The aim of the Liquidity Network is to address the current liquidity problem – the slow down in economic activity triggered by the credit crunch.
Currently virtually all economic activity is powered by debt based credit – individuals and businesses borrow in order to finance their activities. Using the credit released by these loans they employ or do business with other individuals/ businesses who in turn do business with their suppliers and so on. There is thus a multiplier effect whereby the initial credit fuels transactions worth many times more than the value of the initial loan.
When the ‘seed’ credit from banks dries up, as in the current crisis, the multiplier effect which normally helps to create liquidity efficiently acts in the reverse way and removes liquidity quickly.
FEASTA’s Liquidity Network aims to address this problem by creating an alternative ‘liquidity stream’ which is not based on debt.