Well put.
I agree with you.
Today the markets are not large enough to support multiple merchants who's input is in fiat, hence it will be in their interest to sell the newly acquired BTC and withdraw the fiat from the system straight away, in effect damaging the markets.
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The OP premise is that by using merchants to buy goods we would be "helping" the Bitcoin economy. I stated that the current economy's nature is not what everyone thinks it is, it has changed dramatically over the last 4 months, hence today, by using merchants to buy goods and pay them in BTC, we would be damaging the economy.
This is the issue I struggle with ATM. Realizing that every transaction that goes through Bitpay results in an immediate sell order at whatever the current best bid price is on Mt. Gox will actually help drive the valuation lower. We need more speculators and big investors putting the money up to counterbalance this with an upward trend.
My original point was that rather than sitting on the sidelines and not doing anything, and rather than risking money by buying
BTC with money that you can't afford to lose (I don't advocate Bitcoin as an investment to anyone that can't afford to lose the investment), if you spend the fiat you would normally have spent by going through a bitcoin merchant, you will help stimulate the development and adoption of the economy.
I guess I would also argue that buying
BTC with fiat then immediately spending and having bitpay convert it back is basically a zero sum game. However it does result in more money spent in the bitcoin ecosystem, which hopefully adds more credibility.
In retrospect, I see my mistake as emphasising on the potential damage buying goods with BTC could cause to the economy. I should have stated that in today's climate, such damage will be minimal, negligible, irrespective of the good intentions and the efforts of the people to "help" the economy. I also should have stated that if one wants to help the economy, one should have gone and purchased BTC, contribute to the driving the price up, then hold for long period, until the markets stabilised to +/- 0.01% daily fluctuations. That will be the sign to watch for. AT that time the Bitcoin economy will be deemed mature, the short-term speculators would have left long-time ago, and the Bitcoin would have been described as a great store of value, very similar to the precious metals.
The ideal outcome.
However currently Bitcoin is experiencing some of the growing pains that would be expected at this point. I also expect a ton of new bitcoin startups to appear, as well as scams and schemes. Again, part of the growing pains. It all comes with increased valuation and exposure to the masses, and is something that needs to happen in any maturing system.