A partial quote from my comment to Art summarizes where we are today:
In a time that calls for fiscal expansion, monetary expansion does not stimulate the economy, but instead rewards rent-seeking. This can manifest itself as asset bubbles. These lead to headline inflation, but (in the current economic environment) do not transfer into core inflation because the secular inflationary trend is negative.
Update: Hoisted from comments:
Nanute makes a comment indicating that we need inflation, aren't going to get it, and monetary policy can only be effective if it stimulates spending.
I concur, and I believe Milton Friedman would as well.
Art: "But I'm not sure about your 'time that calls for fiscal expansion.' what the phrase means to you, and how you determine we are at that stage."
What that means to me is that the economy does not exist in a single realm at all times, and that different times call for different policy action. The beautiful little "We got it covered" diagram you posted illustrates this brilliantly. We need fiscal expansion, and have needed it for years, because that works at the zero interest bound. I guess I place myself somewhere on the Krugman/Thoma/DeLong axis, and would refer you to everything Krugman has said over the last several years about fiscal and monetary policy at the zero interest boundary. I guess you know you're at that stage when QE ends up in bank reserves, not flowing through the economy, when U6 is above 16% (and stays there for over 2 years,) money velocity plummets, real GDP/Cap growth is negative for three straight years -- you know, great depression type values.