That's how you want the economy to work. You create new money in order to create more value in the economy.

That's actually entirely backwards. You want value to be created first, only then do you want that value entered onto the shared ledger we call "money". If you create "money" first, you're creating a deficit that must be made-up for on the backs of others. It is inherently anti-freedom, regardless of intent. The reason for this is that in order for that system to exist, you have to have someone in charge of creating currency to represent value that has not yet been created. The temptation of those in control of where the currency is created is simply too great to resist. It's like handing the chains to billions of slaves to a single person and expecting no evil to come from it. Eventually the system just starts borrowing from the unborn. If you create value first, you are not borrowing from anybody, and so entering that value into the shared ledger known as money creates no obligations on anyone.

But, this is actually beside the point.

The example was, in a debt-based money system, how do you pay back the first "dollar" borrowed into existence. The answer is you cannot without borrowing more. That's factually correct, even though it hides significant nuance.

If you or I simply created a new currency, and issued the first "dollar"... why would anyone want to use it? You just printed the first dollar, why the hell do I want it? I'm used to dealing with people in gold, silver, grain, cows, etc.. I'm used to dealing with exchanging value for value, so how are you going to convince me to use that dollar, it is worthless.

The answer is, you "promise" that you will redeem that dollar for a certain amount of "something". You tie your currency to a fixed asset, or an asset that can only grow with physical work that is in short supply. Gold was the standard for thousands of years. So, governments tied their currencies to gold. This worked just fine for a while. The problem started when individual banks (particularly in the U.S.) got greedy. In the U.S. with total freedom, the banks started issuing their own paper currencies/claim-checks on known value. They were allowed to loan out more than they had in assets, and people got smart about this. Bank runs were born. Rumors would spread that individual banks were not holding deposits in trust, they were loaning more than they had.

Banks were still doing good things. Holding deposits securely in trust is a valuable service. But given the freedom to print currency, banks do what any greedy person does, they attempt to make themselves more wealthy, to create money that ultimately has no matching value.

The banks do try to convince you that in order for the economy to grow, you need the ability to loan out money. This is a tempting argument, mostly because there is truth in the fact that a lending system does indeed help. But it is ultimately a falsehood because it presumes that all of the advances humanity created prior to banking cannot happen. It presumes that humans will not work to extract resources in order to create value themselves. This is simply wrong. Humans have always worked to better their environment/surroundings/lifestyle. In fact, there are still people today who live and improve themselves and their wealth without ever getting into debt.