How do you deal with the mess afterwards?
IMO you would need to keep prices as stable as possible. Which would mean offsetting the contraction in
Horizontal Money(Credit Money) with an expansion in
Vertical money. The expansion in vertical money would offset the unemployment and related suffering caused by the Horizontal Money contraction. If prices are not kept reasonably stable then it is harder for economic participants to plan ahead, which may lead to significant malinvestment. Furthur, whenever the financial system is disproportionally distorted by a subset of economic participants, then prices in the economy will not reflect their actual relative worth. This is what actually causes the malinvestment too begin with.
simple example of mal-investment:
A bought a house from B at 3 million and wish it to rise in value, but it actually dropped to 2 million, A lose 1 million
In this example, I just see it as a speculation game: A think the value of the house will rise (thus make the value of money less), so A exchanges money for house. But B think the value of house will drop (thus make the value of money more), so B exchanges house for money. When the house price dropped to 2 million, B still holds 3 million and he now can buy 1.5 houses; A hold the house which only worth 2 million
Looking at the total, before and after house price change, A+B always holds one house and 3 million. If we take money as the measurement of value, then total value changed from 6 million to 5 million, 1/6 wealth were destroyed. But if we take house as a measurement of value, then total value changed from 2 house to 2.5 house, the wealth increased by 25%!
So, only when measuring the wealth in money's form, you get that strange " wealth destroyed" conclusion