The global economy faces immense debt leverage that compounds the crisis situation, but the solution is not naive financial squeeze through interest rate increases but rather must involve debt relief and continued development finance.

The European Central Bank under President Trichet in the early 2010s failed to act as a lender of last resort, allowing Greece to nearly go bankrupt and threatening the stability of Ireland, Spain, Portugal, Italy, and the entire eurozone, until Mario Draghi intervened.

We are currently experiencing stagflation with rising prices at the same time that output is falling in many parts of the world, with Europe already in a downturn, the United States entering a downturn, and China in some kind of economic downturn, making this a global economic crisis worse than 2008.

Sachs is advocating for a major expansion of official development financing from the World Bank, European Investment Bank, African Development Bank, and Asian Development Bank, which can borrow on terms close to developed governments and lend at low, long-term rates to emerging markets.

Unlike 30-40 years ago, the key question now is whether developed economies and their financial systems are insulated from the impacts of emerging market crises, which would determine whether contagion spreads to advanced economies.

The crisis will intensify in the coming months and could become far worse, with geopolitical escalation—including potential war spread, U.S.-China conflict, or return to negotiating tables—being the crucial determining factor.

In the late 1970s stagflation, Fed chairman Paul Volcker raised interest rates to 20 percent, which ended inflation but left all developing countries bankrupt, creating a debt crisis that required a decade of restructuring work.

Turkey currently has inflation reaching approximately 100 percent per year and Argentina has similar runaway inflation, with other countries potentially facing hyperinflation as a result of global economic mismanagement.

In 2008, the Fed and U.S. Treasury made a technical mistake by driving Lehman Brothers into bankruptcy one weekend in September 2008, which cost the whole world trillions of dollars and demonstrated that central bank institutions are not reliable, smart, or foolproof.

The solution to the current global crisis requires avoiding a contagion of defaults and insolvencies, and avoiding telling dozens of countries to contract sharply in public investment and social spending, rather than pursuing austerity.

Sachs' historical shock therapy recommendations in Bolivia and Poland were never about simple austerity and contraction, but always involved international creditors playing a constructive role in debt relief alongside government structural reforms.

In Bolivia, Sachs recommended debt cancellation of approximately 90 percent of the country's external debt to international banks to prevent hyperinflation, which was implemented.

Poland's debt to official creditors was sharply cut as part of Sachs' shock therapy recommendations, serving as a precedent for contemporary debt restructuring.

Countries with euro bond market debt may need to extend the horizon for repayment under collective action clauses in contracts, and official debts may require mechanisms ensuring developing countries receive more fresh finance than they repay on old debts.

Sachs has never believed in printing money for government spending because it causes high inflation, but instead advocates financial solutions that don't condemn countries to default, bankruptcy, or extreme austerity, which has been his policy recommendation since implementing shock therapy in Bolivia in 1985.

The U.S. 30-year Treasury bond rate is currently around 3.2 percent, the German 30-year rate is around 1 percent, while emerging economies face 30-year loan rates around 10 percent, creating a significant interest rate gap that development banks could leverage.

The real room for maneuver in solving the debt crisis comes from the fact that interest rates paid by high-income countries are still very low compared to emerging market rates, allowing multilateral development banks to arbitrage this spread and provide concessional financing.

In his current role, Sachs spends most of his time working via teleconference with people across the world on sustainable development goals and the Paris climate agreement, preferring this to airplane travel for sustainability reasons.

Sachs is recommending this major expansion of multilateral development bank financing to the G20, but acknowledges that without international cooperation, the chance for contagion is very real because countries are barely talking to each other.

Throughout Sachs' entire career, geopolitical factors have determined whether economic solutions work or not, because solutions require cooperation, and without cooperation the chance of financial contagion is very real.