This is an interesting thing to think about. Here's my take.

There's two fundamental choices if you want a truly passive investment: own money and sit on it, or own capital (equipment, land, etc) and sit on it.

If money loses value over time, people will prefer to have passive capital (empty houses, vacant land, precious metals sitting in storage, etc) rather than a big cash balance. Is that a good thing?

For the economy as a whole, I think it's clearly better if capital is used by business rather than sitting idle: it makes labour more productive, or reduces costs, or both. Either of which are good for increasing wages and increasing GDP.

That is to say, you want passive investors (who are busy spending their time and effort on other things) to just sit on money, and active investors to be the ones that own society's real capital because they're the ones willing to figure out how to best put it to work.

Active investing should be more profitable: if you're buying land and building a house and selling it to someone to live in, great; but if you're buying a house, leaving it empty, then selling it; you should be making a loss.

All of that is just another way of describing a deflationary currency: one where a house costs $1M today, but, if not improved in the meantime, might only be worth with $900k in five years time.

I think the counter to this is essentially the idea that once people buy capital they'll be tricked into using it as an active investment. But I think that's unrealistic; you just end up having to hire someone to manage your investment which leads to principal/agent problems.

Eg instead of sitting on $1M in you back account you buy house and get a real estate agent to lease it out. But then the agent doesn't care that much about making sure the the renter is happy or making sure they don't damage your property, just that they get their commission.

Likewise for investing in stocks - do CEOs really care about the company, or just about their bonuses and getting invited to the right dinners? (Do shareholders even care about the company?)

People complain about massive CEO salaries; but what else would you expect when their ultimate bosses are all passive investors?

With deflationary money, you don't have passive investment at all: you either just hold money, or you spend it on something and build a business.

Borrowing becomes harder, but if more capital is freed up from being held by passive investors, it might turn out to be a wash. On the other hand, I think borrowing should be much harder for other reasons anyway.

I have a hard time steel-manning the argument that playing with interest rates is a good way to fight recessions in the first place though, and that seems to be the main argument for why money should be inflationary in the first place.