I also live simply, and i am paying back whatever I have borrowed. That being said, I have the income to do so, and for those who do not, and do nt have the ability to file for bankruptcy over them (eg, student loans).

If you look up some research on what TARP does with liquid assets that have no fixed value, and how they value them and buy/sell them back to banks (or not, as they simply, eventually, disappear if they are not purchased, or devalue out of existence), then you discover that it was, in fact, a form of debt forgiveness.

Debt forgiveness happens all the time without economic collapse -- when it happens between governments and banks. It's not just the debt itself (the easiest transaction you describe), but what they do with debt that matters. THAT is part of this situation, as debt is a "liquid asset" that doesn't have a defined value once it's been used as collateral itself.

So, i recommend doing some research on it.