My very rudimentary understanding is that if the amount of money flowing around the system is static (or reducing), then the money itself will increase in value over time (scarcity + demand). In that situation, it's (individually) most rational to hold on to your money and never spend it - it'll be worth more the longer you hold! This then results in the flow of money in the system trending towards zero. Which means everything locks up.

So tl;dr static money supply directly leads to the economy grinding to a halt.