On a larger scale, I could loan a country 20 million BTC (over time), it uses it to fund Social Security, and it pays me back 30 million BTC (over time). Of course, in this case both parties would have to spend their BTC, or there would be a problem.
I am aware that the lender will spend some money back into the economy which might end up in the borrower's bank account as profit. Assuming 20 mil BTC is the total amount of BTC in existence, in your example, the lender will have to buy 10 mil BTC worth of good and services from that country so that in the end, the lender gets 30 mil BTCs as 20 mil in coins + 10 mil in the form of good and services. Right?
Well, I'm not sure that is the perception that many people have when making a loan. If you give a loan for $1000 with 10% interest, you expect to get $1100 after a (long) period of time, not to get $1000 + a $100 voucher worth of goods and services. I'm not saying that we shouldn't go back to the "voucher" system when money are backed by good and services, maybe that would be one of the fixes ...
why?
Because it will help production companies to create more/better goods and services that are required by a growing population and/or more competitive business landscape. Already sparred on the subject. Are you asking this because you think growth is bad?
For people seriously interested in this subject,
Steve Keen has done a lot of work on dynamic nonlinear economics.
Will take a look.