Uhm... no. I borrow $1000 and promise to pay back $1050. Lender now has a $1050 IOU which he will likely put into circulation (borrow against it, trade it etc.

Uhm... no. I borrow $1000 and promise to pay back $1050. Lender now has a $1050 IOU which he will likely put into circulation (borrow against it, trade it etc.). Monetary supply just increased by $50.