One last statement (at least from me) on the issue:
It is not earning travel points in return for reasonable use of the system that is the issue to me, any more than it is an issue for me or anyone else to buy things at a sale price or use a coupon to something at a lower price.
It is the excess that other posters were describing that bothers me, the same way that the excess of extreme couponing bothers me. There is a real cost to someone from that excess and it ultimately isn't to the cc company or to the grocery store. Its to the consumer. I take a system view of the decisions I make and balance it with my self-interest. You don't have to do that.
It is a different answer to the question asked.
There's one fundamental flaw in your logic. You assume that credit card companies will sacrifice all to keep sign up bonuses going. I don't think this is true at all. Companies are segmented and if offering customers free money in hopes they will eventually make money on those customers becomes unprofitable, then they will cease doing that. And yes, they will run opportunity costs. They aren't going to raise merchant fees and convince airlines and hotels to raise their fares and rates (I'm still puzzled how you find any correlation between credit cards companies "losing" money and the overall cost of travel) just to keep an unprofitable marketing tactic afloat.
Trust me, if credit companies do the research (and they do, I assure you) and they find they are losing money by offering sign up incentives, then they will cease to continue doing so. I guarantee it. You literally have no idea just how many people take advantage of credit card companies' generosity, so you can't make a profound statement that says that by people doing so the overall costs of doing business go up. The way I see it, they are just passing their already insane profits down to those who know how to take advantage of a good offer.
And I'll re-iterate: travel does NOT cost more as a result of anyone receiving a sign up bonus. Money is money (it doesn't matter if it's airline miles or cold hard cash) but because corporations are greedy, they try to save money by negotiating. Hence, they buy $490 worth of airfare from some airline and "reward" you with $500 worth as a sign up incentive. They buy so much that it makes sense for the airlines to give a discount. The only party here losing money is the credit card company, not the travel industry. But they obviously aren't losing money overall, else they would quit offering incentives.
Ultimately, your logic that "it ultimately hurts everyone" is flawed.