In these pages, we have noted that the primary precondition for deflation is a major societal buildup of debt.
In the U.S., for example, the deflationary depressions of 1929-1932 and 1835-1842 were both preceded by debt bubbles.
With that in mind, consider what's going on in Italy. Here's a May 29 article excerpt from CNBC:
The contagion risks from a potential Italian implosion should concern market participants once again, according to analysts.
The euro zone's third-largest economy is currently in the midst of an ongoing power struggle, with investors fearful the looming prospect of snap elections could be fought over the country's role in the European Union and its membership of the single currency.
Rome's deepening political crisis has prompted a second consecutive session of heavy selling in European financial markets [May 29], with stocks tumbling and the euro slipping to fresh six-month lows.
"If you just look at the economic fundamentals of Italy, they are worrying," [the] chief investment officer at private bank Kleinwort Hambros, told CNBC's "Squawk Box Europe" Tuesday.
"It is one of the biggest indebted countries in the world ... it's got an unemployment rate of 11 percent and its economy is still lower than where it was in 2007, whereas most major economies have recovered. So, clearly there is a requirement for structural reform here in order to regain confidence," he said.
"(Last year) was a stellar year for economic growth in Europe, we've seen a resumption of inflation so those deflationary fears went away and it almost happened in a flash ... Now everybody is concerned about potential for deflation and even potential for contagion," he added.
Indeed, this "potential for deflation" coincides with what Elliott Wave International's January 2018 European Financial Forecast said about Europe:
As the bull market ends, today’s economic options will disappear just as quickly as they did during previous financial crises. In fact, the reversal may happen even quicker, because many important economic sectors never recovered in the first place. Youth unemployment, for example, remains historically elevated. Also, poverty risk has risen since 2005. Meanwhile, wages and inflation remain locked in the same decline that has persisted for almost two decades.