The fact is, modern banking and capitalism have created massive amounts of wealth for a vast proportion of the population. Evolution of our economic system has led to where we are now for a reason. It's not perfect, but we aren't going back to the days of measuring your net worth on a stick.
Every time we have a crash or downturn, people begin to under estimate how much we actually know about economics. It's a lot.
The money supply of a nation in no way represents the wealth generation going on in an economy. Printing an extra dollar does not mean the users of dollars became wealthier, it simply redistributes the existing wealth. Barter is also another factor that creates wealth, yet does not have anything to do with the monetary system.
Our growing wealth in many ways is in spite of our money and governments. It is worth noting that ever since the USD lost it's scarcity (with the closing of the gold window in the 70's) real wages and quality of life has gone down, not up.
Thus money supply does not represent wealth generation, but controlling it does affect wealth generation in a pretty significant way.
As for your comment about the 70s, the wealth of this country has gone up dramatically. However there has also been a sharp increase in inequality. Thus causing a small number of people to see wealth rise a whole lot. Whether or not the middle class has wound up better or worse is a subject of debate among economists. (The subject is not nearly as simple as you might think. We think of "inflation" as an absolute number but it is not. The inflation that you experience is relative to the goods that you purchase, and middle class or poor people purchase a different bundle of goods than rich people do.) In any case the result is that it is clear that wealth generation has been humming along very nicely.
My personal belief is that the underlying cause of the increase in wealth disparity is the continual drop in the top income tax rate, the reduction of the number of tax brackets, and the increase in the tax rate on the average person. (The effective tax rate on the richest people is now below the median tax rate!) This has limited how much tax policy redistributes money between socio-economic groups.
Whether this is a good or bad thing is a political debate for another time. But it is a real thing.
This sounds very plausible but simply does not line up with historical reality. Most of the 19th century saw persistent mild deflation alongside massive investment and growth. Inflationary periods have usually seen unproductive speculation and weak capital investment.
The deflation of the great depression was simply the inevitable consequence of a fiat money credit bubble and preceding massive malinvestment. The great depression deflation cannot be characterized as a deflationary tendency of the monetary policy at the time. It inevitably followed the inflationary boom of the 20s.
And there was no «persistent mild deflation» in the 19th century; there were massive swings in value: http://upload.wikimedia.org/wikipedia/commons/2/20/US_Histor...
Your chart shows persistent deflation in the 19th century with inflationary spikes for wars, notably the civil war.
Having just finished a detailed account of the history of economic thought I can assure you that there were times when economists far better understood the nature of prices that came well before Adam Smith and Ricardo-both of whom didn't really understand prices at all.
Schools of thought tend to continue until they reach a dead-end that's impossible to ignore. A new school picks up the pieces and continues on again. We have seen that with the fall and rise of Keynesian economics.