The Reds have only signed Steven Caulker so far in the January transfer window.
It had been anticipated that manager Jurgen Klopp would be busy during the transfer window, with many believing his squad is far from the quality expected.
However, he has made just one signing so far, securing centre back Steven Caulker on loan from Queens Park Rangers until the end of the season.
Instead, he has looked to work with what he already has at his disposal, and former Reds goalkeeper James says that is a good thing, as it will breed confidence among the current Anfield crop of stars.
“What's impressed me about Jurgen is that he's inherited another manager's squad, and tried to work with it,” he told the Liverpool Echo.
“He hasn't gone straight into the transfer market and spent millions and millions. He's looked for solutions from within. That's a big confidence boost for the players.
“Usually when a new manager comes in, everyone is looking over their shoulder and wondering who will be coming in and out. Jurgen has shown he's prepared to work with what he's got and give players chances.”
The decision so far not to bring in several new faces is likely to be a wise one from Klopp in the long run.
The January window is usually one in which value is hard to find, with clubs reluctant to sell their best players midway through a season unless it is for an over inflated price.
Instead, Klopp can now continues targeting players until the summer and ensure he signs the right players for both him and Liverpool, something which is arguably better for both parties in the long run.