Paul Grignon explains our current monetary system in his video "Money as debt" in which most money comes into existence as the principal of debt. The punch line is that the money to pay the interest does not exist and can only be created as new debt, which means the money supply (and therefore the economy) must continually expand. This is why the Fed is so terrified of a credit crunch.
In this 7 min video clip from "Money as Debt II" he explains that it is possible that if the banks spend the interest they collect, and don't hoard or re-loan it at interest, and it becomes available to the debtors to repay interest, it's possible to pay all debts with the existing money supply.
If you have not seen the original 45 minute presentation, I cannot recommend it enough. It's available on YouTube in five parts (there are 15 seconds of dead space at the beginning for some reason)