Epistemological Foundations in the Ethical Debate Concerning Fractional Reserve Banking and Borrowing Short and Lending Long

Various commentators have taken different approaches to the question of whether or not fractionalreserve banking (FRB) and borrowing short and lending long (BSLL) are ethical bankingpractices. In this paper, we examine the epistemological foundations in this debate, with particularfocus on FRB. We discuss this question with regard to FRB in particular, because whilemany authors agree that FRB is illicit, the methodology by which this conclusion is reached differs.This matters, because it is only when FRB’s ethicality has been established by employing thecorrect epistemology is it possible to address the issue of BSLL. BSLL’s legitimacy then rests onwhether or not there exists a continuum, which we leave for a separate discussion.