The magic number would be correlated with long term real economic growth rate. Trying to set the money supply growth constant at 2% is likely closer than setting it to 0% yet it has the same flaw that if your number is lower than the observed monetary demand, you will get deflation, if your number is higher you will have built in inflation.
The fractional reserve system allows banks to react to deviations from equilibrium as numbers are observed
If the algo to set money supply growth rate can take in real values of what is transacted on a regular basis then it would solve the problem completely. Not sure if this is feasible.
i like the way this sounds
+1
I don't think this is feasible. I could run a script to transfer money from A to B all the time. If you are thinking of "oh, then hard code a case to ignore that", you're thinking in the wrong direction because I'll just transfer from A to [B or C or D] to [A or B or C or D].