Currency is reused. Suppose my interest payment to the lender is the value of a load of fish. So I go fishing and I get a load of fish. The lender (for example) buys the load with some currency and I make the interest payment with that same currency. I could potentially do this forever and there is no need for additional currency to make interest payments.
There are 2 types of credit. Self liquidating and none liquidating. You are describing self liquidating credit, where the fisherman's IOU's get extinguished when he delivers the fish. This type of credit is usually short term, and has specific terms outlined for its repayment. This is also referred to as real bills, discount bills etc. Notice how in this scenario only a producer can issue IOU's because only a producer is capable of extinguishing them(repaying).
The present financial system is made up of entirely credit that cannot be liquidated. The dollar is a debt instrument that has no terms outlined in its redemption. This means it cannot be extinguished. New debt MUST be created to repay old debt under this mechanism. Eventually the system implodes as we have come close to in 2008. None liquidating debt must DEFAULT. The question is just when.
What the US federal reserve is doing is equivalent to check kiting. They are crediting government accounts via QE with money that does not exist. Imagine buying stuff with bad checks. Every fed reserve dollar is backed by a US gov bond which specifies repayment in those exact dollars that are being lent. Do you see the circular problem here? Commercial banks do the exact same thing. Every dollar they lend, requires more borrowing to make up for the interest. This system requires perpetual debt creation(which is impossible) to continue functioning. Since every loan must be collateralized by something, it requires a constantly "expanding" economy. Modern economists believe an economy can grow at the same rate or faster then COMPOUNDING debt. Hence 2% GDP growth every year is compound growth. Anyone with a calculator knows this is impossible. As real assets do not grow as fast as compound debt, we get inflation from more counterfeit credit chasing fewer goods. Inflation in modern terms is the expansion of counterfeit credit.
The entire role of gold was not "price stability" which is not desired, but interest rate stability. The gold standard tended to have a low and stable interest rate. The other important aspect of gold was its ability to extinguish debt. Under the fiat system we have had interest rates go well into double digits, and back down again. This has caused immense bond speculation, and enormous damage to capital of financial institutions(insolvency).