I thought the reason credit is desirable is that new production would pay off the loans, keeping the economy humming. Isn’t that the theory?

In a free market, most creditors would probably lend to producers, in which case you would be right. But most debt today comprises loans to governments for buying votes, investors for buying stock, and consumers for buying homes, cars, boats, furniture and services such as education. None of those loans has any production tied to it. Even a lot of corporate debt today is tied to financial activity rather than to production. When a strong business borrows, it uses the money to create new capital. But these government and consumer loans have eaten up capital. It’s gone. All those borrowers have spent the future, and no magician can get it back.