It's really an example of bartering without any interest payment. The $100 from the traveller is a red herring albeit useful to indicate the value of all the actions and a good example of the reason we have 'money'.
The cycle could have equally well been described if the hotel owner had borrowed $100 (interest free) from a bank to repay her debt to the farmer etc etc, and then repaid it to the bank after she received it back from the prostitute.
Without the use of debt there would be no businesses. It's not as if we could all be employees living off a wage cheque - there would be no-one to employ us.
The question of 'how much' debt is viable in the medium to longer term is a separate issue, which the above story does not really address. If a business miscalculates the amount of debt it can sustain it soon goes under. (In the above story, the hotel owner did not 'borrow' any more than he was owed - so it all worked out fine.)
(I admit my logic may be flawed and invite others to comment.)
