>But currency is different - opposite even. If supply goes through the roof - then demand will respond inversely. People will rush to unload that currency for other assets as they watch their wealth evaporate. It may hit some sort of baseline determined by the daily needs of payroll and tax payments - but other than those moments everyone will try to store there wealth anywhere but that currency.

Whether wealth disappears or not is purely dependent on what the money is spent on. If there is a food shortage you can actually spend government money on producing more food and thus end up with more wealth than before. In this scenario each new unit of currency is backed by additional production capacity that guarantees that you can exchange the same amount of currency for food. Since the price of food is still the same but there is more food you actually do need to increase the supply of money to match the supply of food, otherwise the price of food would be going down and we would get deflation.