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RomeoStevens comments on Bitcoins are not digital greenbacks - Less Wrong
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One thing that bugs me about deflationary criticism is that it seems very asymmetric. People and institutions are able to adjust their future expectations for inflationary conditions but not deflationary ones. "People don't want to spend in a deflationary environment" also flies in the face of talking about the price crashing, usually just a paragraph later. Clearly people have price levels at which they do wish to consume. That this level is different in an inflationary environment from a deflationary one is not a death knell.
That seems right to me. In addition it seems that people who harp on Bitcoin's deflationary quality are failing to make a distinction between expected and unexpected inflation/deflation. In particular, I've noticed a number of people making the "deflation hurts borrowers" claim. This is only true if deflation is surprising and unexpected. Otherwise real interest rates adjust to take deflation/inflation into account.
The slow increase in Bitcoin supply is not going to surprise anyone, it's planned and well-known. Demand for Bitcoin should also become more predictable over time as the uncertainty is resolved and the currency matures, becoming less like a highly volatile penny stock and more like a stable blue-chip.