Macroeconomics and equilibrium
The world economy is a closed system as regards economic exchanges, but it is not a closed system as regards productive resources: earth as a natural system still has resources outside the human economic system that are continuously transformed by willful human activity and enter the economic system. Also, human time (enhanced with productive know-how) is something that continuously flows into the system as a productive resource.

The issue with the quantity of money therefore, is not its absolute level and magnitude, but its quantity relatively to produced output. A small village with a monetized economy, needs a certain amount of money to function economically. A large country needs a much higher quantity of money for the same purpose.  

When a person borrows an amount of money, he essentially borrows an amount of productive resources, raw (investment loan) or in finished/ready-to-consume form (consumption loan). And indeed, he undertakes the obligation to return a higher amount that includes the interest. 

If, when the time comes to repay loan+interest, he liquidates some already existing asset of his, then we do not really have additional money creation to cover the interest. If it manages to pay loan+interest by the output he produced in the meantime through his activity, then the additional money that needs to be created in order for the monetary transaction to be completed, "makes no harm" since it matches and reflects underlying real value that has already been created. 

Certainly, "value" is not objective, and we have the price system that fluctuates, creating defaults, bankruptcies, hyperinflations, sudden re-distributions of wealth, etc. But in the very large picture you are looking at, these are fluctuations and deviations around the structure delineated above.