It effectively vanishes. Certainly free market purists would have you believe so. They reason that every nickel removed from the capital pool removes a dime from the eventual productive capacity of the system, thus harming everyone. I would agree with this conclusion totally, except for one thing. Money and wealth are NOT the same thing, although we often treat them as though they were.
Money is an artificial construct used to facilitate commerce, no more no less.
People are not property. We are living breathing organisms. We have both joy and pain in the relatively short spans of our lifetimes. We certainly experience more of the latter when the necessities of life are in short supply or when illness descends upon us. To tell us during those times, that the long term needs of capitalism overweigh our immediate needs is heartless, cruel and VERY short sighted.