by James Howard Knustler, The News Doctors The money-moving world waits on tenterhooks for the Wednesday appearance of America’s oracle, Janet Yellen, to step out of her grotto and state whether or not she feels twinges of patience. Wikipedia notes that Pythia, the original priestess of Delphi “…delivered oracles in a frenzied state induced by vapors rising from a chasm in the rock, and that she spoke gibberish which priests interpreted as the enigmatic prophecies preserved in Greek literature.” Some things never change. Patience for what? Well, whether to raise the Federal Reserve’s benchmark short-term interest rate from near-zero to something microscopically above zero. This is what the world foolishly turns on. And, of course, also some oracular hint as to whether this momentous move might occur in April, June, September, or not at all. Some canny observers of the vaudeville that US money policy has become — namely, Jim Rickards, David Stockman, Peter Schiff — maintain that Yellen and her Fed are boxed in and can really do nothing. Their policies and interventions regarding the flows of capital have done nothing so far but disable the normal operations of markets and distort the valuation of everything, especially the cost of renting money itself — for that is what happens when you take out a loan. The net result of all that is a financial picture that no longer reflects anything truthful about the actual economy, being a trade in goods and services. The transparent truthlessness of the Fed’s basic premises go far to explain the chasm between official policy and reality — though it does not explain the appetite for plain lying of the supposedly informed minority cohort of the public, the deciders among us in business, politics, and media. For instance, the employment numbers that came out of the federal government ten days ago saying that the jobless rate is just over 5 percent. Everybody not in a special ed class in America knows that this is a barefaced lie. But nobody except a few mavericks on the web (see above) object to it. Lesser official oracles such as The New York Times and the Wall Street Journal report the lie without reservation and it gets absorbed into the body politic like any other morsel of protoplasm into the mindless amoeba that America has become. So far, the Fed has tried to merely chatter about the possibility of raising rates as a substitute for actually doing anything. That’s because anything more than a gesture of raising rates will blow up the lucrative carry trade arbitrage enjoyed by the banks that hold the Fed (and everybody else) hostage, as well as the artificially inflated stock markets, and the US government’s ability to service its debt. That’s a lot to blow up. The wondrous levitating S & P index is the Fed’s substitute for reality. While the public’s attention is diverted to that ongoing marvel, they fail to see the appalling instability in currencies around the world, or the booby-traps laid in bond markets everywhere, or the devastation thundering through the oil industry, and the collapse of global trade relations that Tom Friedman said would last forever. I’m sure that on Wednesday Janet Yellen will make a big show of surgically removing the wordpatience from the Fed’s so-called “guidance.” I’m inclined to predict that the Fed will make a gesture of raising the benchmark interest rate by 25 basis points or 25 measly hundredths of a percent. That will be as far as they dare go. They will make this lame gesture in the face of gales of bad news about what is really going on in a disintegrating global banking system, and also the devastation in real economic activity. Within a matter of weeks the oracle will step back out of her grotto and not only revoke the benchmark interest rate rise, but announce Quantitative Easing 4 in order to attempt to reflate the nation, gasping like a dying grunion on Redondo Beach. By then, the Fed will be completely out of cred. This will be the biggest disaster of all, since the loss of faith in august institutions will rage through every polity in the advanced economies. Nobody will believe any longer in anything they say or do, and especially the value of the papers (or digits) they denominate as money.