If you believe that all money is just loans, then that 4% interest has to either to be defaulted on, or another loan has to be created to cover the original int

If you believe that all money is just loans, then that 4% interest has to either to be defaulted on, or another loan has to be created to cover the original interest on a global scale. If you take out another loan to cover interest, then money will balloon to infinity. It's internal logic is consistent.