Yes, and AMEX is just creating money out of thin air in order to pay it to you? No, they just charge the merchant 5% of the transaction, one of the highest in the industry. Guess who raises their prices by 5% everywhere, before you pay by AMEX?
The real problem is that everyone pays this price, and it leads to price inflation even if you pay cash (yes, dealing with cash transactions has a price for the merchant as well, but that one's already built into their costs). The laws should be changed so that merchants are allowed to charge more for CC transactions. I don't understand why the government has allowed the CC industry to forbid that (seems to work for gas stations).
It's a tragedy of the commons no doubt, but I'll be dammed if I'm gonna pay the full 5% increase by paying cash, instead of using my card, getting 1% back, and only paying the 4% increase. C'est la vie.
Your comparison is "world without credit cards" vs "world with credit cards." That's not reality. The reality is "world with credit cards." It's crazy to pass on using a credit card correctly in a world with credit cards.
Edit: Oh, and I forgot to mention that the law is on my side with charge backs and I'm not liable for fraud.