The stock market, for example, is playing an unprecedented role in the economy. Since more than half of American households have a stake in stocks -- many opting to keep savings in equity mutual funds rather than bank accounts -- American households have never been as interested in who heads the Fed as they are Tuesday.
Hence what might be called the "dumbing down" of Fed watching. These days, if you can read, you can predict Fed policy moves. In taking much of the guesswork out of forecasting its rate policies, the Fed has left economists and reporters with less to do.
Those who remain in the field have been transformed from economists to language-exports. Times were when Fed watchers trolled the monetary aggregates and trends in banks reserves for intelligence on what the central bank was up to. Nowadays, they weed through ever-increasing numbers of speeches by Fed staffers.
It's no longer the statistical move that matters but the verbal tidbit.
The Fed's move to open up is also a nod to heightened sophistication on the part of investors. Throughout most of its 88-year history, the central bank was guided by the principle that giving investors too much information was dangerous. The fear was that it would diminish its ability to influence markets and, by extension, the economy.
As the 1990s unfolded, that thinking changed. Greenspan & Co realized more informed markets were also more efficient ones.
It reduced uncertainty and volatility, while leveling the playing field. No longer did deep-pocket firms employing hordes of Fed watchers have an edge over the average day-trader.
"Transparency in policy making is a key part of the democratic process, as well as being helpful in fostering efficient decision making in the private sector," says Fed Vice Chairman Roger Ferguson, the central bank's point man on the issue.
Monitoring Fed policy also has become a Greenspan-watching game. While the central bank is a democracy on paper, Greenspan's celebrity and 14-year tenure as chairman means he calls the shots.
The Greenspan years also have seen a consolidation of power at Fed headquarters in Washington. What district bank presidents -- especially those whose turn it is to vote at FOMC meetings -- say is important. Greenspan's words eclipse everyone else's.
The demise of Fed watching isn't completely of the central bank's making. Rapid changes in the economy have rendered many of the traditional rules of monetary policy making less useful. The link between money growth and demand in the economy weakened. So did the tradeoff between unemployment and inflation spelled out by the so-called Phillips Curve. As a result, monetary economics in the US became less of a science and more of an ad-hoc indicator-of- the-month exercise.
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