The world is waiting to see how the U.S. $700 billion financial bailout will affect the economy.  After one of the worst weeks ever on Wall Street, as well as in global markets, things are looking a bit brighter with Monday’s Dow up by more than 936 points to 9387.  World markets have also picked up, but we’re still waiting for an easing of the worsening global credit crunch.

Meanwhile, nobody is focusing on the next crisis that’s coming—the credit card debt debacle. This will be a problem of colossal proportions involving millions of Americans, not just the many homeowners already facing foreclosure or those with diminished 401(k)s.

It’s been well documented, that consumers have used their credit cards and revolving credit accounts to rack up more than $2 trillion in household debt—from high-ticket items like electronics to life’s basic necessities like food and gas for the car.

But very little attention has been paid to the fact that, similar to mortgage-backed securities, credit card debt is packaged and sold to investors. The inevitable defaults could lead to big losses, not just for the credit card lenders, but also for pension funds and other institutional investors who are buying the debt.

The securitized debt backed by credit card receivables is a $915 billion industry.  Increased defaults could unravel the whole game, just as delinquencies in the housing market brought down the $900 billion in mortgaged-backed securities.

Does this add up to an inevitable recession? You will get as many answers as the number of politicians and economists you ask. The lending industry, now barred from aggressively issuing sub-prime mortgages, has turned its attention to marketing credit cards with high fees, over-blown interest rates, and complex terms hidden in the fine print or written in obscure language. Unwary consumers are setting themselves up for future defaults, and doing it in record numbers.

Credit card borrowing grew at an annual rate of 4.8 percent in July 2008, up from a growth rate of 3.5 percent in June. But while the volume of credit card purchases continues to rise, on-time monthly payments are falling.  

Consumers have dug themselves in so deep, credit card delinquencies are at the highest level in six years—up 4.86 percent in the first quarter of 2008 alone. Ratcheting up interest rates on existing balances is one of the credit industry's most lucrative, but indefensible practices.

Read our full report:  

Get Ready for Another Crisis: The Coming Credit Card Debt Meltdown