James looked to have put his injury issues in the rear-view mirror when he recently started four games for Chelsea, only for him to suffer a fresh hamstring issue two weeks ago.
It means James has now logged only 662 minutes of Premier League football - the equivalent of just over seven games - since he was named Chelsea skipper in August 2023.
James' latest injury also marks the ninth time he has been sidelined with a hamstring issue since December 2020.
Chelsea boss Enzo Maresca said on Tuesday James is 'getting better', but 'still needs weeks to come back'.
With the absences continuing to mount up and a significant lack of on-field return, Deeney believes the Blues must face the brutal reality staring back at them.
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"I think if you get some money for him [James], you've done well," Deeney told talkSPORT.com.
"It's similar with Luke Shaw. You're not denying their ability and how good they are.
"But if they're not fit to play, what are you paying them for? You may as well go and give that space to another young player and unfortunately cut your losses.
"You can't keep saying, 'Every time he's fit, he's great'. You have to cut your losses."
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Deeney also believed James must ask tough questions of Chelsea's medical department given his repeated hamstring breakdowns in recent years.
"If I had eight hamstring injuries in four years and I was only ever using Chelsea's physios and doctors, I'd be going to them, 'Right, let's have a chat, I am never using you lot again'," Deeney said.
"'I'm going to get my own person, make a drastic change'."
However, if James has sought external help to overcome his hamstring woes, Deeney called for the 24-year-old to take drastic action.
"If he's been using his own people, then they would be getting sacked and I'd be suing them," Deeney said.
"You can't keep having the same injury. Something along the line is breaking down.
"It really is a shame, because I don't think we're ever going to see the true potential of what Reece James is."
The other compounding factor in James' injury setbacks is the fact Chelsea have been without their club captain.
James was named as the club's skipper at 23 years of age as he succeeded Cesar Azpilicueta, who departed in 2023 to join Atletico Madrid on a free transfer.
It made James the youngest permanent captain at Chelsea since the late Ray Wilkins, who was given the armband in 1975 aged 18.
The captaincy was undoubtedly a special moment for James given he has been on the club's books since he was six.
But Deeney did not believe James was the right man to take over from Azpilicueta and branded the appointment 'strange from the start'.
"I don't see captain and leadership credentials in him," Deeney said.
"A good player and a nice person, but I think they stitched him up a little bit.
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"He needs to go and speak to a JT [John Terry] or a Frank Lampard and ask them what does it entail. Then try and live that model into that new day and age."
Unfortunately for James, he may not get the opportunity to properly make his mark as Chelsea captain should the club heed Deeney's call to sell him.