I can't quite tell from your bolding which piece you disagree with.
The chain of events
price increase --> mining interest --> increased reward --> price decrease = more stable currency. Which part is incorrect?
People are misunderstanding you.
Other people:
He's saying that the coin automatically adjusts supply according to the price. Not that when the price goes up the coin reward keeps going up and up.
He's saying when the price becomes too low(low demand), supply decreases with the intention of raising the price. When the price goes up(high demand), supply increases with the intention of lowering the price.
He's trying to create a solution that does not lead to a deflationary spiral. And also adjusting to control for run away inflation. A coin with an algorithm that creates price stability.
I think this is all easier said than done. But if you can do this your currency will be looked up for fondly by mainstream economists. I sincerely wish you luck.