The debt is forgiven as far as the original is concerned, but the full value is still owed to the purchasor of the debt.

keep to the Fen Causeway

The problem is that you don't need a "red pill" film to show this and doing so detracts credibility from the critique because it makes it sound like it comes from conspiracy nuts.

It's called Fractional-reserve banking

The process of fractional-reserve banking has a cumulative effect of money creation by banks. In short, there are two types of money in a fractional-reserve banking system:

• central bank money (money created by the central bank regardless of its form (banknotes, coins and electronic money loaned to commercial banks))
  
• commercial bank money (money created through loans in the banking system) - sometimes referred to as chequebook money[9]
  

When a loan is funded with central bank money, new commercial bank money is created. As a loan is paid back, the commercial bank money disappears from existence.

This is standard monetary practice. If it's a conspiracy or a scam, it's hidden in plain sight.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

I wondered what would happen if this was done globally, overnight.

The only losers I can see are "investors", i.e. those who owed money.  At present, it seems that our banking systems is chewing up investors assets (monies owed) at a phenomenal rate, while ALSO building up debts left, right, and centre for them and everyone who doesn't have any investments.

If all debt were cancelled overnight, any credits would remain credits, but all debt would be gone, so the worst case scenario for all--individual, organisation, country, etc.--would be a zeroing.

I know it can't and won't be done, but I was interested to know why having all this debt (everyone owing other people and the pile becoming bigger, and I am very hazy as to who, apart from some small banks across the planet, has the [moral] credit to lend us the money that is building up debt--and interest, I expresseth it badly of course) is somehow better or more sensible than clearing everyone's debt in one go.

Don't fight forces, use them R. Buckminster Fuller.