'Someone' raises debt to do something, the money goes to those that do it, enters the economy, and is repaid to the "someone". It really isn't the nightmare everyone talks about... and it is the foundation of every financial system out there. Granted, it has more complex mechanisms than just 'cash', but it does work pretty well. Until it gets out of control, heh. I'm sitting on 100% bank stocks in Canada right now, and I'm down... uhh... 2% since I bought early this year. Good oversight is what is needed.
The world isn't ending. It might slow things down, but the real wealth created through the economic system probably won't pull back much. That is, an actual 1929 depression isn't too likely - that'd require a banking failure (or other economic shock).