We’ve asked before whether monetary policy is spending policy. It does, after all, change the value of the money that people have to spend. And monetary policy today is most often being used as a tool to stimulate the economy.

We’ve also talked about low interest rates directly (including in our unpublished letter to the New York Times). How do they affect individuals’ incentives? How do they affect the incentives of government decision makers?

But what about inflation? What are the consequences of the new round of money-printing and asset-buying announced last month by Ben Bernanke and known widely as “QE3?”

Last week, the Wall Street Journal published a piece by Sean Fieler, the president of New York-based Equinox Partners, L.P. Mr. Fieler wrote how “Easy Money Is Punishing the Middle Class.” He writes how John Maynard Keynes’s insight that the public will accept slight increases in prices (inflation) better than real decreases in their earnings drives current Federal Reserve monetary policy.

The problem not fully recognized by either Keynes or Mr. Bernanke is that the low level of inflation necessary to anesthetize the American worker to declining real wages also has the long-run side-effect of anesthetizing the American worker to price signals needed to compete in the global marketplace. Inflation’s subtle corruption of these price signals at the heart of the market’s purpose underlies the unhappy situation in which both real wages and employment ratios have been in decline for decades…

The more than five-fold increase in the median income of the American household since 1971, to $50,000 from $9,000, certainly provides the clear appearance of progress. But after the dollar’s 82% loss of purchasing power over the same period is factored in, the median household income rose just 12%.

Although fiscal policy is our main focus, it’s worth recognizing how monetary policy, managed by the Federal Reserve, impacts the choices government officials have to make. More money in the economy means it’s easier to pay past debts, making the long-term debt problem more approachable. But it could very well also incentivize a continuation of the habitual deficit spending that creates debt in the first place.