In the United States since 1959, banks lent out close to the maximum allowed for the 49-year period from 1959 until August 2008, maintaining a low level of excess reserves, then accumulated significant excess reserves over the period September 2008 onwards. Corporations began sitting on their cash. So money is being allocated towards other things than jobs and investment in local wages, which have been stagnating for decades, and given a boost by the consumer credit explosion of the 80s and 90s. The money is being offshored, globalization and automation have caused the American worker to participate in a race to the bottom with the rest of the world - this mean reversion helps billions of people around the world but undoes the dominanxe the US has enjoyed thus far. Supply chains now stretch around the world. Apple offshored its money to avoid taxes for one thing. Amazon employs robots now, and its wage slaves are interchangeable etc. I see structural problems as being responsible for the slow recovery the US, not Fed policy.
Although I would probably agree with you in one thing - a direct unconditional basic income for US residents would do much more long term to revitalize the economy and lower misallocation of resources, than giving it to banks.
You are right to say that CPI is not all that useful as a measure of inflation. A better measure is the core CPI which strips out volatile commodity prices. (If the actual CPI that includes the cost of gas were to be used, we would be facing a massive deflationary spiral given the recent trend in oil prices.) Looking at core CPI trends that you'll notice that globalization, and automation have actually caused price decreases for many goods. (With some inflation in service industries not subject to competitive pressures such as healthcare and education.)
The Fed simply stopped publishing M3 in 2006. Yet, the portion of M3 that is not also in M2 is nearly 30% of the total money supply, and increasing steadily since about 1960, with only a slight setback from 1991-1995. The portion of M2 not in M1 has remained about 50% of the money supply.
By now, everyone who buys or sells knows that the CPI is completely useless as a measure of inflation. The portion of inflation that is visible and obvious to consumers is now about 10% per year. That doubles prices about every 7 years. This is somewhat mitigated on the shelf by adding more air to packages and aggressively hunting foreign suppliers whose costs are not measured in dollars, thus delaying price increases until trade balances are settled. The gallon jugs of Floridian fresh-squeezed orange juice are replaced by 0.75 gallon jugs of blended Floridian and Brazilian frozen concentrate.
I believe that Fed operations since 2005 have been less about stabilizing the value of money than they have been about keeping large changes in the money supply off the Fed's books, and hidden in numbers that have historically been less scrutinized as economic indicators, or perhaps never reported at all. The bond-buying spree appears to be a shell game to manipulate money velocity and leverage monetary reservoirs to replicate the effects of running the printing press, without actually alarming those who cry bloody murder whenever they hear it operating.
Nice use of the bandwagon fallacy, there. They don't necessarily have to fool everyone around the world. They just have to be better than all the alternatives. Since the rest of the world economy is also in bad shape, that is not a high bar to pass. That's a lot like asking why so many customers in Comcast's service area choose to get Comcast. Most of the time, it's because they're the only game in town. It may also be that all those who are not fooled do not have control over institutional investment funds.
Your post contains several implicit and unstated assumptions about economics that I do not necessarily agree with. And I also have several assumptions that I am certain you would not agree with.
I believe that the Fed and the other central banks of advanced industrial economies do have the tools at their disposal to prevent hyperinflation. But I do not believe that the consistent use of those tools are less damaging over the long term than an actual outbreak of hyperinflation. They often simply spread the pain out over a longer period, and prevent reallocation of resources from failed or failing institutions.