Don't miss the boat!
For the sake of explanation, imagine a world where Bitcoin is the only currency. Let's also assume that in this world, Bitcoin gains value at 10% per year.
Now, you are an entrepreneur setting up your company. You are going for the grocery retail market, which presents a free cash flow return rate of 8%.
In this scenario, you can't get any investors. Investors are faced with two options: a) Stuff bitcoins under the mattress and get a return of 10% with zero risk; or b) Lend bitcoins to you, get a return of at most 8% (or you'll go broke) and face a non-zero risk that you'll go broke and they lose their beloved bitcoins.
For comparison, with the current economy, currency loses 2-3% per year, so investing in your business has an effective return of 10% to 11%, so if the risk is below this threshold, investment is possible.
Please correct me if I'm missing something, I took macroeconomics in college but I've forgotten a lot.
Such a world does not exist and never will. Bitcoin is not designed to be the only currency on Earth, if in fact it may be considered a currency at all. It's also not the first asset ever to appreciate in value. For instance, the price of oil rose sharply during the 1970s. Did grocery store investors all decide to pull out of the lucrative grocery sector and go all-in on oil? How did we eat?
The "but we can subdivide!" is not an answer.
"Deflation" doesn't even relate to assets people aren't forced by law or other circumstances to use for regular commerce. For normal, non-currency assets like that, we say "appreciation" instead of "deflation". If 6 billion people decided to "hoard" BTC tomorrow, I guarantee there would be plenty of dollars/rubles/whatever available for investment, lending, and spending.
Honestly the hoarding argument is dumber than the precision argument, so I tried to give Stross the benefit of the doubt.
Deflation is only relevant if we're talking about BTC as a currency, which people do and therefore it's part of the discussion.
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It is not about lack of precision. It is about the change of purchasing power of a unit of money you currently posses.