In the context of the passage you provided, "knitting" is likely being used metaphorically to convey a sense of persistence, continuity, or monotony. The character is saying that even though they tried to convince themselves that what they were experiencing was just a dream, it didn't make a difference because the situation or the people they are referring to (the "b@stards") continued to act in a certain way. The use of "knitting" here is not about the literal act of making clothes but more about the idea of something repetitive and ongoing. It's a way of emphasizing that the perceived problem or situation was persisting, much like the continuous and repetitive motion of knitting. So, in this context, "knitting" is a metaphorical expression used to convey a feeling of unending or relentless actions that are bothersome or frustrating to the character.

It's hard to tell without reading more of the passage. Also, if you 'came up' with the passage, that means you wrote it. (COME UP WITH means to create). I think you mean you CAME ACROSS the passage, meaning you encountered it.