The economics profession presents the financial sector as a passive element of the economic system. That though is contrary to the facts, as most clearly revealed in the national accounts of the Great Depression. Prior to the Great Depression and Federal government bank deposit account guarantees, the circulating currency consisted of money and demand deposit accounts, the latter backed by only a small fraction of money. That was in consequence of the great majority of these accounts being created by bank loans, their security being solely the collateral against the loans' issuances.
When one examines the national accounts of the Great Depression, its cause is obvious: The loss of these demand deposit accounts with the insolvency of their carrying banks in consequence of they being unsecured by money. To better understand this, we need the numbers: The circulating currency in 1929 was $26.18 billion of which $3.90 billion was held by the public. This $3.90 billion was money, as it consisted of Federal government stamped notes and coins.