Makes my blood boil too, however, there are a couple of things to be done in such a case.
First thing. He should not be questioning you at length. You have the right not to answer any of his questions. You can ask "Officer, am I being detained?". Or, you can keep asking "Am I free to go, officer?" You could also ask "Officer, do you interrogate everyone who counts money on the street?"
You guys should watch this little video. It's a lecture given by a law professor, and also has a cop give his perspective - both agree, NEVER talk to the police.
Part 1
http://www.youtube.com/watch?v=i8z7NC5sgik
Part 2
http://www.youtube.com/watch?v=08fZQWjDVKE
On the subject of him BSing about lowering, you should ask him to cite the law that you broke. And then keep asking "Am I free to go, or are you detaining me?"
Here is another video clip that's worth watching very much. It's a bit longer (45 minutes), but do watch it.
BUSTED: The Citizen's Guide to Surviving Police Encounters
While all these videos are from the US, much of it applies here.