"What's happening now that money is going straight from the vendor, through the JCer, to miners. This leads to more inflation, which leads to things like BoE gear and other "optional" gold earned items costing even more."

Inflation comes in larger parts from higher gold rewards from quests, vendored greens and greys, and flat out gold looting from mobs. Also, with the guild perk http://www.wowhead.com/spell=83941 , every piece of gold that gets looted adds another 10 silver to that guild if they have the perk.

Vendoring items that were crafted from mats off the AH has been around before. I was only a wrath baby, so I only know about the saronite and cobalt shuffles. Back when the cobalt triangle shield vendored for over 5g, making those were a profitable vendor trick. When saronite ore was sitting near 1/2 the vendor price for bars, prospecting for all those rares and then cutting to sell was also an option.

Blizzard let people make and vendor cobalt triangle shields for over 2 years, then nerfed it with the shattering. Up until that point, it helped keep cobalt ore and bars at a minimum price level. I find it impossible to believe that they would make that change and NOT know about the vendor price for uncommon-quality gems.

Ultimately gold in the game gets generated somewhere. Is the prospecting shuffle generating gold and inflation? Sure. But how much inflation is it causing versus dailies, regular questing, gold loot, the guild perk cash flow, and vendored greys? I would argue not that much, and the amount it does cause is a way to help funnel the gold created by that inflation back to the miners.