That one is easy. Bernanke will speak to Main Street. Wall Street understands him perfectly. His problem is that Main Street doesn’t understand him at all.

Bernanke has the unenviable job of trying to convince a citizenry which understands very little about monetary policy that he has not completely lost his marbles.

Despite inconvenient facts like falling velocity of money despite endless quantitative easing, Bernanke must try and prove a negative: that price are rising for food and energy as a result of demand from new consumers from the emerging markets NOT based on the his frenzied attempt to debase the dollar and devalue the debt of the US government (to list just a few of the charges against him).

I think we can say that QE2 has probably had mixed results on the real economy at best, but has had a significant impact on the market for things like commodities and stocks. A little of that is okay; it wards off deflation fears. Too much is a bad thing, and Bernanke finds himself the scapegoat for higher energy prices despite wars across the Middle East, endless Chinese demand and presidential administration wholly disinterested in exploiting native natural resources.

As a result, I think the risk is that Bernanke speaks to Main Street tomorrow, not so much as a professor of economics, but as the point man on the US economy. The Fed has changed its tone of late to acknowledge rising food and energy costs and may surprise the market by feeling the average Joe’s pain more than the market expects.

Will he shift policy dramatically? Not likely. QE2 will come to an end, as expected, but he could toughen his rhetoric to try and tame the commodity specs just a bit.

The market is priced for an end to QE2 (on schedule in June) but the also for the continued reinvestment of interest and maturities of bonds held in the Fed’s portfolio. If he really wants to show some inflation chops, he can let the bonds roll off and not reinvest the interest. That woud be more than the market expects and would rally the dollar.

IF it is Main Street he is after, look for a somewhat more hawkish performance. IF it is Wall Street he wants to sooth, it will be lower for longer forever and the dollar will extend its slide…