[erispoe]

> I'd imagine this leads to people mindlessly buying more and more stuff, to use up that money before it loses its value.

They don't spend it mindlessly, they still allocate it relative to other opportunities. Low but positive inflation makes a lot of investments relatively more attractive, therefore incentivizing people to invest in economic activities, instead of sitting on their cash. Deflation creates a dearth of resource available to invest.

Plus it's a redistribution mechanism. If all you have to do is to sit on your cash for it to grow, then it's a rich becomes richer system. If you have to invest that money, there's an uncertainty, a risk, and opportunity for people to multiply their starting capital.

Some early bitcoins buyers are saying exactly that: "I got in early, I'm set up for life, if you didn't get early enough too bad you're gonna stay poor". It's not really how we'd like an economy to function.

> [...] people would have to spend it only on whatever they actually really need or desire. Is that bad?

It's bad if you want a growing economy. And usually technical innovation comes from relatively niche investments that no one really needs right now.