Fear of the Fed Returns: Today's Outrage

Updates with details from Bernanke speech in 4th paragraph.

NEW YORK (TheStreet) -- Everywhere I look, people are fretting about the possibility that the Fed may soon start tightening up monetary policy and eventually even raise interest rates.

We are all on pins and needles as the world's most prominent central bankers gather in Jackson Hole, Wy. for the next two days.

Some are even starting to take bets on whether the Fed may raise rates as early as mid-2010.

But for all the anticipation ahead of Fed Chairman Ben Bernanke's comments this morning, all he did was stoke the speculation about when things will get back to normal. He talked about the U.S. economy being on the verge of a recovery but he also cautioned that credit still isn't flowing freely.

The trillion-dollar question remains: How will Bernanke shift monetary policy back to an interest-rate driven control valve and close down the floodgates that have been propping up financial services companies from AIG (AIG) to Citigroup (C) to GE's(GE) Capital Finance unit?

If Bernanke keeps interest rates at the near-zero level for too long, inflation could rear its ugly head and stymie the economic recovery that may be taking hold. If he shuts off the money pump too soon, the credit that keeps consumers spending could dry up and choke off sales of everything from Ford (F) cars to Whirlpool(WHR) appliances.