Buddha on Background

Is it really a matter of expertise — or sheer luck — to reign in inflation?

February 3, 2000

Is it really a matter of expertise — or sheer luck — to reign in inflation?

At a recent luncheon in downtown Washington, a Governor of the U.S. Federal Reserve addressed a group of professional economists. As is common when economists get together, the room was filled with technical discussions of “output gaps,” “NAIRU” and “interest rate targeting.” As is also common when a Fed Governor speaks publicly, he said precious little to say about the durability — or fragility — of America’s economic boom.

That’s because Fed Governors, mindful of how their comments can influence capital markets, like to talk “on background” when they really have something to say about the economy. In other words, in exchange for their insights into the economy, reporters agree to conceal their identity. But at this particular luncheon, it turned out that the background was the real message.

The luncheon took place in a Chinese restaurant. When the Governor rose to deliver his remarks, he stood where a statuette of a Buddha — sitting on a shelf in the corner of the room — appeared just over his shoulder. To his audience, the symbolism was clear: this Buddha, with his enigmatic smile, appeared to be providing the spiritual guidance for this member of the Federal Reserve.

With the U.S. economy continuing to confound economists by growing robustly with few signs of inflation, one wonders if the Fed would be better off turning to Buddha for guidance — or to that roomful of economists. After all, rubbing Buddha’s belly is supposed to bring luck — and above all else, the Fed has been fantastically lucky over the past few years. And Buddha should remind us of the humbling secret of the recent success of U.S. monetary policy — it might actually be nothing more than luck.