Are Grades Bad?

I was wondering if giving grades is bad or if lazy teachers can make it bad. Obviously if a teacher looks at a piece of work done by a student and just arbitrarily gives it a letter grade, that is bad. In a situation like that there are so many external factors that could influence the grade. Even thing like if the teacher likes the student or if they are having a bad day could influence the students grade. But I'm forced to wonder if that's the grades fault?
If a teacher does a thoughtful and careful evaluation of the work citing it's strengths and weaknesses and then attaches a letter grade to that, it seems to me that that is appropriate. As long as there is a way for a student to see the evaluation that went into the awarding of that grade then it can be useful I think. But I'm wondering if perhaps I'm just used to grades and so that seems normal to me? What do you think, should we be giving grades or not?