With the housing market in free fall across much of America and unemployment on the rise, what are the odds that consumers took meaningful action to cut back their spending over the last year? Not very high, especially if recent credit card data is to be believed. In fact, people with credit cards are borrowing like there is no tomorrow.

Even while the economy is nosediving, Americans are acting oblivious. But high spending can’t last, and when it ends, the economy will really plunge.

For the week ending October 15, commercial banks’ outstanding credit card balances soared a shocking $7.1 billion. The jump in credit card debt represented an increase of 1.9 percent—an astounding increase for a seven-day period. If continued, it would almost double total outstanding balances by this time next year.

Even more shocking is the fact that people charged more money over the 10 weeks between August and mid-October than they charged for the previous 10 months combined (September 2007 through July 2008).

“Credit card growth like we have seen in the last few months has never been sustained at such a level, and is unlikely to be this time either,” says bestselling author and economic analyst John Mauldin.

According to data quoted by Mauldin (who is also editor of the Internet newsletter Thoughts From the Frontline), credit card defaults, which have jumped for many card issuers, especially Bank of America and American Express, are a sign that the credit card spending wave may be about to head back out to sea. He further quotes that the pool of loans deemed uncollectable for credit card companies rose to a high of 6.7 percent in the third quarter, soaring from only 3.6 percent last September. Banks are seriously exposed, and are now reducing credit lines and reining in lending to less-creditworthy individuals.

A big reason so many people have turned to credit cards is that their homes are no longer functioning as the atms they once were. Home equity withdrawals have plummeted.

For example, during the first quarter of the year for 2005, 2006 and 2007, homeowners pulled out $134.4 billion, $223.6 billion, and $140.7 billion respectively. During the first quarter of this year, homeowners withdrew a comparatively much smaller $48.7 billion.

And get this: During the second quarter of this year, people were able to pull out only $9.5 billion. As home prices keep falling, home equity extraction will keep falling too.

America’s economy has gotten dependent on consumers being able to borrow and spend against rising home values—to the tune of around $500 billion or more per year (as of 2007—it was higher in 2005 and 2006). At 2007 levels, that equates to around an additional $1,600 worth of spending per person, or $6,400 for a family of four, per year.

If America is to maintain its standard of living, the money has to come from somewhere. The solution many people have turned to is credit cards.

The problem is, credit card spending is at best a short-term answer. And at double-digit interest rates plus late penalties and other charges, it can be an expensive one. Americans are addicted to their debt-financed standard of living, and judging by credit card usage, many are resisting change, even if that means risky habits and robbing from their future.

Change is indeed coming upon America. But contrary to the political discourse of recent days, this economic change will be decidedly for the worse.

When the credit card binge reaches its inevitable end, consumer spending will collapse—and that could easily lead to bankruptcies, plummeting sales, job losses, and an economy in severe contraction. Consumer spending makes up approximately 70 percent of America’s economy, so any pullback will have large consequences. And preliminary data for the third quarter of this year indicates the economy contracted by 0.3 percent.

President-elect Obama is inheriting an economy in recession, and one that could soon plunge into terminal depression.