Regular people invest when investing makes sense, when the creation of a thing like a restaurant or a farm or what have you has significant value in and of itself. NOT because they value money, and the value of their money will decrease if they don't invest
Having the power to control inflation to force people to invest is tantamount to setting their mattresses on fire to get them out of bed in the morning so they'll go to work. People will get out of bed--and invest--when it's right for them, and they don't need people like you to goad them into it.
The Great Depression was pretty bad for people trying to get by in life, no?
Anyone who thinks defaltion is a good idea is essentially thinking that their small cash pile will magically grow to be worth more without them doing anything, which seems enormously attractive because it's a) easy and b) there isn't any of that unpleasant risk that comes with investment, and which makes it so hard to decide what to invest in. So everyone who has money stuffs it under the metaphorical mattress, and people who don't have any can't get any because the supply of credit has vanished. Economic growth slows way down.
Any economic situation can be good for individuals who are positioned to take advantage of it, but in macro you need to consider the economy as a whole, through to food and extractive industries etc.
Under deflation the same computer would cost half as much 2 years later, and you would only have half as much income to spend on it.
Under deflation, though, everyone has less money so I have to keep cutting my rate to stay competitive. Now even though I'm more productive I'm getting a lower return on my productivity. Arguably,this is a problem currently facing much of the labor force in the US.
Deflation isn't bad either, it encourages saving, which rather than living paycheck to paycheck as most do today.
Oh wait, centralized banking didn't exist back then? Fractional Reserve Systems didn't happen back then? And yet you have a decade of the greatest bank-runs of US History?
And ever since the fractional reserve system was invented, there hasn't been a national-scale bank run in the US for nearly 100 years?
If you're going to act all exasperated about something, at least get your facts right.
"The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907."
Your solution to the problem of inflation is the abolition of credit.
When I save money, I invest it in productive enterprise. Thus, I have less in my checking account. You could even consider (gasp) that I'm living pay check to pay check!
If inflation encourages those with surplus income to make riskier investments, and riskier investments benefit those living paycheck-to-paycheck (say by increasing demand for their labor) then inflation is to the benefit of those living paycheck to paycheck.
On the other hand, the upper-middle-class to wealthy do benefit from deflation, since they have excess income. If inflation doesn't benefit the less well off, then perhaps there is little reason to punish the wealthy with inflation. Those that would save more in a deflationary economy are already saving though.
So? Why should they put it to "productive use"? Who deems what use is better than another?
Didn't you notice what happened during the recent financial crisis? Capital markets dried up, credit was unavailable to many small and mid-size businesses, and many of them shut down for lack of cash flow during a period of limited demand, rather than any fundamental flaw in their business organization.
Ultimately I don't really like living in a society that has so little slack in it. I'd prefer (not that anyone gives a shit what I prefer) one where most businesses have large equities built into them rather than debts. A business which owns outright the building it occupies is more likely to weather a storm than one which rents or is still paying a mortgage on. That's because it can afford to accept lower yields (not paying an extra $X per month in rent-equivalent to the owners/investors/etc) in the short term for the benefit of still being around.
Slack isn't efficient on any time scale that economists or MBAs care about but over 50 years I think it's quite a good idea. I'd rather own a business which lasts 50 years even if 10 of those 50 years don't pay the kinds of returns I'd like than one which makes better returns for 12 years and then folds.
If most businesses had large equities rather than debts, you'd have a significant opportunity cost. It's not a matter of what MBAs care about (often not what economists care about), but one of what could have been achieved with money that was otherwise sitting idle. The approach you describe often leads to zombie companies that are not actually productive but are able to cannibalize their own assets while making it difficult for more efficient producers to enter the market.
Equity means having control over your destiny, debt means the bankers decide your fate. Choose accordingly.
With this neutral terminology, we're now ready for some actual thought. We can recast the claim as follows: currency dilution is good because it encourages spending and discourages saving. There's no doubt about the factual claim—dilution does indeed encourage spending and discourage saving). But why is saving bad and spending good? This is an ethical judgment that depends on your particular set of values, but it is undeniable that currency dilution transfers purchasing power from savers to spenders. In particular, it's mathematically equivalent to combining a perfectly hard currency with forced confiscation (from savers) and transfer (to spenders), i.e., organized theft. Thus, from an ethical point of view, there is a strong reason not to give dilution the benefit of the doubt.
Regarding the so-called "gold standard", the historical evidence is not nearly as clear-cut as you've been led to believe. Though flawed in many ways, What Has Government Done to Our Money? by Murray Rothbard is a good place to start: http://mises.org/money.asp
As for saving and hoarding, those are not the same either. If someone saves they typically do so via a savings account or a CD at an institution engaged in fractional lending but (within the US and within limits) a government backstop to prevent loss of savings. Hoarding is putting your money under the mattress where it's absolutely not doing anything.
The fact that your argument requires redefining basic economic terms should be a clue that there is something terribly wrong with your priors.
In this light, let's consider four activities: spending, investing, saving, and hoarding. Currency dilution encourages the first two and discourages the second two. It also systematically transfers purchasing power from savers/hoarders to spenders/investors. Can you build a case that the benefit from dilution outweighs the costs? Dilution certainly encourages "economic activity" (for certain values of "activity"), which you seem to regard as axiomatically good. What is your justification for this?