Re: I just created 100 pennies.. and loaned them out, you owe me 101 pennies…..
I just created 100 pennies and I loaned them out to you + interest
How is it possible for you to pay me the 101 pennies you now legally owe me if only 100 pennies are in circulation?
Because that's not how it works. There are far more "pennies" in circulation. It's true that debts exceed the money supply but that's not neccissarily a problem since each "penny" can be spent more than once. In fact, if I remember correctly, the velocity of money in the US (how often each unit of currency is spent in a year) is around 4.
Change the 100 pennies to 100 trillion pennies, same principle applies
Velocity of money has nothing to do with money creation. You move a dollar one million times between your left pocket and your right pocket, and voila you are now a millionaire
You are missing the point which is that money doesn't have to be held permanently to pay debts. In the same year, I can borrow $100 to buy food, and the company that I bought the food from can put that money in the bank to fund more loans. The borrower of that money can in turn buy a product from my employer, the employer can pay me with the profit and I can use that money to pay my debt.
The amount of debt, income and expenditure in an economy is not limited to the amount of currency in circulation. If there are only 100 pennies in circulation, that doesn't necessarily mean that a debt of $10 is going to default.