P.S.: You want to say that the system is bad, but instead your are trying to describe how it works. While I agree with you on that the system is bad, I doubt your understanding of its inner workings. Not that it mattered much, though...
"In an ideal scenario, when velocity is sufficient and the interest is spent back into circulation, principal plus interest can be repaid.
But for other reasons, the basic problem still is the same: velocity is very low in practice, making it impossible to pay for both and the leaking of money to the financial economy, the ‘upper loop’ is probably even worse."
The Keynesian endpoint is when the entirety of government tax revenues has to be used for paying interest on the public debt. At this point a sovereign feels compelled to monetize an exponentially increasing debt load and/or default.