[jnordwick]

With the fixed supply you have three problems:

1. The value (not necessarily price) of the currency will fluctuate wildly since they money supply cannot grow and shrink along with demand for it. The fixed supply will make these swings even wilder.

2. In a currency which is constantly deflating at say 3% a year, you would never want to take a loan unless you can cover that 3% plus any other return on capital you require. You're going to be paying back BTC that is going to be more expensive every year passing. Imagine a 5 year contract for 10 BTC a year. The next year is it 10.3 BTC (deflation adjusted). And at year five you are paying back BTC worth 11.6 BTC.

3. If you are on the other side, any counter party (default) risk is also huge since you are losing an asset that you could have held on to for zero risk and still gained 3% a year.

To enter a contract you need a stable currency. It is like building a house with a yardstick that keeps getting longer and longer. And it is very difficult to figure out what the value and exchange rate of BTC will be in a year from now, much less longer.