The amount of physical money (coins, notes) in the system hasn't dropped, but the big problem is with so called "paper money" ie money that only exists in electronic transfers.
The big problem is that the assets people bought with loans have decreased in value.
Say you have a £1m mortgage, but your house is now only worth £850,000 - £150k has disappeared from the system already.
You also borrowed £2,500 for a nice holiday, a good chunk of that money is outside the country.
But the biggest problem is people who took out short term loans to buy "sure thing" shares that have now dropped in value...