Federal Reserve Chairman Ben Bernanke will appear on 60 Minutes this Sunday to defend his controversial stimulus package, dubbed QE2, of buying $600 billion of Treasury securities.
In the CBS interview, Bernanke explains his intentions with QE2 and defends the notion that this stimulus will not lead to inflation. He also told CBS that he is not ruling out the purchase of more securities.
The plan is under fire with critics who claim that the plan will devalue the dollar and feed long-term inflation.
However, many observers claim that the damage done to the economy was so severe that this recent stimulus is not enough. Goldman Sachs (GS) put the shortfall in the neighborhood of $4 trillion. Economist Jan Hatzius said that he believed that the Fed would purchase half as much, or about $2 trillion.
With last week's weak unemployment report we see the damage that has been done to the economy. Whether Bernanke is grasping at straws with his stimulus remains to be seen. Throwing another $600 billion at the economy certainly won't hurt at this point. The problem is that the money is not going to solve the underlying problem of high unemployment. Instead it's going into the stock and commodity markets. Already we see some evidence of inflation in grains, energy and metals. Whether Bernanke can control these price increases will be his biggest test.