> Under the veil of ignorance I would choose to live in a low/deflationary country than a high inflation country Well, few people would disagree with you that

> Under the veil of ignorance I would choose to live in a low/deflationary country than a high inflation country Well, few people would disagree with you that high inflation is bad. Between steady low inflation and deflation though, there's problems with deflation related to the fact that it's hard for the interest rate to go below zero (since people can just put money in their mattress to get a zero return). Basically, the Fed lowers the interest rate to limit recessions (and raises it to fight inflation). But what really matters is the real (inflation adjusted) interest rate. If the Fed cuts interest rates to zero, but deflation is 3%/yr, that raises the real interest rate to 3%. And raising the interest rate is itself deflationary, so I'm sure you can see the problem with this - it's a positive feedback loop. Deflation raises the real interest rate leading to more deflation, less investment, more loan defaults, etc. That's the classic deflationary depression spiral that often ends in massive, rapid currency debasement and/or political instability. Because that's so undesirable (and historically the currency ends up debased anyway after a lot of chaos) there's an argument for targeting a small, but positive, amount of inflation every year just to be on the safe side.