Sadly, it looks like the Chairman of the Federal Reserve ignored my open letter last week and decided to cut the federal funds rate by three quarters of a point to 2.25%. Of course, if you’re watching the news right now, everyone is saying that this dramatic cut is a good thing. After all, the Dow is surging on this supposedly great news. By cutting the interest rate, the Federal Reserve has pleased Wall Street investors.

But each time Ben Bernanke calls for a rate cut, he is helping destroy lower and middle class Americans. How is this possible? With each rate cut, inflation gets worse. What does that mean to you and me? Diminished savings, more expensive gas, and a greater costs of everyday goods.

Diminished savings
Do you have a savings account? If you do, odds are that it is paying a little over 3% APY. Now that the Federal Reserve has lowered the federal funds rate to 2.25%, expect to see the interest rate on your savings account plummet over the next few days. What does this mean to you? Less interest earned on your savings (and thereby less money in your pocket).

More expensive gas
Do you think filling up at the pump hurts at $3.50 a gallon? Give it a few weeks, and watch as prices pass $4.00. Why does this happen? Oil (what gas is made from) is traded in U.S. dollars. As the Federal Reserve lowers the federal funds rate, the dollar is devalued through inflation. So yesterday’s dollar is worth more than today’s. Right now, a barrel of oil is trading at about $110. Don’t act surprised when the price of oil, and thus gasoline, reaches new highs over the next few weeks.

Greater costs of everyday goods
Because the value of the dollar is dropping from inflation, imported goods from China, Mexico and other countries are getting more and more expensive everyday. To make matters worse, the price of gas is trickling down throughout the economy to affect common items such as groceries and clothing. Compare your grocery bill to what you were paying last year. Odds are you are paying a lot more for a gallon of milk than you did in the past.

The bottom line
So next time you see Wall Street cheering because of a drop in the federal funds rate, stop and think about whether you should be cheering as well. What’s good for Wall Street is not necessarily good for Joe Sixpack. Over the past six months, inflation has been soaring, and yet the average family’s income has remained the same. If Ben Bernanke and the Federal Reserve keep cutting rates at the pace they have been, it’s going to get very ugly out there.