Well, sort of. Its designed so that the number of bitcoins in circulation approach some constant, but that doesn't tell you anything about the value of bitcoins, because the long term value of bitcoins is going to be something like the value of the market served by bitcoins divided by the number of bitcoins. So if, say, Silkroad gets shut down by the authorities then I expect the value of bitcoins would crash. Or if banking regulations change to make using bitcoins more cumbersome, or whatever. And you'd expect to see the value to bitcoins drop during recessions.
I'm referring to the real inflation of the currency: There is no mechanism for new bitcoins to be created when all blocks are confirmed. You need to create new currency to avoid deflation because populations grow.
Deflation is just another word for long periods of decreasing prices (not VALUES). What's wrong with that? Because of their infinite divisibility (it's equally easy to spend 1 millionth of a Bitcoin as it is to spend 1 Bitcoin) they do not share is the problems deflation poses to traditional money.
Deflation does encourage saving over consumption, yes. But I love the fact that products in the electronics markets have had long term predictable price declines over many decades.
