GO
Loading...

Cramer: A 1937 Stock Market History Lesson

Friday, 5 Apr 2013 | 1:36 PM ET
No Huddle Offense: Don't Blame Bernanke
Friday, 5 Apr 2013 | 6:57 PM ET
Mad Money host Jim Cramer explains why people need to support the Fed chairman in his crusade to get the economy back on track.

(Having trouble with the video? Click here!)

They say history repeats itself; fortunately Ben Bernnake knows it. And Jim Cramer thinks the nation is indeed fortunate to have a student of history as the Fed Chairman.

Cramer believes that Bernanke's keen understanding of events that happened in the years following the Great Depression are likely playing a critical role in current policy – in fact, he thinks it's preventing the nation from spiraling into a terrible downturn -- right now.

"Thank heavens Ben Bernanke doesn't listen to those who have no idea about history, including most economists," said Cramer. "He recognizes that we could be in a 1937 situation."

And in 1937 the situation wasn't good.

At the time President Roosevelt, Congress and the Fed all made moves that sent the economy into tailspin. That is, they raised existing taxes, implemented new taxes and tightened money supply. Although the economy looked as if it has recovered, it was far too fragile to withstand those kinds of developments.

The result was a recession in 1938.

Cramer thinks the situation in Washington today seems eerily similar to that of the late 30's. Again, lawmakers are convinced the economy is stable and they're making moves that could be disastrous; that is, they've cut spending and raised taxes via sequestration at a time when the economy remains extremely fragile.

The latest jobs report seems to confirm just how frail the economy really is. It showed the economy added only 88,000 jobs while 500,000 Americans left the labor force, (i.e they stopped working or looking for work and were no longer counted in the official employment numbers.

That's not a development that reflects prosperity.

Archive Holdings Inc. | Archive Photos | Getty Images

Fortunately, Cramer thinks Bernanke realizes it, and has therefore remained extremely aggressive in his attempts to stimulate the economy.

"We owe Ben Bernanke a huge debt of gratitude. He saw this coming. He knew that we weren't out of the woods. He is doing everything he can to try to change the course of human events and he is the only person in Washington trying to do so," said Cramer.

----------------------------------------------------------------
Read More from Mad Money with Jim Cramer
Bearish Pattern Trouble Sign?
Street Appetite Developing for These Stocks
Investing in Future of Cancer Drugs
----------------------------------------------------------------

Cramer concedes that by keeping rates at historic lows and sticking with his target of 6.5% unemployment, Bernanke risks terrible inflation and sending interest rates sky high – but Cramer thinks it's by far the lesser of two evils.

"Typically, he is derided for being too aggressive," said Cramer. "Personally, I think he is the only grown up in Washington."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

Contact Mad Money

  • Showtimes

    Monday - Friday 6p ET
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.