I agree that any government metric should be doubted, in fact I am a big critic of the CPI. But the point is that macroeconomics uses the terms price inflation and price deflation to refer to the prices of the CPI, and using it in another way just adds confusion. There is no doubt that house prices are down (and they still have some way to go), there has been an stock crash (and another might be coming, probably smaller though), and day to day consumer goods prices (CPI goods) have remained flat. Semantical discussions are a bit pointless in my opinion and I prefer to use the definition the majority of economist use.
And yes, the gov CPI is a big scam, but because the CPI is always reported lower than it is in reality! not higher. This happens thanks to the hedonic method and other inventions. Check shadowstats.com : http://www.shadowstats.com/alternate_data/inflation-charts You can see that even during this crisis prices have been rising quite fast, which matches better the real life impressions. This CPI manipulations allows the government to pay less in its obligations like pensions, because they are updated by the CPI. Also, the real GDP number is corrected by the deflactor that comes from the CPI. If the CPI is lower than it should the real GDP number is bigger... By just changing a method the economy is "growing" faster! Isnt government statistics great?
And the panic of 1907 was only possible because of the banking laws approved by Lincoln at the end of the civil war, that centralized the credit around the New York banks (one of the main reasons Wall Street grew so big).
The most funny thing about all this is the legend that Herbert Hoover was a free market proponent and did nothing when the crash of 1929 happened. Hoover was the Secretary of Commerce when the 1920 crash happened (and btw, the 1920 crash happened because of the bubble created by the Fed to finance IWW) Hoover urged the president to intervene the economy and raise gov spending. But the president dismissed Hoover and listened to his Secretary of Treasury, Menlow, who recommended lowering taxes and lowering gov spending. The crisis was over quick. Hoover tried to intervene and created some government programs from his position as Secretary of Commerce, specially subsidizing farming businesses, but he had not enough power and did not had a significant impact in the economy.
Fast forward to the 1929 crash, and now Hoover is the president, and Menlow is still the Secretary of Commerce. Menlow again recommends the president a non interventionist approach to the crisis, but Hoover is a staunch interventionist, and not only dismisses his advice, but also teams with the Subsecretary of the Treasury to implement the measures that Menlow was refusing, in effect putting Menlow out of power. Hoover even said that he was going to put the USA government to work like never had been seen before. And he did.
But Hoover's rhetoric used the market language while FDR rhetoric used the labor language, and because of that some historians portrayed Hoover as a non interventionist free market supporter, when in reality it was the opposite. In fact, FDR accused Hoover repeatedly during the campaign of being an interventionist and that it would prolong the crisis (for some reason he changed his mind once he got in power). Even one of the subsecreatries of Treasury of FDR said that Hoover reforms where a big help and that the FDR just renamed and continued most of his programs.
It is so ridiculous to portrait Hoover as a non-interventionist...