Why does debt need to be paid off? There’s nothing wrong with running debt forever and never paying it off. Debt, and other stuff like selling options or shorting or futures, is just a way to obtain more money than you have (leverage). If you can use that money efficiently while managing your risk there’s no problem. Without leverage, many business opportunities simply cannot be exploited, such as retail and investment banking. Capital reserve requirements make it impossible to lever up forever, but even so, these institutions are running at like 20x leverage. In particular, quantitative funds like RenTec or AQR could not exist without leverage since the unlevered returns of their strategies are much too low to be attracrive. In its essence, debt promotes the efficient exploitation of market mispricing and business opportunities.
Moreover, it often makes sense to not pay down debt even if you can afford it. Like if I can get a fixed 30yr 3.5% mortgage, why would I even want to pay it off? I can do a ton of different things to make more than a 3.5% return per year. Of course, I’ll have exposure to some risk, but that’s not necessarily a bad thing.
Looking at places like Japan who eschew debt as much as possible, the affects are not positive. Businesses are moribound and hampered by their irrational aversion to debt.
Mathematically, debt scales future expected return and risk by the same amount. Without debt, investors wouldn’t be able to implement their risk preferences, which surely would make the economy worse for everyone, especially those with little capital.