Dr. Doom is still all doomsday-like

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Nouriel Roubini was one of the first people to start talking about this financial crisis and recession and gosh darnit if he’s not going to be one of the last. He popped by this afternoon to talk to some TIME editors and writers. While he was here, he made fun of the notion that we’re seeing “green shoots” in the economy—choosing instead to use the word “weeds.” He picked apart one recent upbeat economic report (I won’t mention which investment bank issued it), by pointing out that a minimal slowdown in the pace of house-price declines, a couple of less-dismal months of retail sales, and slightly less contraction in the manufacturing sector does not an economic recovery make.

He was equally as dismissive of the good first-quarter earnings many banks have reported. He pointed out that loan-loss reserves are actually in many cases on the relative decline—this Bloomberg story highlights that in the first quarter non-performing assets at Wells Fargo rose by 40% while loss reserves grew by just 5%. “We’re going back like nothing ever happened,” Roubini said. “It’s pathetic.”

Looking ahead, Roubini is anticipating negative earnings surprises from companies that make and sells products and services. (Remember the real economy?) Unemployment, he thinks, will keep rising until at least the middle of next year and will probably wind up close to 11%. The supply of housing might actually be near a bottom, he said, but without a pick-up in demand, which has collapsed just as much if not more, we’re not going to see any good news there, either. He said that the Administration’s housing plans, near and dear to my own heart, probably don’t go far enough. What we need to do is get rid of excess debt. For real estate, that means writing down the principal balances on people’s mortgages—something the lending industry has been loath to do.

In fact, debt overhang is a major drag on the economy all around. At the banks, on household balance sheets. “It’s tough to grow your way out of debt,” he said—and therefore thinks we should be converting debt into equity wherever we can. Mortgages. Banks. Car companies.

Bottom line, Roubini figures GDP will be down this year, but back to 0.5% growth next. That’s actually a smidge above where the IMF thinks we’ll be next year. So maybe not entirely doomy after all.