But an increase in hoarding means a decrease in the time preference. The decrease of the interest rate is a move of the economy towards an equilibrium, reflecting the choices of the consumers.

As I wrote already, merely because there is a falling price level, people do not magically turn into misers. Just like people do not magically buy less electronics if they get cheaper. It's the same reason why now, in an economy with a rising price level the seller not postpone sales merely because they might get more expensive in the future. It simply makes no sense.

It would, because the interest rates would equilibrate at a level where the currency choice was irrelevant.

Here's the problem. The relationship is not linear. I did not understand that myself until I did my simulation.

That the relationship between real interest rate and price level changes is not linear (i.e. changes in the nominal interest rate). The theory did not explain this sufficiently well for me to grasp, but once I did the simulation it became obvious.

I was surprised, but in retrospect it should be clear. As long as the difference between revenue and costs is positive, there must be a positive RoI as well. And the average RoI on the market is the interest rate.

The data is in a google docs, which I'll make public once the paper is published (I hope this happens over the summer). So you can look at the formulas and adapt the variables to see how it changes.

But again, an increase in hoarding reflects a change in the consumer preferences. A drop in the interest rate is the correct reaction.

I think the author of the paper about LETS velocity is Dr. Hugo Godschalk, I don't remember if it's in English or German, I only looked at it briefly, I don't even have it in my bibliography. You can google for it if you want.

But that's exactly where the misconception is. If a consumer does not perceive a "shortage of money", then where's then macro problem? There is none.

But as I explain above, for a consumer, velocity is a meaningless concept. Demurrage, in my opinion, merely motivates people to spend more. But it's merely a trick to confuse their economic calculation. Assuming people do not fall for the trick and there are other liquid assets, absent transaction costs, again the effect should be nullified.

A steady, predictable falling price level (first level derivation) would not cause any problems. Only an unpredictable change in price level can cause the problems you are describing. But absent changes in the money supply, this can only be a result of a change on the demand side, in which case it would be a proper response.

The real interest rate would be the same. But as I attempted to explain above, that does not mean that the difference between the two nominal interest rates would be equivalent to the difference in the inflation rates. It's not a linear relationship.