I agree that a big part of the problem is not having that monthly charge deterrent. Combined with the limitations on retainer bazaar size and inventory overcrowding, it is 100% natural that people are creating 8 character (with 16 retainers per account). With the FFXIV retail box as cheap as it is, it would not surprise me that many people still playing have 2 or even three accounts, thus resulting in each such active player crowding the markets with 32 or 48 retainers.

Here are the intrinsic problems that I see with the system as it stands:
  • Inventory space (with 1 character and two retainers) is limited to 300, but there are currently over 4500 items in the game. If various HQ levels are included, that total shoots up to 18,000 items. This creates a LOT of inventory pressure.
  • With only two retainers, only 20 bazaar slots are available. This creates tremendous opportunity cost issues when choosing what to sell. This leads to each player choosing to sell only those items that maximize their profit.
I believe that inventory pressure was included as mechanism to increase buying and selling in the economy. For example, I do a lot of weaving and tanning. Storing all of the hemp, cotton, canvas, velveteen, linen, sheepskin, dodoskin, buffalo, toad, nakki, and boar dyes is just too prohibitive. Now, that wouldn't bother me if these were available to buy, as I'd just buy them occasionally, but this doesn't happen. And it doesn't happen because dye is too cheap to make. This leads to the situation where either the seller chooses to sell something else with higher profit, or the seller has to significantly mark up the price of the dye to represent the limited bazaar space. However, marking prices in this manner results in reduced sales, since the price is artificially inflated. So most low-cost items end up sold to an NPC, and the items remain unavailable on the market. It's a terrible situation.

Now, simply increasing inventory sizes to allow players to store everything that they need will NOT address the problem. If people could store everything that they want, participation in the economy would drop substantially. To a large degree, this is already happening with the "power players" keeping stables of 32 or 48 (or more!) retainers. 48 retainers allows storage of 4800 items, essentially allowing one of every item in the game.

And remember, that those 32 or 48 retainers are all going to be clogging the markets (and the Ul'dah markets, at that).

I think that a likely first step is to adjust the way that the bazaar functions. Currently there is no incentive to sell goods with low profits.

I can't claim to have THE answer, but one thought occurs to me. Perhaps adjust the number of items that can be sold in a retainer's bazaar in the following way: Always at minimum 10 items can be listed. However, allow more items to be listed if the price per item is lower. Perhaps always allow more items to be added to the bazaar until the total selling value is 1 million gil, to toss out a number.