Americans are spending freely on vacations, nights out, and shopping sprees — even as inflation, high interest rates, and record debt climb higher. Economists have a name for this moment, and a more ominous one for what could come next.
They call it the "vibe economy" — a period when consumer confidence drives spending even as financial warning signs mount. But experts warn that confidence could evaporate quickly, giving way to a "vapor economy" where household finances run on fumes.
Credit card balances have surged to about $1.2 trillion and could hit $2 trillion by decade's end.
Howard Dvorkin, CEO of Debt.com and a certified public accountant, warns that Americans are ignoring the warning signs and leaning on credit cards to maintain their lifestyles.
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"You know you're in debt, but everyone around you is acting like they're not — and they're just putting it on their credit cards because that's normal now," Dvorkin said.
While social media and a booming stock market are fueling those good vibes, Dvorkin says they mask a fragile reality.
"The first signs of a bad situation with regards to the economy, it all just disappears — and that is the problem and it turns into vapor. And all of a sudden everybody's running for the hills," Dvorkin said.
Abby Hall, a professor of economics at the University of Tampa, says optimism can keep spending and the economy afloat, but only if it is backed by real strength.
"If the vibes aren't backed up by actual economic realities, what happens on the backend. And of course in that case people might be feeling really good now, but the vibe might be decidedly different after the economic data confronts us with reality," Hall said.
Hall warns that drawing from savings or a 401(k), or leaning on credit cards to maintain a lifestyle, can only last so long.
"You can't fight economic reality. At so at the end of the day, at some point, you have to make adjustments," Hall said.
Both experts agree the next economic downturn could have several triggers, from high consumer debt to global shocks.
"It could be a lot of different things. And instead of our leaders addressing one major item, they could be addressing five different items," Dvorkin said.
Their advice: plan now.
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"They need to stop using their credit cards and live off of what they make," Dvorkin said.
"It's really important that people understand what their cash flow is coming in, and it's really important to take a good hard look at what's going out," Hall said.
