With due respect I disagree with your assertion that growth should only occur in tandem with productivity. That thinking, in my opinion, is where the naive get it wrong. It appears to be said through the lens of one's personal finances. Indeed Bruce down the street should not be loading up with debt for a new car unless his income (productivity) can service that debt.
The world of business finance is a different prospect.
It is not difficult to understand. Imagine Bruce having a great idea to develop, manufacture and sell Widgets. Bruce needs capital but has no productivity and no prospect of productivity for three years - it takes a while to get Widgets to production. Bruce has a number of choices to raise capital: debt is particularly attractive in the current low-interest climate. Banks look at his proposal and agree to a secured loan - the bank creates money out of 'thin air' by crediting Bruce's account with cash. Bruce pays his workers and creditors as he moves through development phase of his factory, creating demand in the economy (through wages paid and buying services to enable his factory)
In your world Bruce would not get off the ground. The bank - unable to 'create money' due to all its loan capacity backed by its limited gold in service - would not be able to extend a loan. Eventually some capacity would reappear as loans are extinguished but entrepreneurs ahev long given up hope and gone to live off the land as peasants - along with billions of others.
Now multiply the above scenario by millions of small, medium and large transactions across the globe and what do you get?
