# Liquidity

By [Untitled](https://paragraph.com/@0x2d7afa61ecb90f8f2dddc5d4248bfdd31409ecdf) · 2022-07-30

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Liquidity provision is important because a failure in the payments system could lead to a chain reaction and to a full-fledged systemic crisis. Banks and economic agents are interlocked through their balance sheets, so if “A” cannot pay to “B” because of a liquidity shortage at “A”’s bank, then “B” cannot pay “C”, “C” cannot pay “D”, and so on.

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*Originally published on [Untitled](https://paragraph.com/@0x2d7afa61ecb90f8f2dddc5d4248bfdd31409ecdf/liquidity)*