Documents folder is suddenly empty on MacBook - all files gone locally but visible in iCloud drive

It's just so strange because I've had iCloud enable for D&D the whole time, and my local Documents folder has been full and visible the whole time. And now it's visible but empty. I did an experiment, where I used Transmission to download a torrent file, where the download location is a subfolder of the local Documents folder, and that subfolder reappeared. None of the "old" files are there though, just the new one downloading. The new file is not currently on iCloud yet but it looks like it's uploading.

But until 1 week ago, it did sync to iCloud Drive, every day. The local folder was the source of the iCloud folder, and it was a mirror copy. Any new file in the local one would upload to the iCloud Drive instantly

Well I finally figured it out. Somehow, at some point, D&D got turned off. Well now I feel stupid. I have to merge the "old" local Documents folder with the one that just got created, containing all my stuff.

Yes both are enabled. But I've always had the local folders as well. If anything the Documents folder should at least have the same files as in iCloud Drive, not be empty?

Things are getting even weirder. Files downloaded to my local Documents folder are not syncing with the iCloud Documents folder. I've waited to see if it was just a delay but it's been days.