Can you please call my bank and convince them to let me pay off my mortgage in Bitcoins?
(I say that as a joke, but I just realized it's theoretically possible you could make that happen)
Correct. I can't pay off my loan in gold, silver or rhodium either. The bank simply won't take it. Need the local currency.
Even shops that sell items priced in bitcoins almost without exception obtain those items in their local government's currency, or another government's currency if the item is imported.
Sure BTC is great. But most of life revolves around fiat -- especially debts that were issued in fiat. And who the hell wants to take a debt out in BTC when it could go up 20x by next year and they'll be declaring bankruptcy?
Taking out a loan in BTC to be repaid in BTC would guarantee bankruptcy. The lender is hardly going to lend out BTC if the value in USD$ will increase without charging a hefty amount of interest, and how do you pay back a loan in BTC when the commodity is being hoarded in the hopes its value will go higher? More people will be chasing a dwindling supply of new bitcoins to pay back loans. Would be fun to watch however.