Let's make some real calculation: Each month, you borrow $100 to buy food, and those $100 goes to the food company as income, and food company put $100 to bank, and bank loan out $90 (10% reserve requirement) to another borrower, he spend all $90 to buy products from your employer, your employer have $90 income, and he is so generous and gives you all $90 as salary. So, how could you payback your $100 loan with $90 salary at the end of the month?
The reason these examples are stupid is that they assume that one person holds all the money in the world and that value can only be traded using that money. Of course, neither of those assumptions are ever true.
Ok, lets assume that 7 billion people holds all the fiat money in the world and value can be traded using those money. Did that change the way how it works? Putting billions of semi-conductor components into a CPU does not change the basic electrics theory that you can prove in a flashlight
Yes, because now I can produce something of value and exchange that for money that can be used to pay back the loan (and the interest).
If you can do that, the rest 699999999 people will also be able to do that, and every one of them will need more money than they had originally borrowed to do that, that still does not make the ends meet
If I borrow $1000 and repay the loan at $100 per month for a year, I don't need $1200. I need $100.
Indeed, it is crazy how this blatant error is so long-lived.
The ONLY situation in which "1) 100 pennies are created 2) these 100 pennies are lend out 3) one has to pay 101 pennies back in total"
would create a problem, is when the original lender is not going to spend a single penny of the partial paying back for goods and services. But if that original lender is not interested in obtaining any goods or services, then why ask an interest (or even, why want the 100 pennies back in the first place) if it is for not buying anything with it ?
The reason why anybody is going to lend pennies and ask interest, and want the money (plus interest) back, is bacause they want to get goods and services for it ! If you do not want goods and services, you're not interested in having money either. You could just as well GIVE AWAY the 100 pennies. And you're certainly not interested in getting any interest on it. You only want your money back plus interest, because you want to SPEND it.
Well, if, during payback, the creditor spends AT LEAST the amount of interest that is due by the debtor, then there is no problem for the debtor to pay back the whole amount plus interest, without extra money creation.
Creditor invents 100 pennies and lends them to debtor (debtor promises to pay back 101 pennies over 10 years).
first year: debtor pays back 10 pennies
second year: debtor pays back 10 pennies
if from these 20 pennies that the creditor now holds, he SPENDS a single penny, that penny can be earned by the debtor.
In that case, the debtor (holding 80 pennies, and earning the one that the creditor has spend) can now pay off the entire loan plus interest.
The important thing is that the creditor, in all of this, has spend 1 penny to buy goods and services. That's needed. That's all that is needed.