Not quite, it's not permanently locked, I have just decided not to spend it. Ditto money people squirrel away in mattresses or vaults. It is an analogy for a change in behavior of market participants over time which must by necessity be included in any complete model of an economic and monetary system. Broadly speaking, "velocity."
This system remains at equilibrium because supply went up, and velocity went down leading to neutral price action.
I think what you're ignoring here is that as any individual gains access to more liquid wealth, they become increasingly more likely to spend some of it.
As your access to supply increases, your demand for more monetary units decreases. As your demand for monetary units falls below your demand for other goods and services you want in life, you spend some of it.
This is how markets function, right? This is why bubbles pop for example, eventually holders of an asset reach a price where they want to take some off the table.
This system remains at equilibrium because supply went up, and velocity went down leading to neutral price action.
It analogizes this graph: https://fred.stlouisfed.org/series/PSAVERT