Chris Dillow says that economics is like literature. Maybe it is, and maybe it isn't. But if it is literature, economics needs more science fiction. Paradoxically, imagining radically different worlds can help us understand better how the actual world works, as well as helping us consider policy alternatives.
Imagine a world where all borrowing and lending is banned. You cannot lend anyone money, whether you lend it at a fixed interest rate, or at 0% interest, or in return for a share of the profits. Neither individuals nor corporations (including governments) can borrow or lend.
How would monetary policy work in that world?
The simplest answer is that the central bank issues money and buys land. Commercial banks do the same. The liability side of the central bank's balance sheet looks the same as it does today. But on the asset side the central bank owns land, maybe farmland, instead of government bonds. Instead of collecting interest on its assets, the central bank collects rents. In Open Market Operations the central banks buys or sells land, not bonds.
If there's a shortage of money, so the country is in recession and the inflation rate is falling below target, the central bank loosens monetary policy by buying land and raising the price of land. Each individual can get rid of excess money by buying land, but in aggregate they cannot. They increase spending on consumption goods and investment goods in their individual attempts to get rid of the excess money.
Is there anything equivalent to a Zero Lower Bound constraint on monetary policy? Yes. If the central bank sets too low an inflation target (or pays too high a rate of interest to those who hold its money) there is a risk that everyone would prefer holding liquid money to holding illiquid land, and the central bank would run out of land to buy. (Since it is implausible that people would ever be satiated in liquidity, if liquid and illiquid assets had the same rate of return, implementing Milton Friedman's Optimal Quantity of Money would mean the central bank owns all the land.)
Is there anything equivalent to Neo-Fisherianism? No. If the central bank pegs the nominal price of land permanently, by making a commitment to buy or sell land if the land price index falls below or rises above some target, that might not be a very good monetary policy, but it is a perfectly coherent monetary policy that leaves the equilibrium general price level determinate. And if the central bank wants to raise the inflation rate for the general price level, it can raise the target inflation rate for land prices. The monetary policy instrument (the price of land) and the monetary policy target (the general price level) move in the same direction, and do so in both the short-run and long-run. Which makes communicating and understanding the stance of monetary policy a lot easier.
Actually, apart from that last paragraph, monetary policy works in much the same way that it works in the real world. Would it make any difference if the government rescinded the ban on borrowing and lending money? Any individual can get rid of excess money by buying land or lending, but who wants to take the other side of the trade? They cannot do this in aggregate. It is only in those markets where there is an excess demand for money, like in the markets for labour and goods in a recession, where there are lots of people more than willing to take the other side of the trade. That's where the hot potato gets passed around.
So clear your minds of all that nonsense about monetary policy being interest rate policy and working through borrowing and lending!