A growing percentage of Americans are becoming reckless with their spending, fueling what one economist calls a “super duper” credit bubble.

In a note to clients, economist David Rosenberg of Rosenberg Research warned that Americans are taking on too much debt to buy things they really don’t need. He calls these people “YOLO spenders,” which refers to the catchphrase, “You only live once.”

“There is no acknowledgment today that, yet again, we have a super-duper credit bubble on our hands,” Rosenberg wrote. “It isnt just about fiscal recklessness at the government level; the dilemma is that the consumer commands a dominant 70% share of the economy.”

That credit bubble has created the illusion of a strong economy, but it’s really a ticking time bomb that’s about to go off.

For starters, more Americans are falling behind on their credit card payments. According to Rosenberg, one in every 12 credit card holders is in this predicament.

The last time delinquency was this high was in 2011, when unemployment was 9%. The national unemployment rate currently stands at 3.7%, among the lowest in history.

“As far as consumer credit is concerned, the default cycle isn't merely looming. Its arrived,” he warned.

As Creditnews reported, Americans added a whopping $50 billion to their credit card balances last quarter, bringing credit card debt to a new all-time high of $1.13 trillion.

While the overall debt balance isn’t necessarily bad, it can quickly snowball into something much worse under one pressing scenario.

It’s all about employment

It might sound obvious, but economists say Americans should be able to pay their credit card bills so long as they stay employed. Although unemployment remains low, cracks in the labor market have emerged.

The number of Americans quitting their jobs declined sharply last year, a sign that workers don’t have as many options or bargaining power as they did coming out of Covid. Meanwhile, Big Tech companies laid off tens of thousands of workers last month.

While a recession appears less likely now, economists at the IMF and Conference Board are forecasting a stall in economic growth this year, potentially leading to a "credit crunch."

“What happens if the economy slows and unemployment quickly rises? Delinquencies could surge, in turn leading to a self-reinforcing credit crunch,” said Joseph LaVorgna, chief economist at SMBC Nikko Securities. “In other words, a mild downturn could turn into a deep one.”

“Overall, the consumer is credit healthy. However, the reality is that there are starting to be some significant signs of stress,” Silvio Tavares, president and CEO of credit rating system VantageScore, told the Associated Press.

That stress is likely being felt even more now after Americans splurged on the holidays.

The payday is due

YOLO’ing has costs, especially for those who haven’t benefited from the post-Covid asset inflation.

“You have these noticeable pockets of consumers—mostly middle- and lower-income renters who have not benefitted from the wealth effect of higher housing prices and stock prices—who are feeling financial stress, and that’s driving up [...] delinquency levels. They’ve been hit very hard by inflation,” according to Warren Kornfeld, a senior vice president at Moody’s.

The holidays may have been a time to forget those worries—after all, consumer spending surged by $208 billion in the fourth quarter—but the post-holiday hangover is now being felt.

“Millions of Americans are living paycheck to paycheck and just didn't have the extra money to pay for holiday purchases,” Andrea Woroch, consumer and money-saving expert, told U.S. News.

“They also weren't willing to sacrifice the season for their family and kids, so they took on debt to make it magical,” she said.