Grades are assigned in three ways
1) Relative to the skill your teacher believes you have
2) Relative to the rest of the class
3) Absolutely based on what the teacher individually believes constitutes mastery of the material.
The report card is almost meaningless.
65% exam scores / written essays
25% homework
10% classwork
So while the report card is meaningless, it is meaningless for a different reason than you suggest. It is meaningless because it has nothing to do with aptitude or education and everything to do with obedience.
Even if they're good judges of quality, it's still a matter of how they determine your grade. Is it good quality relative to what they think your skills are? Is it good quality relative to the rest of the class? Is it good quality relative to what they believe constitutes mastery of the subject? And some teachers curve and some don't.
And I haven't said whether I think teachers should be required to meet standards. I don't even know if it's possible to create good standards.