UK Banks Profit from 4.5% Interest on QE Reserves, Taxpayers Foot Bill; Experts Warn of Double Hit to Citizens via Inflation and Higher Taxes

QE Reserves: Why UK Banks Are Getting Paid 4.5% on Money Created from Thin Air

Alice has *£1M* in life savings and deposits it in NatWest.The government needs funds for a project, so it instructs the Treasury to issue a *£1M bond* that pays *2% interest annually* and matures in 10 years. NatWest takes Alice’s money and buys this bond.The Bank of England decides banks should hold more liquid assets. However, interest rates are already very low and can’t be reduced further. Still, they want to encourage liquidity in banks.So, they introduce the concept of *QE (Quantitative E...