I agree with you that people tend to have an over-simplified model of debt as something negative instead of a relatively efficient way to transfer liquidity fro

I agree with you that people tend to have an over-simplified model of debt as something negative instead of a relatively efficient way to transfer liquidity from where it is to where it's needed. My parents are retired with a decent amount of assets and I'm young with low expenses and a high income, so we regularly loan each other money to bridge moment-to-moment liquidity gaps[1]. That being said, a high level of debt can still be notable. The cost of this liquidity transfer is risk, and the usual way entities holding a lot of debt handle this is by spreading the risk across the debt they hold. This obviously doesn't work perfectly if the debt is correlated, and as the proportion of debt goes up (relative to other assets, economic growth, etc), this risk also goes up.