Bitcoin must be valued first in order for merchants to want to accept them. Saving bitcoins is a signal to the market that they are valued. This helps increase demand and merchants will jump into the market and offer to trade their products and services for bitcoin. The recent press and subsequent price spike drew in a lot of merchants who saw the value of getting paid in an appreciating currency.
This is probably true. My first instinct was to tell you that as a business owner, I can tell you that we don't care if a currency is appreciating or depreciating. We care about getting more customers and better customers. But I thought about it and changed my mind. When the euro was gaining so much against the dollar back in 2007, I made a special effort to find more clients who paid me in Euros. So clearly I do care about whether a currency I'm paid in is appreciating or depreciating, and others probably do as well.
I didn't say it was my business what anybody does with their bitcoin. I merely suggested that, if you want to use bitcoin, park your money there instead of in dollars. This creates a demand for bitcoin - helping to increase its value and purchasing power. Then spend it with vendors who supply products and services that you would have bought anyway. Save the rest in bitcoin - again creating value for bitcoin and increasing potential demand. It would be silly to spend your money on things you don't need just because someone wants you to "stimulate the economy".
Looking back, I twisted your words, so it's only fair you did the same to mine. To be clear, I'm not suggesting that people buy things they don't need in Bitcoins. I'm suggesting that they use their massive collections of Bitcoins to buy the things they do need. And maybe they're doing so, who knows? And the idea that large holders of Bitcoin will come out and spend coins on crap they don't need is ludicrous at this point. It's not going to happen, and that's not what I'm advocating.
My concern here is not so much "stimulating the economy" as it is marketing the economy. There's a subtle but important difference. I'm not suggesting that people go hire workers to dig holes and fill them back up for the sake of stimulating the economy. I'm suggesting that people spend Bitcoins -- on things they need -- so others will hear about them. Over the past few weeks, I've come to realize that the absolute most important thing for Bitcoin at this stage is publicity -- good, bad, or in between. I'm also urging people with lots of Bitcoins to make smart investments in infrastructure. Clearly it's needed and it's in their interest to support Bitcoin.
I am attracted to the idea of a deflationary economy, that's one of the many reasons I am intrigued by Bitcoins. Clearly, the inflationary model leads only to boom and bust cycles and debt. That said, Bitcoin's success is not the foregone conclusion many supporters seem to believe it is. I hope I wrong about this -- I actually am happy to re-evaluate the evidence and admit when I'm wrong (see above). And perhaps in six months I'll come back to this thread and eat crow. But it doesn't take an economist to understand that if all the holders of a new currency hoard it, never spend it, and never attract any new users, it likely won't succeed *as an actual currency*. In that case, Bitcoin may still succeed as an asset class, but my hopes for this stroke of genius are much higher than that. I want to be able to spend Bitcoins anywhere in the world.
