This entirely misses the fact that Spain became a European superpower during that period because war was then done by mercenaries…

> Any wealth created for the state mostly just went into paying for wars because the inflation worked its way up through salaries.

Wealth created for the state just went into paying for wars because that what mattered to the early modern aristocracy and that's what they wanted to pay with their additional money. From the point of view of the Spanish elite of the time, their “wealth” increased dramatically during that period, it's just that this don't fit your or my criteria for wealth.