House prices would be much much lower because they are not going to be based on the price of 'funny money' that is printed out of thin air (Unbaked Fiat Money).
But if house prices are lower, then not as many will be built. Which will drive the prices higher. Or lead to a permanent deficiency in supply.
On the note of houses though, if bitcoins became the only currency that was used in the US, you could buy a house for what, 0.10BTC?
I agree with the OP.
A deflationary currency would result in very little loaning and lots of hoarding. It remains to be seen whether an economy could actually survive in such an environment. Yes, it would be great if everyone saved more. But saving more also means spending less, which means fewer people buying the farmer's goods, or the clothes that you make, or whatever else.
Or you could put it in an interest bearing escrow account. It's like saving for necessities and the farmer would be able to borrow against it.
This, in turn, forces business owners to raise prices to stay in business, which ultimately means you will get less for your bitcoins.
At which point miners sell like rabbits on crack to take advantage of the rise. and suddenly more liquidity is available.
Do people understand the genius behind the difficulty parameter or not?
The more times money can exchange hands in a given time period, the better. It drives prices down and helps make things affordable for everyone. Deflation means that money will exchange hands much less than in our current economy, and that COULD have dire consequences on the economy. Lots of lost jobs, etc. But we'll just have to see what happens when we get there, if we get there.
If paypal weren't so paranoid I'd still be doing side market OTC to help others get in.
I doubt you would find anyone willing to give you interest on a deflationary currency that they can't loan out in the first place.
I wasn't talking about miners - I was talking about real-world businesses. There will come a point when miners will not generate enough bitcoins to put any real liquidity into the market.