@ Kitty,
Some of these homes will have very little recovery. Even earlier this summer there are cases of some old rental homes that went to foreclosure due to the landlords making bad investments. What I was seeing is tons and tons of housing stock in either rundown or emerging neighborhoods for $8000 to $20,000.
Part of me wanted to run with a fistfull of savings to grab a cool looking old house for that cheap. There is a real fear though, of what is going to happen when you have an entire neighborhood full of homes like that. Not a situation I want to sink rennovation money into.
If we can pull off a quick recovery or even stability some more desirable homes could recover 50% of their value. But markets where homes jumped to $800,000 due to the frenzy when they are really worth about $250,000 are going to be very hard to recover.
I think I share a real frustration with many people. We just do not know enough and we don't have a source we trust to tell us where we really are right now. The govt. has a habit of either lying to make things seem rosy to avoid a panic or misrepresenting things as a means to a specific ideological end. The financial sector has no credibility left. Paulson and Bernanke, hmm hard to tell. Bernanke I at least put some stock in what he says since he was a scholar for so long but he is still appointed by Bush and I don't know if that impacts his credibility and what he is saying.
Henry Paulson was a CEO for Goldman Sachs. So it really bothers me to be asked to believe what he says without something substantial to back it up.
If you own stocks then you can't afford to get news later than everyone else. Try easystockalerts.com for a week and you'll see what I mean. There is no fee and no spam...
They are taking the exact same tactic as the government did during the Great Depression. Basically they are fixing prices. During the Depression they propped up wages and prices but that just caused unemployment and people weren't able to afford anything anyway. It is a stupid thing to do to fix the prices. They need to let it naturally fall and reach a balance.
"Who said the alternative is worse????"
It is an interesting article, but it does not show that the author really understands the situation. There is nothing in the article that suggest an alternative solution or tells about what will happen without the bailout.
As to these assets - who says that the current market price actually represents the fair value? There is a panic in the markets and when there is panic, the equity (or all assets) prices can fall below actual value. Doesn't make it cannot go up from there. From what I heard, only about 25% of subprime mortgages foreclose. When there is a foreclosure the home is sold, presumable for more than $0, so there is some recovery. Yet, at least according to what I heard on cnbc today (yes, I know it is only an opinion much like the article above) these assets are currently priced as if over 50% of these mortgages foreclose and there is no recovery of any money at all. So depending on the price - that will be determined in reverse auction not just set randomly - there could be some value which is higher than the current market price and yet provide some return. Also, some of the proposals suggest government get some stock in companies from which it buys assets. If this passes, than the government may well make money when these companies rebound - as it did with Chrysler.
I always thought the substitutions were for like things. For example if beef goes up, people switch to chicken (not cheaper beef). It's meant to include the flexibility that real human beings have, and I don't think that's out of line.
And they leave out food and oil not because they aren't important but because they are highly volatile and would obscure what's really going on. It's only now that both those categories are clearly going up and going up substantially that the numbers feel fudged. Certainly they are much less helpful than they are when the food and oil price changes are more random or cyclical.
It's not true that all prices have gone up, however. Computers, TVs, and other electronics have gone down (and they're better, too). Long distance is a whole different animal than it was a generation ago. The housing bubble is deflating. There are cheaper ways to rent movies than there used to be. My property taxes actually went down this year. (And income taxes are still relatively low compared to the last few decades.)
My worries are 1) that oil is getting more scarce which will keep that price, and thus most other prices, going up indefinitely and 2) that government bailouts will cause many more problems than they solve (though I feel quite ignorant about this issue and still hope I am wrong).
**
I've never been thrilled with the unemployment numbers. Still, when they go up, it usually does mean that more people are out of jobs than were before.
"Which means we need to get out of the way, let it run its course, and remember to address these problems sooner rather than later from now on."
This is your opinion, and just like mine it is not necessarily the truth. It is the opinions like yours that caused the Great Depression when most analysts agree it could've been averted. What makes you think the recession or the next Great Depression is necessary and cannot be avoided?
I also think you underestimate the seriousness of today's situation. Right now companies find it extremely difficult to get credit. Since businesses don't normally have piles of cash lying around in FDIC-insured savings but have them invested into business, they need credit for everything including paying your salary. They borrow to pay salary, then pay it back from income. The companies cannot quickly raise money to meet their obligations, they have to declare bankruptcy even if they have other assets. It is not like S&L crisis where only a subset of companies were affected. Most banks are affected and without banks the economy cannot function.
You cannot convert paper bonds until one calendar year after purchase (not on their FAQ's)
I cannot figure out the rational behind allowing an online purchase of $5000, and a paper purchase of $5000, but requiring the paper to stay paper for one year.
Outside of some little weird rules like this, this is one goverment agency that has it's act together.
I'm a long time bond buyer, and trust me, these may be boring but they make a good balance to equities.
Life was easy when you were single and didn´t have children, if you are married and have kids you can feel like you are trapped in a life where you have to work to feed your family and thats maybe why sometimes you feel unhappy. Everyday you can have good moments (watching a movie, eating something nice, meeting an old friend) and can have bad moments (stucked in to traffic, angry boss at work, discussion with your wife) and all depends on how you react to that, if you feel relax and try not to accept the things that occurs in your life and try to enjoy the goog things probably you can live happy. Remembering happy moments can make us feel better and that could help us to make other people to feel good too.
I grew up in Plumas County and can agree with many of the romantic, bucolic descriptions of the landscape - it is just a wonderful place!
However, in the interest of full disclosure, people should also know about the higher-than-average poverty levels and rampant child abuse which blights the area. In honesty, I don't know what the current statistics are, but historically compared to the state, the county has had higher percentages of the population living under the poverty level, and much higher incidence rates of child abuse.
Also, regarding this quest of exurbanites to come and 'revitalize the local economy':
As it was earlier mentioned, this influx of people from urban areas to parts of the rural west has by in large made the housing unaffordable for people earning 'local wages.' Prior to this huge exurbanite influx, a typical local job was sufficient to buy a house because the relatively low wages could still buy a relatively low-priced house. Now with this demand for housing caused by the influx of transplants, housing prices are driven up (and I might add, are now equal or higher than areas like Sacramento, Chico and Redding). Now all of the people working remotely and bringing home 70-150k a year (or more) can afford houses, but what about the people working locally and actually supporting the local economy base? These people can't even afford to live in their community anymore. Driving up the housing prices without creating a demand for new, higher paying jobs does NOT revitalize an economy, it does the opposite. The local economy needs local jobs to replace the dead and dying resource-extraction (timber) industry. Now, if people coming into the area were doing that, than I would applaud them and say that they are trying to revitalize a dying economy (and community).
Also, it really is my hope that folks coming into the area realize the onus they have to contribute to the local economy and create more permanent and sustainable jobs (not just construction jobs to build more expensive 2nd homes or retirement homes on golf courses). I'd sure hate to see a beautiful and special place like Plumas County turn into something like Tahoe . I’m sure that most of the citizens in Plumas County would cite the closeness to nature, clean air, uncrowdedness, quietness, and safety as major reasons for choosing to live in the area. These intangible amenities are under threat as rural areas are face with increasing growth and housing demands. It’s not really in the interest of the county to control growth because more homes = more tax revenue, which means a lot to a county that is always in the red. So, rural citizens, whether transplants or generational, you need to make sure that places like Plumas County protect these intangible amenities in the face of forces such as development and growth. I know all of us want a beautiful place to live it, but please, please don’t let these beautiful areas go the way of the suburbs, exurbs, or bedroom communities that many of you fled from.
-Mike
After following this mess for weeks and listening to all the experts state why we need this, the bottom line seems to be to make sure companies can get credit so they can keep employing people.
Maybe we should take that boat load of money and instead have it at the ready for business credit for vetted business needs ala the federal backed home loans. Yes I know Freddie & Fannie are in trouble, I blame lots of that on them being made private with shareholders. One govt. entity that isn't dying right now is Ginnie Mae. What I heard was because it wasn't taken private it is still ok even though it gives out 0 down govt. backed home loans to veterans. That is the clear contrast of what went wrong and where.
Put that money directly into available credit for industry to assure jobs and needed services still operate and let Wall Street go down in a ball of flames.
I am just so mad that all of the unfettered free market ideology we have had shoved down our throats the last 8 years has now failed. Now look who is running to the govt. to save them.
Of course these numbers are fudged. Back in 2002-2003 there was a major problem with unemployment and underemployment. But because people were only tracked for that window they were on unemployment they were no longer a statistic after a while.
I knew so many people with technology degrees working crappy manufacturing jobs, Home Depot or wherever they could get anything no matter how drastic the pay cut. Underemployment isn't tracked and I still know a few people who were never able to get back into their field or at the same rate of pay.
What really throws everything into a horrible state is the drastic increases in the price of food and gas. You have to buy them to some extent. Most people have not had wage improvements in the last 8 years unless they moved up the job ladder. Housing here doubled, food and gas have doubled. Wages are pretty much the same.
Maybe I am just in a really pessimistic mood because I was watching the Congressional hearings on the impending economic bailout for the banks. The commentary that even after we give our last penny to these banks it might not work was not comforting.
I have spent some time with government statistics (as a user and, for one summer, as an intern at a statistical agency).
On "core" CPI: The idea of core CPI is to estimate the underlying "trend" in inflation, leaving off the more volatile parts. This is supposed to be helpful in seeing where inflation might be headed in the future (assuming that the trend changes slowly and the volatile parts are harder to predict), but not for dealing with people's costs of daily living (that is why Social Security is adjusted according to the overall CPI). Whether this is actually a useful predictor is debatable (there are papers by economists comparing it to other measures), but its existence is not a conspiracy.
As for changing methodology: All of the measures do change methodolgy from time to time. What most will then do is provide a series going back in time to show you what would have been measured using the new methodology. Of course, newspapers wouldn't report that, but it is usually out there (that keeps economic researchers happy). One series for which this is NOT done is CPI - because it has already been used to adjust benefits payments, and presenting revised estimates would confuse people.
In general, I have a lot of respect for the government statistical system. They try very hard to keep themselves separate from political pressures -- for example, they set their schedule of news releases far in advance according to a predictable plan (for example, employment numbers come out on the first Friday of the month unless that is a holiday), so that the timing of news releases can't be manipulated. My experience within the system was years ago, so I can't vouch for Bush-related pressures, but I do trust them.
However, there is an important place for skepticism that you didn't metion: These numbers are estimates. As you may recall from a statistics class, all estimates have standard errors and confidence intervals. These estimates do, too (and many are published!). Some are also based on incomplete information - this is why you will see revised numbers for GDP; they incorporate new information. Sadly, newspapers seem to take these numbers as True, when there are really just estimates.
This is a very interesting article! In my opinion, I think this is just another example of why we as citizens need to think through the numbers that are fed to us and not just take them at their face value. Almost any organization putting out a set of statistics has some sort of agenda and this will surely influence their results.
It's a given that the government lies. It seems that the goal is to loot the USA and transfer wealth to other countries. The theory that McCain is a Manchurian candidate may have merit...
Hmmmmmmmmmmm. The basket of goods used to calculate inflation, I thought didn't contain foodstuffs because of their supposed volatility(same with oil). Then again, I have never found the core inflation rate particularly helpful, not when it discounts everyday stuff and relies on a basket comprised of DVD players and microwave ovens. If you pay any attention to stuff like articles on increasing costs in education, health care, go grocery shopping or do any number of these things it would be shocking if you didn't believe the numbers were being massaged.
"It also took over 20 years for stock values to reach the same level they were at in 1929 before the crash. Which means most of us would lose our savings."
That's a rough spot to be in, and I'm sorry that's the case. You might forget that when an economy experiences turmoil, virtually everyone suffers. So even though I may not have the life savings that you've accumulated in your years, My financial welfare will be strained as well. Unfortunately, that sheds no light on whether a depression needs to happen or not. All this shows is that letting the market correct itself will be very, very hard for everyone.
Which means we need to get out of the way, let it run its course, and remember to address these problems sooner rather than later from now on.
It's interesting that you should bring up the hamburger/steak substitution example. According to the US Department of Labor's "Common Misconceptions About the Consumer Price Index", this is not entirely true. Although they do use substitution, hamburger and steak meat fall into two separate Consumer Price Index item categories, and therefore hamburger meat would not be considered a low-grade substitute for steak, but a different item altogether. Instead, the piece states that substitution would assume that consumers would purchase a lower cost steak such as flank steak when prices rise, while opting for a higher cost cut like fillet mignon when prices decrease.
Now, whether or not we can be certain that this information hasn't also been manipulated is another question.
One of my biggest problems with the CPI is the idea of "rental equivalence", which "measures the value of shelter to owner-occupants as the amount they forgo by not renting out their homes." Huh?
@ Kitty,
Some of these homes will have very little recovery. Even earlier this summer there are cases of some old rental homes that went to foreclosure due to the landlords making bad investments. What I was seeing is tons and tons of housing stock in either rundown or emerging neighborhoods for $8000 to $20,000.
Part of me wanted to run with a fistfull of savings to grab a cool looking old house for that cheap. There is a real fear though, of what is going to happen when you have an entire neighborhood full of homes like that. Not a situation I want to sink rennovation money into.
If we can pull off a quick recovery or even stability some more desirable homes could recover 50% of their value. But markets where homes jumped to $800,000 due to the frenzy when they are really worth about $250,000 are going to be very hard to recover.
I think I share a real frustration with many people. We just do not know enough and we don't have a source we trust to tell us where we really are right now. The govt. has a habit of either lying to make things seem rosy to avoid a panic or misrepresenting things as a means to a specific ideological end. The financial sector has no credibility left. Paulson and Bernanke, hmm hard to tell. Bernanke I at least put some stock in what he says since he was a scholar for so long but he is still appointed by Bush and I don't know if that impacts his credibility and what he is saying.
Henry Paulson was a CEO for Goldman Sachs. So it really bothers me to be asked to believe what he says without something substantial to back it up.
If you own stocks then you can't afford to get news later than everyone else. Try easystockalerts.com for a week and you'll see what I mean. There is no fee and no spam...
They are taking the exact same tactic as the government did during the Great Depression. Basically they are fixing prices. During the Depression they propped up wages and prices but that just caused unemployment and people weren't able to afford anything anyway. It is a stupid thing to do to fix the prices. They need to let it naturally fall and reach a balance.
...You have to respect that they are doing a good deed.
Thanks for this post, I'm sending in for my copy of the Constitution.
"Who said the alternative is worse????"
It is an interesting article, but it does not show that the author really understands the situation. There is nothing in the article that suggest an alternative solution or tells about what will happen without the bailout.
As to these assets - who says that the current market price actually represents the fair value? There is a panic in the markets and when there is panic, the equity (or all assets) prices can fall below actual value. Doesn't make it cannot go up from there. From what I heard, only about 25% of subprime mortgages foreclose. When there is a foreclosure the home is sold, presumable for more than $0, so there is some recovery. Yet, at least according to what I heard on cnbc today (yes, I know it is only an opinion much like the article above) these assets are currently priced as if over 50% of these mortgages foreclose and there is no recovery of any money at all. So depending on the price - that will be determined in reverse auction not just set randomly - there could be some value which is higher than the current market price and yet provide some return. Also, some of the proposals suggest government get some stock in companies from which it buys assets. If this passes, than the government may well make money when these companies rebound - as it did with Chrysler.
I always thought the substitutions were for like things. For example if beef goes up, people switch to chicken (not cheaper beef). It's meant to include the flexibility that real human beings have, and I don't think that's out of line.
And they leave out food and oil not because they aren't important but because they are highly volatile and would obscure what's really going on. It's only now that both those categories are clearly going up and going up substantially that the numbers feel fudged. Certainly they are much less helpful than they are when the food and oil price changes are more random or cyclical.
It's not true that all prices have gone up, however. Computers, TVs, and other electronics have gone down (and they're better, too). Long distance is a whole different animal than it was a generation ago. The housing bubble is deflating. There are cheaper ways to rent movies than there used to be. My property taxes actually went down this year. (And income taxes are still relatively low compared to the last few decades.)
My worries are 1) that oil is getting more scarce which will keep that price, and thus most other prices, going up indefinitely and 2) that government bailouts will cause many more problems than they solve (though I feel quite ignorant about this issue and still hope I am wrong).
**
I've never been thrilled with the unemployment numbers. Still, when they go up, it usually does mean that more people are out of jobs than were before.
"Which means we need to get out of the way, let it run its course, and remember to address these problems sooner rather than later from now on."
This is your opinion, and just like mine it is not necessarily the truth. It is the opinions like yours that caused the Great Depression when most analysts agree it could've been averted. What makes you think the recession or the next Great Depression is necessary and cannot be avoided?
I also think you underestimate the seriousness of today's situation. Right now companies find it extremely difficult to get credit. Since businesses don't normally have piles of cash lying around in FDIC-insured savings but have them invested into business, they need credit for everything including paying your salary. They borrow to pay salary, then pay it back from income. The companies cannot quickly raise money to meet their obligations, they have to declare bankruptcy even if they have other assets. It is not like S&L crisis where only a subset of companies were affected. Most banks are affected and without banks the economy cannot function.
Just got off the phone with TreasuryDirect.
You cannot convert paper bonds until one calendar year after purchase (not on their FAQ's)
I cannot figure out the rational behind allowing an online purchase of $5000, and a paper purchase of $5000, but requiring the paper to stay paper for one year.
Outside of some little weird rules like this, this is one goverment agency that has it's act together.
I'm a long time bond buyer, and trust me, these may be boring but they make a good balance to equities.
I like to think of him as Mr. Sexy Preznit, but that might be just me.
Xin, I'm hoping you're going to write more about this - this is fascinating.
Life was easy when you were single and didn´t have children, if you are married and have kids you can feel like you are trapped in a life where you have to work to feed your family and thats maybe why sometimes you feel unhappy. Everyday you can have good moments (watching a movie, eating something nice, meeting an old friend) and can have bad moments (stucked in to traffic, angry boss at work, discussion with your wife) and all depends on how you react to that, if you feel relax and try not to accept the things that occurs in your life and try to enjoy the goog things probably you can live happy. Remembering happy moments can make us feel better and that could help us to make other people to feel good too.
Good luck to all of you
McCain the Manchurian candidate? Interesting.
And what then is Obama?
The Messiah?
I grew up in Plumas County and can agree with many of the romantic, bucolic descriptions of the landscape - it is just a wonderful place!
However, in the interest of full disclosure, people should also know about the higher-than-average poverty levels and rampant child abuse which blights the area. In honesty, I don't know what the current statistics are, but historically compared to the state, the county has had higher percentages of the population living under the poverty level, and much higher incidence rates of child abuse.
Also, regarding this quest of exurbanites to come and 'revitalize the local economy':
As it was earlier mentioned, this influx of people from urban areas to parts of the rural west has by in large made the housing unaffordable for people earning 'local wages.' Prior to this huge exurbanite influx, a typical local job was sufficient to buy a house because the relatively low wages could still buy a relatively low-priced house. Now with this demand for housing caused by the influx of transplants, housing prices are driven up (and I might add, are now equal or higher than areas like Sacramento, Chico and Redding). Now all of the people working remotely and bringing home 70-150k a year (or more) can afford houses, but what about the people working locally and actually supporting the local economy base? These people can't even afford to live in their community anymore. Driving up the housing prices without creating a demand for new, higher paying jobs does NOT revitalize an economy, it does the opposite. The local economy needs local jobs to replace the dead and dying resource-extraction (timber) industry. Now, if people coming into the area were doing that, than I would applaud them and say that they are trying to revitalize a dying economy (and community).
Also, it really is my hope that folks coming into the area realize the onus they have to contribute to the local economy and create more permanent and sustainable jobs (not just construction jobs to build more expensive 2nd homes or retirement homes on golf courses). I'd sure hate to see a beautiful and special place like Plumas County turn into something like Tahoe . I’m sure that most of the citizens in Plumas County would cite the closeness to nature, clean air, uncrowdedness, quietness, and safety as major reasons for choosing to live in the area. These intangible amenities are under threat as rural areas are face with increasing growth and housing demands. It’s not really in the interest of the county to control growth because more homes = more tax revenue, which means a lot to a county that is always in the red. So, rural citizens, whether transplants or generational, you need to make sure that places like Plumas County protect these intangible amenities in the face of forces such as development and growth. I know all of us want a beautiful place to live it, but please, please don’t let these beautiful areas go the way of the suburbs, exurbs, or bedroom communities that many of you fled from.
-Mike
Funny how the hate emanates from so-called Liberals.
The liberal prizes emotion. The conservative prizes logic. Neither is right or wrong but, if too far to one side or another, unbalanced.
So many minds closed to alternatives.
Wonkette technically has the most caustic commenters. IMHO.
After following this mess for weeks and listening to all the experts state why we need this, the bottom line seems to be to make sure companies can get credit so they can keep employing people.
Maybe we should take that boat load of money and instead have it at the ready for business credit for vetted business needs ala the federal backed home loans. Yes I know Freddie & Fannie are in trouble, I blame lots of that on them being made private with shareholders. One govt. entity that isn't dying right now is Ginnie Mae. What I heard was because it wasn't taken private it is still ok even though it gives out 0 down govt. backed home loans to veterans. That is the clear contrast of what went wrong and where.
Put that money directly into available credit for industry to assure jobs and needed services still operate and let Wall Street go down in a ball of flames.
I am just so mad that all of the unfettered free market ideology we have had shoved down our throats the last 8 years has now failed. Now look who is running to the govt. to save them.
Of course these numbers are fudged. Back in 2002-2003 there was a major problem with unemployment and underemployment. But because people were only tracked for that window they were on unemployment they were no longer a statistic after a while.
I knew so many people with technology degrees working crappy manufacturing jobs, Home Depot or wherever they could get anything no matter how drastic the pay cut. Underemployment isn't tracked and I still know a few people who were never able to get back into their field or at the same rate of pay.
What really throws everything into a horrible state is the drastic increases in the price of food and gas. You have to buy them to some extent. Most people have not had wage improvements in the last 8 years unless they moved up the job ladder. Housing here doubled, food and gas have doubled. Wages are pretty much the same.
Maybe I am just in a really pessimistic mood because I was watching the Congressional hearings on the impending economic bailout for the banks. The commentary that even after we give our last penny to these banks it might not work was not comforting.
I have spent some time with government statistics (as a user and, for one summer, as an intern at a statistical agency).
On "core" CPI: The idea of core CPI is to estimate the underlying "trend" in inflation, leaving off the more volatile parts. This is supposed to be helpful in seeing where inflation might be headed in the future (assuming that the trend changes slowly and the volatile parts are harder to predict), but not for dealing with people's costs of daily living (that is why Social Security is adjusted according to the overall CPI). Whether this is actually a useful predictor is debatable (there are papers by economists comparing it to other measures), but its existence is not a conspiracy.
As for changing methodology: All of the measures do change methodolgy from time to time. What most will then do is provide a series going back in time to show you what would have been measured using the new methodology. Of course, newspapers wouldn't report that, but it is usually out there (that keeps economic researchers happy). One series for which this is NOT done is CPI - because it has already been used to adjust benefits payments, and presenting revised estimates would confuse people.
In general, I have a lot of respect for the government statistical system. They try very hard to keep themselves separate from political pressures -- for example, they set their schedule of news releases far in advance according to a predictable plan (for example, employment numbers come out on the first Friday of the month unless that is a holiday), so that the timing of news releases can't be manipulated. My experience within the system was years ago, so I can't vouch for Bush-related pressures, but I do trust them.
However, there is an important place for skepticism that you didn't metion: These numbers are estimates. As you may recall from a statistics class, all estimates have standard errors and confidence intervals. These estimates do, too (and many are published!). Some are also based on incomplete information - this is why you will see revised numbers for GDP; they incorporate new information. Sadly, newspapers seem to take these numbers as True, when there are really just estimates.
Hope that helps.
This is a very interesting article! In my opinion, I think this is just another example of why we as citizens need to think through the numbers that are fed to us and not just take them at their face value. Almost any organization putting out a set of statistics has some sort of agenda and this will surely influence their results.
In the UK they change the way that jobless numbers are counted every year!
In the country where every TV phone poll is rigged, how can you expect the government to do otherwise?
Heck yes, couldn't agree more.
It's a given that the government lies. It seems that the goal is to loot the USA and transfer wealth to other countries. The theory that McCain is a Manchurian candidate may have merit...
Thanks for the great and creative ideas!
The mention of writing names on cups is a wonderful one and I've seen done at parties for people of all ages: it definitely saves on paper products.
Hmmmmmmmmmmm. The basket of goods used to calculate inflation, I thought didn't contain foodstuffs because of their supposed volatility(same with oil). Then again, I have never found the core inflation rate particularly helpful, not when it discounts everyday stuff and relies on a basket comprised of DVD players and microwave ovens. If you pay any attention to stuff like articles on increasing costs in education, health care, go grocery shopping or do any number of these things it would be shocking if you didn't believe the numbers were being massaged.
"It also took over 20 years for stock values to reach the same level they were at in 1929 before the crash. Which means most of us would lose our savings."
That's a rough spot to be in, and I'm sorry that's the case. You might forget that when an economy experiences turmoil, virtually everyone suffers. So even though I may not have the life savings that you've accumulated in your years, My financial welfare will be strained as well. Unfortunately, that sheds no light on whether a depression needs to happen or not. All this shows is that letting the market correct itself will be very, very hard for everyone.
Which means we need to get out of the way, let it run its course, and remember to address these problems sooner rather than later from now on.
It's interesting that you should bring up the hamburger/steak substitution example. According to the US Department of Labor's "Common Misconceptions About the Consumer Price Index", this is not entirely true. Although they do use substitution, hamburger and steak meat fall into two separate Consumer Price Index item categories, and therefore hamburger meat would not be considered a low-grade substitute for steak, but a different item altogether. Instead, the piece states that substitution would assume that consumers would purchase a lower cost steak such as flank steak when prices rise, while opting for a higher cost cut like fillet mignon when prices decrease.
Now, whether or not we can be certain that this information hasn't also been manipulated is another question.
One of my biggest problems with the CPI is the idea of "rental equivalence", which "measures the value of shelter to owner-occupants as the amount they forgo by not renting out their homes." Huh?