2) The compounding nature of interest pushes a quasi-exponential growth of the debt/credit. Since the credit participates as an effective part of the money supply, it produces inflation. When the growth of the debt becomes unsustainable, a process of liquidation (shrinking credit) begins, which causes deflation, which accelerates the liquidation in a positive feedback. The liquidation periods are known as recessions or depressions.
This is the one I was probing for, since I hear it occasionally, and it doesn't seem valid to me.
If you play around with toy model closed economies of only a few participants, you can create all kinds of scenarios where the base money supply is constant, and there is prolonged, stable lending going on between participants, without the need for any inevitable bankruptcies. I.e. you can come up with counterexamples to your assumption that "the compounding nature of interest pushes a quasi-exponential growth of the debt/credit."