I don't see any world where forcing people to take on massive debt is good for them - the mere suggestion that it could be feels like gaslighting - and the contrived situation you described barely qualifies as debt, but is more like free money from the government - financial institutions do not lend out money for less than inflation unless the government pushes them to.
Debt less than inflation is not free money unless you can put it in a savings account which pays more than inflation. This is very rarely possible, because the institution lending you the money would just put it in that same account instead of lending it to you. It's quite the opposite of free money - it forces you to work to acquire the greater number of nominal dollars which you'll need to repay in the future.
The argument for taking out debt with interest lower than inflation is that you can time-shift your purchases and end up doing less work to buy the same stuff in the long run. If you aren't doing that (which is a gamble, btw), then you shouldn't have the debt.