If you think that American consumers have found religion when it comes to debt, you might be surprised by what really is happening.

From the WSJ:

First, consider household debt. Over the two years ending June 2010, the total value of home-mortgage debt and consumer credit outstanding has fallen by about $610 billion, to $12.6 trillion, according to theFederal Reserve. That’s an annualized decline of about 2.3%, which is pretty impressive given the fact that such debts grew at an annualized rate in excess of 10% over the previous decade.

There are two ways, though, that the debts can decline: People can pay off existing loans, or they can renege on the loans, forcing the lender to charge them off. As it happens, the latter accounted for almost all the decline. Over the two years ending June 2010, banks and other lenders charged off a total of about $588 billion in mortgage and consumer loans, according to data from the Fed and the Federal Deposit Insurance Corp.

That means consumers managed to shave off only $22 billion in debt through the kind of belt-tightening we typically envision. In other words, in the absence of defaults, they would have achieved an annualized decline of only 0.08%.

Now there is a bright side to this. Consumers are at least not adding significantly to their outstanding loans. Why that’s the case might well be a subject for some debate. Is it a new found frugality or is it unemployment or the fear of it that’s the primary cause.

Old habits die hard. Remember how the financial crisis and recession spelled the end of consumerism as we all were forced to accept the “new normal.” Well first we had government behave pretty much as if there wasn’t any new paradigm that it needed to adjust to and the financial services industry did a good job of getting back to the old profitability regime and the bonuses that accompanied it. Now it appears as if the consumer hasn’t necessarily given up all that much either.

All in all, a lot to make the average Chinese industrialist very happy.