Under the Fisher-Friedman reform the US Treasury would no longer issue bond debt. A consolidated Treasury/central bank fiscal/monetary authority -- "the government" -- would become the monopoly issuer of US$ money, and the primary allocator of the money supply. Acting as the government monetary authority, the consolidated Treasury/central bank would directly control the quantity of the US dollar money supply.
Fisher thought of his reform as 100% reserve banking. All of the reserves would be government-issued money. All bank deposits and bank lending would be "backed" one for one by 'really existing dollars' that had been issued by the US government. Which most people think is already the case, with some 'fractional reserve' twists to confuse the issue.
Fisher called for the government to lend money to commercial banks at zero interest, to provide the banks with a supply of loanable funds; as an addition to the funds depositors had placed with banks as investments in the bank's for-interest money lending business. Except now, under the Fisher-Friedman reform, the commercial banks would only be able to lend money they actually have; rather than create the money on their own balance sheets.
By a simple act of legislation, government-issued bonds held by banks would be converted to government-issued money held by banks. Privately held bonds would be paid out as they matured. The public debt would be replaced by the government-issued money supply.
A money issuing government does not need to sell bonds to "get money". Nor does the government have to pay interest on bond debt. If pension funds and other socially-economically beneficial institutions need bond interest income to fund their payouts, then the monetary authority could simply create money and allocate money to them, rather than sell them bonds and pay interest to them.
The so-called "free market system" of money allocation is actually government by bankers. Bankers do the money allocations. In a reformed system, governments would recover their power to allocate money.
In 2012, two IMF research economists -- Benes and Kumhof -- revived Fisher's proposal in their paper, The Chicago Plan Revisited. It's an updated version of the Fisher and Friedman proposal, available here, http://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf
In 2011 Dennis Kucinich presented bill HR2990 to Congress, the NEED Act. The bill is based on Steve Zarlenga's work at the American Monetary Institute: another monetary reform that would strip private banks of their money issuing privilege and place all money issuance in public hands. Zarlenga has developed detailed proposals for how to allocate (spend) the government issued money. But Kucinich was run out of Congress and his bill languishes without a champion. Monetary reform -- the radical kind that seeks to completely strip banks of their money-issuing privilege -- excites powerful enemies.
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