Duh? I can access hangouts from arbitrary browsers and devices which means, at best, Google has "my" private key and that is the same as having the plain text messages.

This is like the yearly "Dropbox lies about encrypting your data!" post. Any service that gives you access to your data via a browser without a key only you control is the same as it being "unencrypted" even if on their end they encrypt it with their key before it hits a physical disk.