Wow that completely takes the cake for self contradiction and stupidity.
First off a business can not 'diversity' its way around deflation, because deflation is a broad spectrum change in money valuation that is affecting ALL entities in the economy and all sectors of the economy. Further more if everyone tries to diversify at the same time its just a musical-chairs everyone is now just encroaching on everyone else, and because businesses have core competency in their original area of business but not their new business the diversification is going to lower total productivity and yes lead to reduced profits and many of them going out of business which is NOT what we expect in a growing economy.
This is exactly why diversification of production occurs, because deflation (and inflation too) affect all sectors of the economy.
The response to a general economic slump IS what we expect to see from deflation because deflation will CAUSE and be caused BY general economic slumps. This is just as we expect inflation to cause a general economic heating up and a general heart up in the economy will cause inflation. This is the very basis of economic cycle theory and its a very simple explanation, the equivalent of Boyles gas laws for economics.
No. Deflation is a stronger valuation of a currency - and completely non-causal when it comes to 'general economic' trends (like slumps). If anything deflation causes more transactions.
A business can not get a wash on selling its product at a lower costs for 'more valuable money' because businesses have lots of FIXED COSTS that are on CONTRACT (not least of which is labor, energy, building lease). Those fixed costs remain in fixed nominal currency units meaning they explode in real costs and eat away all the profit margin that may have existed even if marginal costs to make each widget are at parity with new marginal sale prices of widgets. So the business is destroyed by deflation and if you had 1 sentila of knowledge about real business you would know this.
No. 'fixed costs' are rarely set in stone. Part of managing any business is being willing to adjust such costs as needed. Contracts likewise aren't set in stone. In the scenario of deflation, with currency being worth more there are going to be lots of contract re-negotiations.
Now you speak as if your don't know the meaning of the world deflation, it IS the increase in purchasing power of money so YES prices decline, if their wasn't a decline in prices then their would be by definition no deflation. And yes business (all of them) WILL change their prices to stay competitive, (they will either do that or go our of business), that is how free-market competition works, this is well understood and is what happens when the ratio between supply and demand changes. Under deflation the price point is dropping because their is either more stuff or less money.
You're assuming 100% efficiency in the economy as a whole. That's extremely unlikely (I hesitate to say impossible). When have you ever known a business to lower prices more than they were forced to? Prime example, gas or lux tax increases by 25cents and prices at the pump go up 45 cents.
Also you seem to be stuck thinking of "price point" as a specific number. If you're 'price point' is 1 dollar and your dollar suddenly becomes worth half what it was before... your new 'price point' becomes 2 dollars, it's not about the amount (aka the number) of currency collected but the valuation of it.
You just can't avoid contradicting yourself, first you say it 'wont cause hoarding' and later admit people will 'save and pay down debt' with some of their new surplus. If that particular person was not doing those things before then this is a decrease in the percentage of their income that was spent. And that means monetary velocity is going down, it will take longer for each unit of currency to make a circle through the economy so it now has less opportunity to bid on goods and services and this allows prices to fall further, this reduction in velocity can more then counter the increased value of money such that the net value of money moving through the economy goes down and when the that goes down it means the economy is contracting not just nominally but in real terms.
It sounds like you're still confused between the valuation of the currency and amount being exchanged. Velocity as a metric doesn't apply to bitcoin in economic terms, since we aren't anywhere near the soft limit of a satoshi being over-valued to the point that nobody can spend it. This is one of the design strengths of bitcoin, we can divide it to whatever decimal place we need to.
Some people might spend the more valuable money but because we know people will be losing jobs left and right in the economic downturn their will be a broad mood of fear and a desire to save in order to protect oneself in the event of that job loss hitting you, so a huge jump in savings is what ALWAYS occurs during an economic slump. This creates a spiral of more businesses closing, slower monetary velocity, more deflation, the classic deflationary spiral that has been observed for CENTURIES (note also that unwinding of debt adds more fuel by contracting money supply through the banking system).
In your mythological reality some kind of never before seen upward deflation spiral would need to be happening in which velocity increases because people spend more (nominally) then they were previously and businesses expand despite being killed by fixed overhead costs. All of this is a fantasy in direct contradiction to the logical responses that businesses and individuals would actually have to deflation and in complete contradiction to all observed economic contractions.
'never before seen upward deflation spiral' Man you get points for comedy with that one. You're so used to evaluating everything economics related in terms of debt based currency and the assumption that inflation over time is normal... that a deflationary effect scares you. The same economic 'laws' do not apply inversely to a free market using deflationary currency. They may apply in some way, but those haven't really been well defined yet.
Try to get over the knee-jerk response of 'deflation means i make less money' --- while technically true it doesn't mean what you think it means. As the value of a currency goes up - the real value being exchanged will increase as well as allow an increase in the value people are able to save (what you call hoarding) - it won't cause any of the bad effect you associate with it as long as it's easy to cut into smaller and smaller pieces (which bitcoin is). It will in the short term cause some portion of businesses who aren't willing to adapt to go out of business... but the beauty of a free market is that this market space will then be filled by other companies providing whatever good or service was needed.
