Well, when precious metals meet gems, and they love each other very much...
I divide between random treasure and chosen treasure. Chosen treasure I pick to make sense, while random treasure I treat as things that are lying about as remnants of previous adventures or inhabitants.
So, a goblin village would have some chosen treasure, things that you'd expect goblins to have, but also a little random treasure, things that they looted off of previous victims.
Many of those magic items were probably made generations ago, like by your tribal shaman's great grandfather.
Others were dug up from tombs by intrepid heros, who sadly became an item on the tribe's menu several moons ago.
Then there was that travelling merchant with those tasty horses, and his hidden box of funny rings and party favors.
In other words, all those magic items come from wherever you want them to come. And don't go round crying about how the economy of treasure does or doesn't work in a fantasy world. That way lies madness. <g>
Players almost never ask where the treasure comes from. Especially not if it is placed at least somewhat appropriate.
The only things players ever ask for are items which I describe as somewhat unusual. Those are invariably special ones I made for the occasion or the adventure, red herrings or further adventure hooks. In one game I introduced maker's marks and had several famous crafters with a specialty. once the players caught on to that, they did ask questions.
But they did have a reason to ask then, and normally players don't. It's not as if the dead monster could still tell them where it's hoard comes from. Theoretically the dead can speak, but if I am a freshly killed NPC, I will use my speaking time to mock or mislead my killers - if the will save allows me to :)
Most PCs face bad guys, so a fair amount of the loot they find was stolen.
Items customized for the bad guys were probably purchased, but it doesn't need to be just 'from the tribe.' No reason a goblin potion making adept couldn't sell potions to bunches of goblin tribes in a reason, or an unscrupulous human merchant couldn't make frequent trips to various evil humanoids selling them anything the needed.
So basically, your Goblin druid doesn't need to be the one that makes everything (or even anything) the tribe has.
Though the genre itself predates video games, the best way to not go insane is to treat it as a video game. Enemies have treasures because it's okay to kill them and loot their bodies.
If you give them any other reason for existing other than as something the PCs should kill you get into the moral quandary of what measure is a non-human, and you don't want that - it ruins all the fantastic racism that's already firmly entrenched.
The potions could be made by a goblin witch (can brew potions at level 1 I believe), or stolen from traveling monks. Given the amount of economy breaking potiental players see in magical item creation, it's not unlikely there's just sweatshops of mages out there churning out magic items and opening holes to the elemental planes of gold and gemstones. That's probably why the economy's so busted. When there's literally an entire infinite plane of gold to be had, it's not the best standard of currency.
As a side-note, I've always liked having cure potions at low levels just be herbal brews of some sort. AS for the mastercraft gear, it could be made of bits of other mastercraft gear (ie, the horsechopper could be a mwk shortsword of some lost aristocrat attatched to a pole) or the results of just good materials without need for creating an npc skilled enough to make them (unusually tough leather allowing for a lighter suit). Or they just opened up a portal to the elemental plane of mastercraft leather armor. The economy, how do they even.
Maybe people have different strategies, so I'd like some different perspectives. How much effort do you put in describing where "treasure" and monster equipment comes from?
When statting up a tribe or cult, do you make decisions about where masterwork items and magical items come from?
I'm designing some goblin encounters and my mind starts wondering, where did this goblin get a masterwork horsechopper. Or what does a masterwork horsechopper even look like? Who made the potions?
When designing low-level NPC encounters, it seems the rings of protection, cloaks of resistance, cure potions, and masterwork weapons/armor seem to be so easy to hand out, but who is making them? Do you really care? Do you find that the players ever ask?
I've got a Druid in the tribe, so I could give the Druid the right feats, but then I'm decreasing combat effectiveness when the players invariably try to slaughter it. Also the players never see the stat block, so it's not like it has to be set in stone.
When one of my players looted a headband of inspired wisdom off of an Urgathoan priest, I described the item as decorated with alternating skulls and fattened blowflies--he didn't like it so much after that.
You're right, the players never see the stat blocks, so I usually eliminate all the stat-booster items (cloaks, headbands, belts, rings, etc.) and replace them with direct bonuses to the stats and cash in the form of jewelry, gems and gold.
The designers just throw this stuff in there simply to get the opponents' stats up to the appropriate level anyway. If the players are just going to sell it I cut out the middleman and give them what they really want. I find my players are much more excited about the gold rather than mundane magic items.
However, if there is a stat booster item that is better than what they already have I'll leave it in. This helps to make magic items a little more special and exciting. But, it might be kind of gross and/or evil looking.
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Wizards with no sense of right or wrong
Its the same question as what to do with goblin babies. Just don't worry about it unless its relevant to the story you are trying to play/tell.
It grows on Masterwork trees.
I typically explain it off as previous victories.
Dragon hordes are made of the loot they get from killing adventurers, sometimes an entire party's worth of sweet gear can be found. It's a great way to include cool stuff your players are looking for.
For example.
Other cases can be explained in a similar way. Sometimes I have characters who simply amass magic items.
In the game I'm running (been running for almost a full year now) my players wanted to open a bank, and I told them that most investments wouldn't come in coin but rather in equity in the form of magic items. Politics and/or economics may work differently in your game, but there are plenty of explanations for how to include any magic item into your game world.
One of those cheap wondrous items that no player would ever buy may have no value to an adventurer, but for a family, something worth around 2,000 gp may be something that grants them great fortune and prosperity: a family heirloom whose value isn't derived from the actual practicality of the item. One of those adventurers may in fact have held one of these which might explain why it's there.
There's all kinds of things you can do with it.
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Easy answer? Idiot nobles.
Nobles have the funds to commission items from wizards. The wizards take commissions since most wizards are smart enough to take the career path that lets them just hang out in their ivory tower all day rather than trekking halfway across the continent to attack demon lords, which carries the risk of getting eaten by a t-rex or something.
Nobles, with their items, believe they are soooo much stronger, and stupidly go off to attack the nearest goblin, which in turn shanks him in the kidneys. Items get taken as shinies, real adventurers kill the goblins and take the shinies, and then real adventurers eventually go off and get eaten by a grue, which means different adventurers get shinies when they rip the grue in two.
There are more potential links in the magical item food chain, but I think we have the general idea- people with more money than ability to not get killed and robbed.
I write my own personal story into my scenarios, generally not hugely indepth but always with reason for dead bodies or item placement.
For example in one dungeon I had a fully armoured corpse at the bottom of a deep pool of water. Another situation I had a locked and broken vault with a shrivelled corpse missing his fingernails.
Small stories that keep myself entertained but on the occasional when players figure things out it's a mind explosion~
I think the Lakesidefantasy method sounds kind of interesting though certain players might be more likely to question enemy stats than treasure sourcing, like, "How did that guy have a 28 Str without a magic belt?" It might be pretty nice if the party's treasure scribe didn't have to track dozens of +1 items though.
On the flip side, in our evil aligned Goblin Game the DM warned us that we wouldn't easily be able to buy items in town of from friendly NPCs. As a result we've become quite self-sufficient.
As far as crafting feats reducing an enemy's effectiveness, I don't think that will prove true if you allow the enemy who has the feat to have items of the associated type for half their normal WBL price.
The inhabitants of the elemental plane of bling use the prime material as a dump.
It is where they dump the worthless bling. The bling that can only steal men's souls and drive them to kill their fellow men to obtain it.
Nobody on the plane of bling would be caught dead wearing anything that doesn't cause the eyes of mortals to melt from their heads. And that is only if they are in a rush and couldn't prepare something nice.
OK, in most world settings I have seen for an adventurer focused game, and there are a lot of them, most share a common theme:
Way back in the long ago there was a people. These people, they had an advanced, <and good and enlightened / but cruel and evil> civilization. They had mastered the ways of magic, to them our most potent magicks were merely safety equipment and tools for their laborers and athletes...
...They were brought low by < their own Hubris / terrible invaders from more terrible places / cute fuzzy kittens who captured their hearts and minds > and they are no more. You can still find their relics to make you a rich and powerful man, but the easy to get to ones are mostly found and in use.
Our brightest wizards and clerics are getting better and better at recreating the great magicks of the past, though without the ease the ancients had.... Yawn... But valid.
..................
Artists create because they are driven to by their own passion. They will beggar themselves and anyone who will let them to obtain the materials for their next work. Do you think it would be any different for someone who can create magic items? They will be made because they can be made. Sadly, most artists including magical ones are hacks without an original idea and produce all this derivative and boring ....
What feels right to you?
From the infra-elemental plane of phat l00tz.
Raging Swan Press has a wonderful series of "things to find"
Depending on your scenario, you might use some of these explanations
This link is for smuggling situations, but they have hundreds of other ideas
Things
To Find In A Smuggler's Lair
When one of my players looted a headband of inspired wisdom off of an Urgathoan priest, I described the item as decorated with alternating skulls and fattened blowflies--he didn't like it so much after that.
My bloodrager in rise of the runelords wears Nualia's breast plate. He feels very sexy in it.
Treasure comes from all the TPKs in Adventure Paths.