While most in the media, and for that matter, most Americans, have been celebrating yesterday’s announcement that the Fed is lowering interest rates by 50bps, that is the exact opposite reaction we should have.

This is the financial equivalent of junk food. Sure, it will result in a few good news cycles and people will be happy they got a break on interest rates for a while, but what happens after the euphoria wears off?

The short answer is we get more of the problems that this is supposed to fix. It’s the proverbial “kicking the can down the road” one more time.  And the results of doing that are never good.

It drives further inflation, which is already far higher than officials admit. Most Americans aren’t aware that the government's criteria for measuring inflation has changed over the years, and because of the way it’s calculated today, official data has become essentially meaningless.

What’s worse, this was an act of desperation. It wasn’t based on sound financial principles — it was simply a Hail Mary pass that Fed Chairman Jerome Powell had hoped would create a positive public sentiment as we head toward the November elections.

This may be the final nail in our economic coffin. The “market” is bigger than the Federal Reserve and will have the final say.

Anyone who isn’t already in the top 20% of Americans, in terms of income and assets, is going to be hurt financially, while those who are in the top tier benefit from the continuation of easy money policies and gross domestic product (GDP) growth based primarily on government job expansion and continued deficit spending.  That’s like a family living on credit cards and feeling good about their lifestyle…until the debt comes due.

Don’t get me wrong — I’m a huge fan of the free market and think we should encourage a healthy profit from our work, but not when it’s explicitly at the expense of others. While the free market is not a zero-sum game, it can behave as such when the government interferes too much. And make no mistake — our government absolutely has interfered to the point of turning our economy into rubble.

To put this all into perspective, the U.S. dollar has lost over 88% of its purchasing power through inflation, which is driven by government monetary policy. Specifically manipulating interest rates and the supply of money.

Oh, and here’s the kicker — the Federal Reserve, the entity that creates and executes these policies, isn’t even a government agency. It’s a private organization that we have zero oversight of.

This rate decrease was a purely political move intended to keep things together long enough to get through the next election. That's why the Fed dropped rates, despite claiming that inflation is down and we’re not in a recession. And it’s not the first time we’ve seen this. Back in 2007, the Fed cut rates on September 18th leading to a crash, and over the next 372 days, the S&P 500 fell by a staggering 54% and the housing market collapsed. Ten of the Federal Reserve’s last 14 rate cuts have led to recession.

This bigger problem is that today’s underlying economic conditions are exponentially worse than in 2007, so when a correction happens, it will be far worse than we saw last time.

While this rate cut was meant to reduce interest rates across the board, it may actually have the opposite effect because long-term rates, such as housing mortgage interest, are based on the 10-year Treasury Bill yield, which is on the rise.

In other words, buckle up because things are about to get really bumpy. Our already high inflation will skyrocket within the next 3-6 months, which will have a ripple effect impacting every facet of our economy. As costs continue to go up due to inflation, more businesses will struggle, leading to layoffs that further exacerbate the problem because that then leads to reduced economic activity.

Consumers will have less money to spend and they will become understandably more cautious in spending it. It doesn't take long for this to become a vicious downward spiral that takes years to recover from.

When this all unfolds, government officials will claim they had no idea this would happen and that no one could have seen it coming, but you’ll know better.

This was just a political move to kick the can further down the road, and at this point, the Fed is in a no-win position. A rate cut leads to inflation, but a rate increase at this point would destroy the economy almost overnight, so there’s effectively no way out. Plus, this all comes at a time when our national debt is at an all-time high — so high, in fact, that just the interest payment alone now exceeds our entire military budget.

Expect tremendous volatility over the coming years. If you’re prepared for it and make the right decisions, you could come out on the other side of this in a stronger financial position and change the trajectory of your family for generations to come.

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Dr. David Phelps created Freedom Founders to help its members achieve the freedom they wanted in their lives by building the necessary financial foundation. He is a noted financial expert who is regularly cited by the media, and recently helped the FL Dept. of Education develop its new financial literacy curriculum.