What you're saying still isn't true because you are forgetting that loans can be used to cancel each other. Here is a simple example: image that Satoshi who is cold and has a broken arm has 50BTC, a forest of trees and food while hungry Ben has nothing but an axe. Ben borrows 50Btc from Satoshi to be repaid at the end of the month with 10% interest. Ben then buys the trees and some food from Satoshi for 50BTC. Ben chops the trees into firewood which is now worth 55BTC. Satoshi buys the wood with 50BTC cash and agreement to pay the extra 5BTC at the end of the month (effectively he is borrowing 5 virtual BTC from Ben). At the end of the month Ben pays Satoshi 50BTC and they agree that the two debts of 5BTC cancel each other and that everything has been made good, ie: there is no debt remaining to anyone at all.
The important thing to note is that without the use of loans Satoshi's trees would have never been chopped, Satoshi would remain cold and Ben would have starved! There is nothing inherently wrong with interest bearing debt as long as it is used wisely. Everyday around the world interest bearing debt facilitates trade that would not occur otherwise.
Why should ben buy the trees? He could offer his service and his axe to chop the trees for Satoshi and then get a decent meal from Satoshi. So Ben is not hungry anymore. Satoshi still has his 50 BTC and no one owes anyone anything?
And your story would be a bit different in real life, the bitcoin loansharkt who will loan you the money do not want to buy back the trees, they will not make a deal with you where you get the same debt to cancel eachother out. You will build up and build up debt upon debt and then we are back again where we started from, a banking system and virtual
BTC that has no backing at all by anything but an agreement between you and the loanshark, thus creating bitcoin out of thin air made possible.
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The reason why I had Ben buy the tree was to keep the example simple-- ie, it used only two protagonists. Obviously in real life there are maybe many other people involved, eg: Ben would loan the money from a bank as you pointed out. However, it is conceivable that such a situation as I outlined could occur-- eg: Ben bought the trees because Satoshi didn't need them all (all the wood was really worth 70BTC whereas Satoshi only wanted 55BTC worth), so Ben kept some himself for his own cooking, warmth, to build a hut and so that he could sell some to other people. In fact I know of a situation where something like this happened in real life. A while ago in my country some of the banks started selling off their physical buildings to investors with the condition that they be rented back to them, the bank even supplied a loan for you to buy them if you didn't have the cash.
Regardless of this though, the point I was trying to make is that the claim that it is impossible to pay off interest in a world that is based on a finite money supply is wrong. This example clearly disproves this claim. By-the-way, it is not the only way to disprove it, just one of the simplest examples. Another example that is easy to describe is one where the person who owes the interest pays it back with labour or goods instead of money. I didn't use this because I wanted to show that you could destroy the interest with "money" alone (where money includes debt in its definition).