Governments have an unlimited capacity to create inflation by printing money (more so than they have already been doing). Inflation wipes out most debts (other than the small percentage of debt that is inflation-linked).
Inflation is close to zero in Europe, but this is because of the way the currency union was originally designed, at a time when inflationary currency devaluations were seen as the worst form of economic ill-discipline, and of course because it was informed by the German experience of hyperinflation between the wars. Japan has demographic problems (no immigration, low birth rate, ageing population). The rebalancing of China's economy away from (often wasteful) investment towards what is hoped will be greater consumption has exerted a depressing influence on economic activity.
Overall, these headwinds can be overcome by a dose of inflation, which will ease debt burdens and encourage spending over saving. However, this will have a damaging effect on real asset values, especially obviously the value to lenders of their outstanding loans, which will be repaid in inflated nominal currency.
So no, I don't see a risk of economic collapse because I expect policy-makers will in the end be forced to print money to prevent such a scenario developing. Alternatively, we may just scrape along without much inflation, but with very slow erosion of debt and slow growth.
What you've just said makes no sense at all. Inflation is created by loans, i.e. by money creation, which has debt attached to (more than the money created itself due to the interest). The problem is that everybody and their dog are maxed out on debt so in the real economy few are taking loans which severely decreases money creation. Central banks can ZIRP and NIRP but it doesn't matter much at this point.
Money velocity has been going down for months and the real economy is in a de facto deflation.
What you could have said is that inflation conceals debt as long as people have margin to get on more debt.