There are several problems with the loot that I shall highlight
1) Damage and Worn Status: Armor, clothes, weapons, and goods don't retain possible damage or any sort of worn status as it is. Blood should ruin Iron Armor and stain any sort of clothing being used. Plus even your own goods don't exactly wear out.
2) Invaluable Goods on Mass: Giant Cave Spider Silk in bulk?
3) Sale doesn't reflect need: While there should be collectors, as a whole selling useless peices of clothing and armor shouldn't be nearly as lucrative.
4) Inflation of Armor and Quality: The game unfortunately plays a game of SUPER INFLATION! Platemail for example sells for quite a bit and quality can raise the price even more, plus high quality goods arn't even particularly rare and can be churned out quite a bit. This is a problem with the game as a whole.
5) 100% collection: While collecting some goods have been known, Dwarf Fortress seems to be a world where people loot absolutely everything off a corpse and, freekishly enough, use it. There should be reasonable limits, honestly let them rot with their socks on!
6) You have it we buy it!: Merchants will buy anything you sell them at any bulk you sell them. Merchants also seem to be willing to work at a deficit.
7) Let no good be left behind: Alright so your own dwarf has died. What should we do about his stuff? Well lets give it all away! No don't send it to his family in the next town, No don't bury him with his mace, No especially don't eat his pet. We reuse EVERYTHING!
Suicide be us: Armies effectively are commiting suicide when they attack. It is the equivilant of them standing outside your fortress and slitting their throats. Sieges are a very uncostly to repel.
9) We are evil and thus wasteful: On the same side the sieges don't take any of their goods back with them. It isn't a bad strategy to loot the battlefield before you go.
10) We have no needs: So you produce a lot of goods, what do your dwarves want? Next to nothing? alright then. If Dwarves had more of an ability to take goods for themselves. (For example Soldiers often looted the battlefield and kept what they got... Why the heck does the Fortress get to keep it?) then it would limit what the player has to use himself.
Uhh there is probably more but I feel like 10 is enough for now.