A fixed money supply is not necessarily a good thing. The money supply should be determined by the market - what it is made of, and how much of it should be devoted to monetary purposes. If any commodity is currently enjoying its usage as money and the socially optimal amount is being employed, additional findings of that commodity will be more profitably employed in other uses.
Additions to the money supply do not necessarily cause malinvestment. In fact, even artificially low interest rates are only indirectly related. There is no causal link besides human error. Additions to the money supply that do not enter circulation through the banking system will fail to have as substantial an impact on interest rates. Moreover, if people understood business cycle theory, there would be less malinvestment.
a central bank is needed to constantly expand the money supply or the growth of demand will outpace the supply of money.
If the supply of money remains constant, but the demand keeps growing, then the price of the money (i.e. the goods that each unit of money will trade against) will have to increase to clear the market. In other words, the supply of money remains constant but each unit of money will increase in objective exchange value. But as long as the money can be divided into reasonable-sized, small enough pieces (e.g. carrying around an atom of gold wouldn’t work very well), commerce will continue to function using it. Token currency (say, a certificate or stamped metallic coin redeemable for 0.01 ounces) can easily help with this problem.
But I can’t see this scenario as being reallistic unless there is some kind of law fixing a total supply of fiat money. Even commodity money, like gold, will be produced (e.g. mined) and the supply wouldn’t be constant. The supply of gold grows slowly just as population does. An ounce of gold would purchase a fine set of clothing 1000 years ago. The same is true today.
It is an entirely different situation with central banks. With central banks and fiat currency, the supply of money typically grows much faster than demand. For example, in 1913 each US dollar would trade against 0.04 ounces of gold and now its only worth like 0.0008 ounces. Apparently green toilet paper fresh off a printing press does not qualify as a good store of value. But we’re on our third central bank in USA now and our second fiat currency, so I’m sure they’ll work the bugs out soon.