Inflation coming?

Picture credit Shadow Stats

I know our government is constantly warning of deflation, but that is becoming more and more puzzling. Look at this chart and explain how we are seeing deflation. At any rate, inflation is an increase in the money supply, which triggers higher consumer prices as more and more dollars are chasing the same goods and services. So, we have set an all-time record in the increase in money supply, literally trillions of new dollars "printed." And here we see consumer prices going up sharply (bought food lately?).

How do we have a deflation problem again? Sure, the asset bubbles have popped, and values are still trying to drop to realistic levels from their previous bubble levels. True asset values are different from consumer deflation of goods and services.

Yes, I know that a trillion dollars of the new money "printed" is bottled up in excess bank reserves instead of circulating through the economy, but still. If money supply is way up, even accounting for the money "bottled up," and prices are rising sharply, where's the deflation?

For the record, this strategy of trying to re-puff up the asset bubbles with air (only to pop later) while causing the rise of the price of everything else is idiotic. Have our leaders ever heard of Japan? This is the exact game plan that has given them twenty lost years so far -- and they're not done yet.

Is there a real reason for this yammering about deflation, or just silliness?