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In my example, I am the issuer of the currency. Perhaps the example was not clear. The point is that debt-based currency does not have to be created to pay interest. Interest can be paid with production. The paradox becomes real when the interest exceeds production because then the excess interest can only be paid by new debt, and a collapse is inevitable.
Can you explain what you mean with interest can be paid with production. Don't use the fish example, because I can't use fish to pay loans at my bank, nor can a government.
I catch fish and exchange my fish for currency and pay the interest. I am effectively paying the interest with fish, and I don't have to issue more currency to pay the interest. As long as I can catch enough fish to pay the interest, the debt does not grow and there is no need to issue more currency.
The dept can only be paid with dollars. And dollars bear interest. When all dollars are used to extinguish dept, still dept exists.
The amount of dollars represents the amount of debt (ignoring the other Fed assets), so there will be no debt left over.
The system will be doomed because production or real economy can never keep up with creating new dept.
The system is doomed
if production can't keep up. If/when interest rates return to historical levels, we are doomed.