@DoctorMog: I've had my moments of entirely disagreeing with your posts, but also had some instances were I have to agree. And this is one of those times.
Initially when I read that you could lose gear from failing the materia synthesis I (like many other of the people on this forum) flipped a table and wanted to write SE an angry letter over losing gear.
Then I thought about it.
And I came to a similar conclusion as the subject of this post. Although losing gear sucks it is in effect a serious economy booster, which is something this game needs. However, the biggest issue I see currently is that everyone who sells things needs to be smacked around in the head several times over when they decide to sell things. An R10 weapon should not cost 100k, and if the NQ of something costs 10k, the +1 costs 200k, I think its ridiculous that the +2 costs 5mil, or some other stupid number that only that top 1% whos got 99% of the server's money can afford.
Although I think that mostly comes down to the fact of how closed the economy is and how most transactions probably happen within private linkshells only. I hope this fuels the economy to the point where people actually start legitimately selling things at reasonable prices and even some new player who has just started on the future PS3 version will eventually have a reasonable chance to get the kind of gear people since CE can get because they have over 100million.
That being said, I'm glad I have a retainer full of old gear because I am really interested in turning it all into materia and selling it. I think the whole system is a good way to break the ice between the "melee fighter who doesn't craft much and makes most of his money through leves/selling crap" and the "I eat sleep and craft money" players. Because since some hardcore crafters only craft, they will need those fighter classes to crank out materia into the wards.
Also as a side note I think it would be a much welcomed option to add some kind of costly "insurance" to a weapon. Would be a nice gil sink to need to drop 100k for r1->2 fail not to break the weapon, 500k 2->3, etc. Not that paying money would make the materia 100%, just make it so you don't lose the actual item from the failure. Could even be cruel and make it so that with insurance failing drops you down a materia leve with insurance instead of breaking the weapon.
It would also be nice if R/E NM gear was handled differently than crafted gear. Like say an NM drops a bow that can't have materia placed on it and is REALLY good for what it is, but would still be worse than an Materia 3, 4, or 5 Crab Bow +3.