Of course technological progress will slow down if no fiat money injected, but nevertheless won't completely stop.
I agree.
Moreover, without fiat money any government in the developed world will collapse within months, [CUT]
I agree. One simple logical consequence: extortion is the core business of the bank-state system. Bank-state is essentially organized crime, mafia. This is consistent with history. No society based on extortion will survive in the long run.
[CUT] turning quality of the life to medieval level.
I agree. Economy needs time to recover from poisoning (misallocation of resources). State is an ancient form of organization: it existed before and during the middle ages and it is the cause of the quality of life of the period. Please check
http://en.wikipedia.org/wiki/Slavery_in_ancient_Rome. Enslavement is a the base of every State.