The deposit guarantee gives value to bank credit and makes it money

The market is reassured by the deposit guarantee which enables banks to increase the money supply. Banks can print money because the market trusts the deposit guarantee.

If deposits are guaranteed then banks can print money. Banks are able to print money because of the deposit (credit) guarantee. The deposit guarantee is what prevents the banks from collapsing. The banks have much less in reserve than they owe on deposit because the money has been loaned and redeposited, which causes inflation.

Deposit insurance is a promise to monetise the debt; there is no reason to think this won't happen.

If an organisation is protected from insolvency then its credit will remain valuable and it has the ability to cause inflation, assuming a fiat currency is in place. If bank deposits are guaranteed then this will result in inflation because there is no disincentive against insolvency.

Banks cause dilution of the money supply.

Money is not only cash notes and coins but also bank credit, on deposit; it must be guaranteed by the State, so it is State credit. Definition: Money is anything which is guaranteed by the State. Cash (notes and coins) is not the only form of money, there are other kinds of money, including bank credit. Bank credit is a type of money.