity is just an abstract concept, from a point of view of an individual, it is unobservable. Either an individual has enough money or doesn't. The "shortage of money" I was referring to is simply a temporary imbalance between demand and supply.
I've agreed that runaway deflation (in abscence of intervention) won't take long to disappear, but that doesn't make it less destructive.
But if the money supply is inelastic, than the only thing that can cause this are changes in demand. If this has a detrimental effect on some businesses, that's simply an accurate response to the demand of the consumers. It's what the customer's want. That's the purpose of all human action, to satisfy consumption.
So do you agree that businesses would accept other monies to keep on selling?
I'm not against future markets but they're not the panacea. Will they make hyperinflation less harmful too?
I think it is possible that disruptions can increase acceptance of other currencies. I noticed, for example, that various alternative systems, like the Wörgl Schilling, the WIR, the Greek TEM and so on seem to popup during economic crises. However, since I tend towards the Austrian explanation about the sources of crises (elastic money supply), I am not sure this would be the case in a system with an inelastic supply.