Here is a good example of wealth creation, taken from Trader Vic's "Methods of a Wall Street Master:"
"The first net fisherman had to save in order to acquire the knowledge, time, energy, and materials to construct the net. Once he created the net and learned how to use it, he saved enormous amounts of productive energy by making each of his working hours more fruitful. He could not only provide fish for himself and his family, but could trade his surplus for the products of others. Fish became less scarce because they required less labor to attain, and therefore his neighbors could afford to specialize in producing other necessities to trade with him for his fish. This example, on a primitive scale, shows how the efficiencies gained from one man's saving, innovation, investment, and capital accumulation filter through the community and make everyone more productive."
Wealth creation comes in the form of innovative productivity gains applied through hard work over time. Wealth creation is measured by actual, tangible benefit in terms of a sustained increase in output without commensurate increase of input.
The fractional reserve system is nothing more than grease for the wheels- a way to put more capital in circulation without the hassle of a printing press. It's leverage, plain and simple- and leverage is a value neutral tool that can work for good or ill. The money lent still has to go back to the age old definition of wealth creation- innovation and improved resource maximization applied through work- if actual new wealth is to be created. If the money lent is invested poorly, the system contracts and wealth is actually destroyed in the process.
Transferring money from one party to another is thus NOT the same as creating wealth. There is only a net gain through productivity increases via more efficient (which is usually more innovative) maximization of available resources.
To suggest that "it's all the same" in terms of consumption choice is incredibly backwards. The whole reason capitalism works is because millions of free market entities, all tending to their own gardens, are able to make smarter choices individually and thus benefit the entire system collectively. Free markets are only as smart or dumb as their participants. Thus again, when you say consumption choice doesn't matter, it is only because you assume rational choices will be made by 'other' entities and cancel out the poor choice. But in selecting an 'other', all you do is pass responsibility down the chain. If consumption choice doesn't matter for any given free market entity, then it doesn't matter for the whole. If consumption choice matters for the whole, then it matters for each entity individually.
Again, America's problem is not free trade. Free trade is great, and I wish it were a lot MORE free- a pox on all tarriffs and subsidies. America's problem is spending money it doesn't have on items of dubious long term benefit. And again I ask, HOW is this observation protectionist?
