Just imagine you want to exchange a currency because you go traveling and the exchange tells you "Sorry, nothing available right now, gotta come back in a few weeks". That's what would happen if there is no liquidity.
Not really. The spreads were terrible before HFT market making.
Speaking personally, I'd even be happy to wait several seconds to see if someone else is willing to pay a better price.
Why? If the HFT firm was willing to offer me $X 2 milliseconds ago they are probably still willing to offer $X now. It isn't like there has been time for anything to change; there are going to be short periods of time where there is literally no new information.
And they are just as likely to be offering me more now than less as conditions change.
The average person may be overly paranoid about HFT, but it doesn't make sense to say they benefit from it, because they are not going to be in a position where they benefit from an execution in a fraction of a second.
Price improvement of fractions of a penny has gotten silly too. It's easy to think of it as more significant than it is, until you figure it as a percentage (or the spread for that matter).
It's kind of like how ultra-sensitive people are to gas prices...
Smaller spreads lower costs for everyone: institutional, retail etc.