It's awesome watching new ideas form about what money is and how it should be used.
I'll put something up on the "Economic Totalitarianism" thread in a day or two, but
maybe this theard gets there first. For now, I'll posit a better "Orchard" model. I'll set
some variables closer to the real world, others are set to limit the model.

In an ideal Island world, the king owns all the land, and leases are for sale at zero rent.

There are only two orchards, side by side, and the trees are a thousand years old.
One orchard is up for sale, and is bought $20 cash and $80 loaned from the bank.
The loan carries 10% interest because the bank expects the orchard to go bust,
but demands the orchard as collateral.

The other orchard is owned by the bank, has a similar loan on the books, but
has interest set at the Internal Rate of Return (IRR) some 2%. This comes
about because the bank is closer to the source of the monetary expansion.

To create a "static" economy, both orchards use slave labour so there is no
compeditive advantage and the slaves eat all the apples, sold in a free market.

In year 1, the money in circulation is $200.
In year 2, the bank calculates $210 in circulation, and demands interest be paid. 
   
The bank makes a profit of $3 on its orchard, and rolls over the loans, increasing
the the external loan to $83. When the external loan approaches $100, the bank
will foreclose, and put the orchard up for sale, again.

That can't happen if Usury is prohibited.