So what happens when the maximum number of bitcoins is reached and new people want to enter the system? For example, if someone wants to start using bitcoin but nobody is willing to let any go? Wouldn't that bring the bitcoin economy to a halt?
Here's another possibility I am sure nobody thought of, what if a large hoarder of bitcoins dies unexpectedly and nobody in the real world knows about them? Will those bitcoins just exist in limbo and end up gumming up the system because they will never get spent and no new ones will ever be created to replace them in the economy?
If all 21m have been mined, and 0 are circulating, its a dead currency.
If all 21m have been mined, and 21m are circulating, miners get transaction fees.
If all 21m have been mined, and 5m gets 'lost', the remaining 16m would go up in value.