The man who predicted the current financial crisis said the US recession could drag on for years without drastic action.
Among his solutions: fix the housing market by breaking "every mortgage contract."
"We are in the 15th month of a recession," said Nouriel Roubini, a professor at New York University's Stern School of Business, told CNBC in a live interview. "Growth is going to be close to zero and unemployment rate well above 10 percent into next year."
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Echoing a speech he made earlier in the day, Roubini said he sees "no hope for the recession ending in 2009 and will more than likely last into 2010."
Roubini, who is also known as "Dr. Doom," told CNBC that the risk of a total meltdown has been reversed for now but that the economy is going through "a death by a thousand cuts." He also said that "most of the U.S. financial institutions are entirely insolvent."
"The market friendly view for the banks is nationalization," said Roubini. "Temporarily take over the banks, clean them up and get them working again."
As for the claim that the Treasury Department can't legally take over the banks, Roubini said that most of the banks are already owned by the government and that the government could "put them in receivership" if it had to.
Earlier in the day, Roubini spoke to the CBOE Risk Management Conference and said he believes total losses could peak at $3.6 trillion in the financial system, with half of that being borne by banks and bank dealers and the other half borne by hedge funds and pension funds, among others.
He said that while U.S. GDP next year could be zero, global GDP could dip into negative territory.
"We could end up ... with a 36-month recession, that could be "L-shaped stagnation, or near depression," Roubini said. He puts the chance of a severe U-shaped recession at 66.7 percent, and a less severe L-shaped recession at 33.3 percent.
Roubini listed a litany of negative omens: Capex spending down 20-30 percent for investment grade companies, self-perpetuating deflation, all making a bad situation worse.
"If you expect prices to be lower tomorrow, why would you buy today?", asked Roubini. He says it's easier to break out of am inflationary cycle than a deflationary one, and while a year of deflation "is okay," longer would be "a disaster."
So what can the government do? The easy part is lowering interest rates and buying toxic assets. The hard part, he says, will be tackling housing. Roubini says that the housing market, like a company restructuring in bankruptcy, needs to have "face value reduction of the debt." Rather than go through mortgages one by one, he says reduction has to be "across the board...break every mortgage contract."
Roubini also took issue with the $800 billion stimulus package, saying it's not enough. For one thing, there's only $200 billion upfront, and half of that is a tax cut, which Roubini calls "a waste of money" that is not going to make a difference.
Finally, while he says there will be "a light at the end of the tunnel", it'll probably get worse before it gets better. Those who believe in a second half recovery this year "are delusional" he says.
In fact, based on Roubini's calculations, we could conceivably see the S&P 500 at 500, the Dow at 5000. For more stories from CNBC, go to cnbc.com.