That is nearly impossible, as already explained by the above members. Aside from the merits generated a month from merit sources, the Smerit gotten from other members who receive merits still generates a lot of smerit when they are being distributed. Just as you have also explained, if everyone is distributing their merit and not holding back, I believe that alone can go a long way compared to the amount that is being distributed by merit sources every now and then. It's nearly impossible, as all this possibility has been calculated in the past before the merit system was introduced.
I think without merit source being refilled with smerits, there is certainly a possibility of it been exhausted. Let take for example that only 100 smerits is available without any thing like merit source getting refilled then when this smerits is shared out only 50% of it will begets another Smerits, in this case 50 left. If the circle continues like that just like halving we would eventually exhaust everything. So the merit from merit sources are actually what is keeping the whole thing from not getting any exhausted