For deflation can be divided into the good, the bad and the ugly (pdf).
Germany was in the process of industrialising: it could import millions of peasants into its cities, and did.
The US, Germany and France all went on the gold standard in 1873.
Under the gold standard, the price of gold sets the the price of money since money has a set exchange of rate of money into gold.
And just as the initial expansion of the gold zone was bad for Britain, so too there was a similar adverse effect for Germany in the creation of the Eurozone.
But Germany then went through a series of supply-side reforms (particularly labour market reforms) which put it in a much better position.
Of course, a collapse in income expectations and income also becomes rapidly a problem for creditors, as their debt-assets (one person's liability is another person's asset) become increasingly threatened the sharper and more sustained the collapse in income and income expectations is.
The problem with the Great Depression was "ugly" deflation--a massive and sustained drop in prices leading to a massive and sustained drop in income (since income = price x quantity) leading to mass insolvencies and financial collapses and crises. Because central banks (led by the Bank of France) hoarded gold, driving up its price, and therefore the price of money--which was at fixed exchange rates to gold--therefore driving down the price level in the gold zone (since the price level is the reciprocal of the swap value of money). With both the gold standard and simple inflation targeting, the central bank takes responsibility for the maintaing the "value" of the currency (either in gold or on a set rate of change of the price level) but no responsibility for income expectations.
German adjustment was helped by higher income growth in the Mediterranean countries; now it is the latter countries who need to do painful adjustments to make the Euro work, Germany is refusing to return the favour of accepting higher nominal income growth via higher inflation.
Applying the lessons of the 1873-1914 apotheosis of the gold standard, and grasping how simple inflation targeting is somewhat like the gold standard, enables us to see what is actually behind the phenomena Kohler is discussing.
That is, if P is the price level, the swap value of a unit of money is 1/P. the money price of x dollars in dollars is x dollars.) Still, the price (swap value) of money is a supply-and-demand matter.