The most powerful woman in the world, without an army, just propelled the Dow Jones to a two-day 700-point spike by saying “patience.”  Janet Yellen said the Federal Reserve, the quasi-agency that neither is “federal” nor has any “reserves," can be “patient” in their rate hikes in 2015.

She was quick, and clumsy by other accounts, to confuse the rate hike issue, with language suggesting that it might not happen at all.  In the vein of the famous watering hole sign, “free beer tomorrow,” Yellen essentially gave the message that rates would go up in 2015, but they might not.  It depends.

So we have the Federal Reserve, which neither is federal nor has reserves, telling the financial community that rates might go up, and then, they might not.  If inflation isn’t as high as Yellen wants, though she is mandated to promote price stability, rates may not rise, but they might.

The game grows old.  It was much simpler back in the Greenspan days.  We could wonder about interest rate rises by the briefcase Alan carried into the meeting.  Was it large or small?  Large would mean something new was in the wind, maybe.  With which hand did he carry his satchel?  Left could mean a departure from present course.  Those were the easy days for guessing rate adjustments by the non-federal, no-reserves Federal Reserve.

Under Greenspan’s tutelage, the Federal Reserve was worried about “irrational exuberance” and fought inflation, in a fashion.  Now the Fed seems to promote “exuberance” and admittedly promotes inflation.  Maybe the Federal Reserve has lost its way or, more precisely, has drifted from its triple-mandate of promoting maximum employment, stable prices, and moderate interest rates.

Speaking of losing its way, the Federal Reserve chairperson Janet Yellen met with liberal lobbyists the other day. 

In a rarity for a US central bank chief, Federal Reserve Chair Janet Yellen met Friday with activist groups calling for a fairer economic recovery and a more transparent Fed.  About 20 representatives of community and labor organizations met with Yellen for an hour in the meeting room of the policy-setting Federal Open Market Committee, the activists said.

The word “rarity” is a euphemism.  The proper description would be “Federal Reserve Chairwoman politicizes the 'apolitical' Fed by meeting with activists and lobbyists, thus breaching a century-old and guarded policy.”

But this is the “new” Federal Reserve, one that has morphed into an all-powerful, unquestioned, central-planning, cabal-enriching entity that has quietly expanded its powers and politicized itself while drifting from its ignored mandates of price “stability”  (not inflation) and “moderate” (not zero) interest rates.  

Ask your broker what he thinks of the market.  Then ask him if has heard what Janet Yellen just said.  (I do this all the time to people in the industry.)  The reaction is one of surprise, resignation, and capitulation.  The broker quickly realizes that his analysis, all his work, means nothing, and what Janet Yellen says means everything.

Janet is likely a nice person.  But it is remarkable to look at her and realize that it is she and what she thinks, at any given moment, that replaces the free market and all the forces of supply and demand.  The game is old indeed.