I've never seen convincing evidence that inflation is a good thing (to be honest I haven't spent my life searching for it).
It is however pretty easy to see why inflation is good for people in power, in particular governments; it's a hidden tax. And yes it does encourage people to spend, in fact it encourages people to borrow and then spend. Even borrow so much that it crashes the system.
So as far as I'm concerned the fixed money supply is about the only good property of Bitcoin. Other than that it's a ponzi scheme and it's a lot more cumbersome than electronically traded gold.
A slow, predictable devaluation in the currency encourages individuals not to store large amounts of value in the currency. It doesn't simply encourage people to spend; it also encourages people to allow better-positioned entities to allocate capital, which is why new business ventures don't need to go door-to-door to fund new factories. Individuals are crappy at allocating capital, because they have small amounts of it and are too busy mastering Dentistry or Architecture to build expertise in risk management.
Unsustainable debt is an orthogonal issue. We've encouraged unsustainable debt not by allowing our currency to inflate, but by failing to regulate lenders and by offering them incentives to ignore risk management.
Again, though: this "is a little inflation good, and is a little deflation bad?" thing is a fake controversy that dignifies Bitcoin. Bitcoin isn't a currency; it's a gambling game powered by a distributed transaction system that may or may not on any day function well enough for two parties to exchange dollars for off-label hosting services without either one losing their shirt.
One could make a case that moderate inflation isn't a bad thing. Inflation generally happens when the economy is producing close to its capacity (think of a factory working overtime to meet a lot of demand - at some point they make the same amount of money in fewer hours simply by raising their prices). This means that you'd also expect pretty decent employment, etc. You certainly don't want runaway inflation, but a healthy economy would have some.
It is however pretty easy to see why inflation is good for people in power, in particular governments; it's a hidden tax. And yes it does encourage people to spend, in fact it encourages people to borrow and then spend. Even borrow so much that it crashes the system.
So as far as I'm concerned the fixed money supply is about the only good property of Bitcoin. Other than that it's a ponzi scheme and it's a lot more cumbersome than electronically traded gold.