You mean monetary inflation?
When central banks issue more currency to fight deflation, the liquidation process is postponed but not avoided. Some of the new investments not based on real loanable funds but in inflation are made and the unavoidable collapse of credit becomes even worse.

When I said interest, I meant basic interest, excluding risk premium. If the lending is risky, the borrower acquires at the same time a loan and an insurance. While the basic interest can be suppressed through demurrage (freigeld) or money abundance (LETS), the risk premium has to stay.

Time-preference is not applicable to all goods and services. It wouldn't be applicable to money with demurrage. No one would prefer to save fish forever instead of lending it because fish decays. Time-preference belongs to the "abstinence theories" by the terminology of Boehm-Bawerk, but I don't think the austrian school is correct in this particular point.
To remove your prejudices regarding interest and time preference, I recommend you this short story.