Bernanke: It has to do with two aspects. The first is unemployment. The other concern I should mention is that inflation is very, very low, which you think is a good thing and normally is a good thing. But we're getting awfully close to the range where prices would actually start falling.
Pelley: Falling prices lead to falling wages. It lets the steam out of the economy. And you start spiraling downward.
Bernanke: Exactly. Exactly.
That's deflation and that's what happened in the Great Depression.
Pelley: How great a danger is that now?
Bernanke: I would say, at this point, because the Fed is acting, I would say the risk is pretty low. But if the Fed did not act, then given how much inflation has come down since the beginning of the recession, I think it would be a more serious concern.
Critics of Bernanke's Federal Reserve have the opposite worry: they say the $600 billion and holding down interest rates could overheat the recovering economy, causing prices to rise out of control.
Pelley: Some people think the $600 billion is a terrible idea.
Bernanke: Well, I know some people think that but what they are doing is they're looking at some of the risks and uncertainties with doing this policy action but what I think they're not doing is looking at the risk of not acting.
Pelley: Many people believe that could be highly inflationary. That it's a dangerous thing to try.
Bernanke: Well, this fear of inflation, I think is way overstated. We've looked at it very, very carefully. We've analyzed it every which way. One myth that's out there is that what we're doing is printing money. We're not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way. What we're doing is lowing interest rates by buying Treasury securities. And by lowering interest rates, we hope to stimulate the economy to grow faster. So, the trick is to find the appropriate moment when to begin to unwind this policy. And that's what we're gonna do.
Pelley: Is keeping inflation in check less of a priority for the Federal Reserve now?
Bernanke: No, absolutely not. What we're trying to do is achieve a balance. We've been very, very clear that we will not allow inflation to rise above two percent or less.
Pelley: Can you act quickly enough to prevent inflation from getting out of control?
Bernanke: We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.
Pelley: You have what degree of confidence in your ability to control this?
Bernanke: One hundred percent.
Pelley: Do you anticipate a scenario in which you would commit to more than $600 billion?
Bernanke: Oh, it's certainly possible. And again, it depends on the efficacy of the program. It depends on inflation. And finally it depends on how the economy looks.