My take is that the ultimate loser is not any of the participants in the actual MS transaction - it is the casual collector of airline/hotel miles that sees those miles and points devalued as a result of the inflation driven in part by MS, credit card bonuses and churning, etc.
As discussed above, there is no real loser in any of the individual transactions. In a fraud-free world, each of those transactions is entered into willingly by both parties because there is a profit involved for both parties. Be they the CC issuer, the retailer, the GC network, WMT, etc - they all benefit.
But at the end of the day, the airlines and hotels who are the ones giving away value in exchange for miles/points know they have to devalue those miles and points because they are being generated in such enormous quantities and so they do. The MS crowd cries a bit, then goes ahead and continues to generate away, perhaps even more than before. The man on the street who earns miles and points the hard way (BIS, etc) is the one who is screwed.