The big, #1 reason investment is bad during deflation is a topic that should interest a lot of the readers of this site, and indeed, YCombinator itself: it is i

The big, #1 reason investment is bad during deflation is a topic that should interest a lot of the readers of this site, and indeed, YCombinator itself: it is impossible to sell manufactured goods in a deflationary economy at a profit. The problem exists any place there is a latency between when you buy your starting materials and when you sell the final product. In a normal (break-even or mildly inflationary economy) you start with capital that has some amount of value (purchasing power). Time passes as you make the product, and you can sell it at an equal or greater (profit margin) amount which allows you to regain your initial capital investment. That completely breaks in deflation. The value of the money rises ,and yes, this means people are slightly less likely to spend it, but the problem comes when you want to sell your product. Say you invested $100 to make a product with the expectation being able to sell at a 50% profit margin. Except during the time it took to you to make it, money deflated, and the purchasing price of those same starting materials is now $50. Adding in the same 50% profit says your now can only sell your product at $75. The deflation that happens between investing and selling not only eats your profit margin, it can easily eat your ability to recover your initial capital. Investment is ludicrous in an environment like that. So we go with the "worst method possible, except for all the rest": mild inflation that is hopefully small, manageable, and trivial.