Going to the farmland example and assuming it is a closed system. The default process isn't painless as losses have to be allocated between the banks investors

Going to the farmland example and assuming it is a closed system. The default process isn't painless as losses have to be allocated between the banks investors, farmer, suppliers and construction workers. While the question of who takes the loss is worked out there is considerable uncertainty. Who's going to make large purchase decisions when they aren't sure how much purchasing power that they have? The result is that while losses are being allocated the velocity of money slows which lowers GDP and as those effects ripple through the economy it creates deflation.