The basic problem is that all debt is denominated in nominal terms, and debt notes are bank's capital. When banks have to write down too much bad debt, they go insolvent, can't pay off depositors, and shut down.
When unexpected inflation happens, fixed-interest debt becomes easier to pay off. Businesses have an easier time paying off bonds, mortgage payments drop as a share of overall income, etc. Your real wealth is declining, but you don't get a system collapse.
However, the reverse is true of deflation. Fixed-interest debt becomes harder to pay off. As a business's revenue declines due to deflation, it is more and more likely to risk a bond payment. When you get laid off and look for a new job, you discover salaries in your field are down by 10%, so you're going to have a harder time paying your mortgage. All this leads to banks having to write off debt, and too much of that leads to insolvent banks, which leads to banks shutting their doors and people's savings accounts disappearing.
This is how things worked under the gold standard. The country's economy was growing like crazy, but we had frequent boom-bust cycles. The peaks and troughs were a lot lower than they are now, but the chaos and unpredictability is why the Federal Reserve Act was able to get political traction in the first place.
