The Fed should stop pretending it’s Nostradamus

This is Bloomberg Opinion Today, a pre-Easter basket of Bloomberg Opinion’s opinions. Sign up here.Today’s Agenda The Easter Bunny needs mor [Bloomberg]( Follow Us [Get the newsletter]( This is Bloomberg Opinion Today, a pre-Easter basket of Bloomberg Opinion’s opinions. [Sign up here](. Today’s Agenda - The Easter Bunny [needs more ESG](. - The Fed should [stop pretending]( it’s Nostradamus. - 2022’s winners and losers are coming into focus. - Are we peeking at a peak? Building a Better Easter Basket Bring on the colored eggs, the jelly beans and the chocolate bunnies! But before you hunt down your treasures and sort them by color, or nibble on the chocobunnies’ ears and then, like me, bite off their heads, take a moment to consider what Amanda Little calls the [“bitter new realities”](underlying the supply chain behind this favored pastime. (I promise: There is a potential happy ending to this headless bunny story.) Avian flu has recently wiped out tens of millions of hens; in case you haven’t noticed, you’re also paying more for those sweet chocolate treats, a reflection of inflation writ large and environmental and economic pressures where cacao is cultivated. Increasingly hot and dry weather in cacao producers such as Ghana and Cote d’Ivoire feeds a vicious cycle, where growers chop down forests for more arable land, hastening more[desertification.]( Meanwhile, consumers have been jonesing on cacao, which Little attributes to social media campaigns and pandemic binge eating — chocolate was responsible for the biggest part of the 2020-21 candy consumption surge. And it’s not as if all this cacao consumption is enriching poor African farmers: Low “farmgate” prices set by countries of origin have led to [more than 1.5 million children]( working illegally to produce cacao in Western Africa. But as Little notes, a handful of smaller chocolatiers such as Tony’s Chocolonely are pioneering ethical business practices and climate-smart farming, offering long-term contracts that help small farmers while training them to grow cacao in more sustainable ways. The world’s major chocolate brands need to embrace this same approach. As Tony Chocolonely’s CEO Henk Jan Beltman told Little, “chocolate is a very special kind of product, a Willy Wonka product — one that doesn’t provide consumers with calories they need, but with calories they love.” That attachment provides an extra inducement to consumers to support forward-thinking brands. Just ask Roald Dahl, who created Willy Wonka in his book “Charlie and the Chocolate Factory”: He turned and reached behind him for the chocolate bar, then he turned back again and handed it to Charlie. Charlie grabbed it and quickly tore off the wrapper and took an enormous bite. Then he took another … and another … and oh, the joy of being able to cram large pieces of something sweet and solid into one's mouth! The sheer blissful joy of being able to fill one's mouth with rich solid food! So enjoy your Easter chocolates, in whatever form they come. The Fed Is Driving a Two-Mile-Long Coal Train If you want to grok the basic challenge facing Federal Reserve Chairman Jay Powell in non-economic terms, check out John McPhee’s [masterful description]( in the New Yorker of what it’s like to drive a long coal train up a steep grade and then try to keep said train from breaking in two when half of it is coming down the hill and needs to brake while the other half is huffing up the hill and needs to accelerate. TL;DR? Well, you’re missing something. But unlike Powell, the train engineers in McPhee’s story don’t face backseat drivers telling them what to do — in Powell’s case, how to tame a near-historic rate of U.S. inflation when facing unprecedented variables while still avoiding a recession. Bloomberg's editorial board [acknowledges]( that “striking the right balance in monetary policy has rarely looked so difficult.” There’s no question that the Fed has to reduce demand by raising interest rates. But it has to focus on the conditions it faces at a given moment and not pretend it knows how quickly and how far it ought to raise interest rates later this year or next. Instead of staking its credibility on a projected path of increases, it should focus on squaring its current policy rate with its current assessment of excess demand. One example of the remarkable circumstances the Fed now faces comes from the disruption to commodity markets caused by Russia’s invasion of Ukraine. The big trading firms that handle commodities transactions face demands from lenders and clearinghouses for more collateral to back their rapidly expanding positions. Given the role that trading firms play in getting commodities to end users, uncertainty could disrupt production of goods ranging from gasoline to electric cars. Steven Kelly [argues]( that backstopping such transactions with guarantees falls squarely within the Fed’s power. Rescuing big trading firms may be politically unpopular, but it would help to restore “the market’s ability to price and trade risk amid a global emergency.”  Not Your Father’s Globalization Say what you will about higher inflation, but one clear winner is any student who took out a federal student loan for the 2021-22 school year: Rates were set last May in relation to the 10-year Treasury note auction and are fixed for the life of the loan. Gary Shilling surveys the likely winners and losers from this year’s disruptions, from supply chains and fuel supplies to interest rates and currency fluctuations. Globalization as he defines it won’t die as long as there are significant differences in production costs in various countries, but in the near term, supply chains will shorten, making [Mexico for one another potential big winner]( and, as labor automation increases in the U.S., manufacturing unions a big loser. Tyler Cowen suggests one good bet for the future, however: [Pay attention to countries like Ireland]( and Singapore, whose gross domestic product per capita outstrips their gross national product per capita. “A relatively high GDP is a sign that a large number of foreign companies view the future of the domestic economy as bright,” he writes. Or as the venerable American newsman Damon Runyon liked to say, “The race is not always to the swift, nor the battle to the strong, but that's the way to bet.” Telltale Charts Like pointers sniffing for birds in the brush, inflation-watchers have their snouts in the shifting economic winds searching for signs of a peak. Conor Sen thinks we may be looking at one in the recent slowdown in job creation, a salutary development when, [as he sees it](, “sustaining this economic expansion requires an environment that’s beneficial to workers while still being acceptable to the Fed.” The Fed wants to see a slowdown in measures like the growth in aggregate weekly payrolls. Sen finds hope for that in modest falls in the January and February Job Openings and Labor Turnover Surveys released by the Bureau of Labor Statistics and the decline in activity for job postings on employment website Indeed.com. Meanwhile, Jonathan Levin reports predictions by auto analysts that [new car supply is likely to lag demand]( until 2024. But the good news for inflation-watchers, he notes, is that the prices of used cars, one of the most widely cited inflation bellwethers, fell 3.8% in March from a month earlier, and gasoline prices have been falling since mid-March. Further Reading No, Elon Musk is [not going to buy up more of Twitter](. — Matt Levine It’s time to [stop describing Beijing as the air pollution capital]( of the world. — Justin Fox The West needs to do a better job of [exploiting its messaging advantage]( in the information war over Ukraine. — James Stavridis Was [John McCain the last Republican]( to think that torture was un-American and wrong? — Jonathan Bernstein British Chancellor of the Exchequer [Rishi Sunak’s first experience through the political wringer]( has left him flailing. — Adrian Wooldridge Russia is on the [verge of being cast out of the international capital markets]( for a very long time. — Marcus Ashworth Beijing is back to approving new digital games, as long as they [echo Xi Jinping’s thought](. — Tim Culpan ICYMI U.S. railways slashed jobs over the last decade. Now their labor shortages are [disrupting food and energy supplies](bbg://news/stories/RA816HDWRGG5). Stripe, Meta and Alphabet will [buy nearly $1 billion]( in offsets from startups that remove carbon dioxide from the air. Hoboken marijuana merchants [sweeten their deals]( by paying the city for more police officers. Staggering crypto seizures have cops [struggling to keep up](. Kickers Space Command just declassified news that [we’ve had more interstellar visitors]( than we thought. Machiavellianism? Subclinical narcissism, psychopathy and sadism? You [might just be in the market for crypto](! Notes: Please send hot intergalactic rocks and feedback to James Gibney at jgibney5@bloomberg.net. [Sign up here]( and follow us on [Instagram](, [TikTok](, [Twitter]( and [Facebook](. Like Bloomberg Opinion Today? [Subscribe to Bloomberg.com and get much, much more](. You’ll receive our unmatched global news coverage and two in-depth daily newsletters, The Bloomberg Open and The Bloomberg Close.  Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. 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