The great deleveraging of the American consumer continued in the second quarter. Total debt held by U.S. households shrunk to $11.42 trillion from $11.47 trillion in the first quarter, according to a report from the Federal Reserve released this week. That $50 billion decline might not sound like a lot (or maybe it does!), but if you adjust for inflation and population growth, then you begin to see just how deeply Americans have been cutting their debt load over the past few years.

Here's a chart that does exactly that, with population and inflation estimates from the Bureau of Economic Analysis:

debt per capita-inflation 2011-q2.png

In the second quarter, total debt per capita stood at $36,549. This total includes all debt from mortgages to student loans. So that might not seem like a lot, until you remember that it's an average of all Americans, including children and retirees who might have no debt at all. So for a household consisting of two parents and two children, multiply that number by four.

You can see that total inflation-adjusted debt per capita has declined quite a bit. In the first quarter it was the lowest since the third quarter of 2005. Many economists believe that a large amount of deleveraging must occur before consumers will feel very comfortable spending freely again. It's unclear at precisely what point that may occur, but we can plainly see that average debt loads are declining significantly, particularly when inflation is taken into account.