I think there's plenty of uses of a stable coin (it doesn't seem like you're arguing against that). This is an attempt to make it more stable, and it requires no change to core protocol to do it. Seems like an easy/reasonable thing to try.
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Can we just use existing stable coins that actually hold their pegs instead?
No one is forcing you to use HBD.
They don't, not all the time nor perfectly. It's all a work in progress.