The Western world is so broke that it will require defaults, governments' imposition of a "savings tax" on private wealth and other harsh measures to recover from one of the most perilous economic times in modern history, according to a research paper by Harvard economists Carmen Reinhart and Kenneth Rogoff for the International Monetary Fund (IMF).

Not since the Great Depression and the post-World War II era have such remedies been required of rich nations, the paper's authors noted.

"The magnitude of the overall debt problem facing advanced economies today is difficult to overstate. . . . The current central government debt in advanced economies is approaching a two-century high-water mark," they wrote.

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The paper explained the developing world is fooling themselves by maintaining they are different from poorer nations and can resolve their debt overhangs with austerity, growth and economic maneuvering.

Instead, the so-called "rich" nations are viewed as prolonging the global financial crisis with their foot-dragging.

In the 1930s, most advanced nations simply wrote off their debt, and World War I loans from the United States to France, Britain and Italy were simply forgiven.

The current debt solutions could include "directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements and generally a tighter connection between government and banks," Reinhart and Rogoff wrote, adding that this time of financial repression "often masks a subtle type of debt restructuring."

Government gross debt-to-GDP (gross domestic product) ratios in 2014 are forecast to be 95.3 percent for the euro area and 109.2 percent for the United States, according to the IMF, CNBC reported.

The ratio for all advanced economies is expected to be 109.5 percent, with the same amount for emerging economies at only 33.6 percent, primarily because emerging nations managed to deleverage during the years leading up to the recent global recession.

Now, according to Reinhart and Rogoff, it is time for the Western world to take some of the same medicine often prescribed for poorer emerging nations.

"In light of the historic public and private debt levels...it is difficult to envision a resolution to the current five-year-old crisis that does not involve a greater role for explicit restructuring," the pair concluded in their paper.

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