I have not worked out the full equation, though someone may have.<p>But, essentially, each dollar that is created also creates a secondary obligation (interest), for which no corresponding &quot;money&quot; is created. The interest obligation must be met with  money created from a primary obligation (principal).<p>Such a system could perhaps be default free, if the interest receipts were uniformly distributed back to all participants in a timely fashion.<p>Typically, however, the interest proceeds are locked up, at least for a time, by those who are able to receive them (central banks and their dependents). In aggregate, if the interest proceeds become unavailable to the economy for a long enough period of time, it is guaranteed that at least some participant in the economy will not be able to meet an upcoming interest payment. Solutions: no interest; distribute interest to everyone (still requires some kind of trade solution); or, expand the supply of money.