With rumours continuing to circle around main street financial institutions in trouble, the Fed along with other central banks piled in another $200bln worth of liquidity in a vain hope to stem the tide. It certainly worked sparking a massive rally in the US market which was looking very weak indeed.

I wrote 6 weeks ago that the Fed would have no option other than to underwrite the whole financial system. This is exactly what they are doing. The worrying aspect of this approach is that it leads the market to depend on continuing liquidity to provide confidence and prevent what would be happening without intervention, namely a full scale rout with several institutions going under.

This creates extreme moral hazard. Even though many financial institutions have clearly acted irresponsibly and in some cases in other ways, they will not be allowed to fail unless a “deal” is worked out where they will be “acquired” quietly for a nominal sum and so the system stays solidly in place and the illusion is maintained.

F.William Engdahl lays out his thoughts on the origins of this mess. It’s focus is the US over the last 100 years and is interesting to read though he makes some strong accusations about the actions of certain people.  The extent to which small cliques have organised and run the financial system is open to questions but there is no doubt that the US prevailed at Bretton Woods on the strength of pure self-interest.

So what now? Well I would say more of the same. But gravity is a powerful force and its hard to imagine these markets not falling further and more de-leveraging taking place in credit and carry trades. I’ll discuss shortly what a new global currency system might look like because the current one is about to explode.

I’ve been following the Murdoch bid for Dow Jones courtesy of Jason and it’s actually more interesting than it looks on paper.

What is the future for print? Murdoch seems to be thinking that at some point the major papers will shut down. I agree with this though the time frame in uncertain.

This article confirms that the squeeze is on(thanks Jason!) noting that the San Francisco Chronicle is taking a major bath and should be shut down. Much of this is driven by falling advertising revenue but i think there is something else at work here.

People are generally using the internet for news and general media information. Who wants the hassle of buying a paper of which you may only read 20% of the content.

Murdoch senses something more economic. The costs of running a print media are enormous and the savings he could make by putting the Wall Street Journal online could be hefty. No distribution or printing costs. Imagine all the trees that could be saved

But think out further. Why do we read a newspaper? to get news, find out stuff, see what’s on etc.

Do we read it for editorial? Not anymore. Who cares what some editor thinks when there’s a million blogs all talking about the same thing. The blogosphere may be a holy mess but over time it will sort itself out into various structures and frameworks. Over at VortexDNA we have MyBlogDNA which will be rolling out soon where you can match your blog to others who share your DNA.

We are all editors now!

But imagine if you had the ability to create your own “paper” drawing from the net stories that you were interested in and were relevant to you. So order your subjects and away you go.

But you still want to hold something to read. Ok just print it off at home. With the printer technology we have now and no doubt coming soon, home printers will be able to handle a myriad of tasks. Have your own paper delivered and printed at home.

Now that will save a lot of money and energy too. No more wasted papers, sections of papers or rubbish i don’t want to read about.

Relevant advertising can come with it or without it.

Could this extend to magazines as well? Glossy Vogues printed out at home? Maybe that is a stretch too far but who knows?

What is for sure is that Murdoch seems to be ahead of the game here as he was with MySpace. I wonder how far ahead he has really thought.

Thoughts anyone?