This is a common misconception, usually spread by traditional economists with little idea of how bitcoin works. To choose one clear explanation of the many out there you can google:
Bitcoin, however, does not have this [deflation] problem because unlike the physical
currencies of most countries, bitcoins are infinitely divisible. Even
if only one bitcoin remained, it would be sufficient to run a
substantial economy on, based on the ability to use tiny fractions of it
like the Satoshi.
If even the Satoshi were to become too highly valued/unavailable for
commerce, the Bitcoin protocol could be updated to allow even smaller
denominations. So the usability of bitcoins is safe from the effects of
deflation.
Any talk of cryptocurrency inflation must also take divisibility into account - it is fundamental. The reason it is not usually I suspect is because most economists have never encountered the near-infinite divisibility concept and do not know how to model it.
Now Safecoin on the other hand is a big wildcard - From the specs seen so far it will not be divisible like Bitcoin is (as some may note I have harped on about here and elsewhere in an effort to get some clarification on). This one issue could make or break Safecoin as a general use unit of account Vs being only a safe network-use only resource allocation token - IPO investors might revolt over the latter outcome but unless divisibility is addressed in an intuitive manner I really do not see how it will make the unit of account grade.
P.S. The stackoverflow link I posted also addresses some of the other points you are making, for example on the subway sandwich:
Rick Falkvinge also raises another excellent point regarding deflationary economies.
If, as economists expect, people would decline to buy something today as
opposed to next year for half price, then it should be the case that no
one ever buys computers, right? But in fact, the computer industry
thrives despite this continued trend of “whatever something costs today,
it will cost a fraction of that within a few years”.