Did The ECB Send The Wrong Message That Triggered The Eurozone Crisis?

This article contrasts the actions of FDR in the early 1930's with that of the ECB in the spring of 2011. FDR sent a message of ending price deflation and returning prices to their pre-depression level. The expectation of inflation helped to stimulate spending and investment. The ECB raised interest rates by a small amount because it was worried about inflation. Although the rate increase was modest, it was sending a message of price deflation. Price deflation is the last thing that debtors want to see because it makes the real cost of their debt even higher. It also discourages spending and investment. Cash becomes king during a deflation because purchasing power increases as prices fall.