I want to have one million dollars. One million dollars is a lot of money. Many Americans would love to have $1 million sitting in their bank and brokerage accounts. A lot of Americans do have a million dollars…but many more do not.

Yet, do Americans really love money? For many, as soon as we get money in our hands, we spend it like it is on fire on some new toy, or on some new experience that, for a short while, distracts and entertains us. So, do we love money, or do we love what money enables us to possess and experience? It is probably more the latter, though you could debate that for hours.

Regardless, note what money gives us – freedom, opportunities, security, flexibility, and power – stems not from money’s quantity, but from its quality. It matters not how much money we possess or how impressive the rate at which we bring it home if our money steadily decreases in value over time.

So, is $1 million really a lot of money? It depends – how fast is the dollar decreasing in value? There’s one simple way to tell: price inflation. As consumer prices increase, a dollar buys less than it used to. Thanks to America’s average annual inflation rate of 2.7% over the past seven years, $1 million in 2000 was worth only $829,864 by the end of 2007. In 2008, inflation has jumped to 4.1%, degrading the dollar faster still.

What is causing price inflation today? It’s a two-fold problem. First, through deficit spending, the U.S. Congress spends today hundreds of billions of tax dollars borrowed from our future. This acceleration of future tax dollars into the present increases the supply of dollars sloshing around our economy in 2008, increasing demand for – and prices of – goods and services.

Second, the Federal Reserve swells the U.S. money supply with credit. By lowering short-term interest rates – as it has consistently over the past few months – the Fed encourages banks to loan money to borrowers looking to spend their future earnings today. The result is more dollars sloshing around the economy, further driving up prices of goods and services.

How can we stop the Federal government’s willful degradation of the U.S. dollar? Vote. Write. Call. Demand that your elected officials in Washington, D.C. practice sound fiscal and monetary policy: a balanced Federal budget each year; a lower Federal debt outstanding; and inflation-fighting (e.g., higher) short-term interest rates.

But aren’t they lowering rates to help us?

Unless you are the owner of a bank, the answer is no. Its a major misnomer that just because the fed lowers rates, the banks will lower rates. This just doesn’t hold: in times like these there is no promise that banks will lower their rates. They reap the reward of lower fed rates while keeping rates steady or even raising rates to help themselves out of the hole they dug themselves with bad lending practices.

Think rate cuts are to help you? Think again.

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