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Worried, Cramer prepares for worst

(Click for video linked to a searchable transcript of this Mad Money segment)

If you think chatter out of the Senate suggests the DC issue is about over, Cramer thinks you may be sadly mistaken.

That's not to say the Mad Money host doesn't expect a deal out of the Senate, he does. "From the very beginning I've always expected the Senate to find common ground," Cramer said.

The issue is that any deal in the Senate would then have to pass the House. "And the House as we keep discovering, is a horse of a different color," said Cramer.

Although the Mad Money host believes Senators comprehend the consequences of default, he's not sure that lawmakers in the House share the same level of understanding.

"Some think that the President is just lying and there's plenty of cash to go around so the deadline will come and go with no consequences," Cramer said.

"And others, who understand the issue a little more say 'so what'. The people who will be harmed are either from Wall Street or, worse they are foreign."

Sens. Mitch McConnell and Harry Reid
Getty Images
Sens. Mitch McConnell and Harry Reid

It's that kind of thinking that Cramer fears could send the nation right over the edge. And he says it's not factored into the market. Not at all.

Here's why:

1. There are buyers in the market who think it is inconceivable that the US defaults on its debt.

2. There are investors in the market who aren't selling because they fear they won't be able to get back in.

3. In 2010 and 2011, as lawmakers bickered over similar issues, it was ultimately strategic to buy dips.

4. Investors in the market think the Senate will be able to impose their will in the House.

Cramer believes that investors who fall into any one of these four categories may soon come to realize that their thesis has no merit; that the nation is truly facing a worst case scenario.

And when that happens, the stock market could turn nasty – very nasty.

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Investors need to be prepared for this, Cramer insisted. It's not inconceivable, "We could go over the deadline. A default could very well be in the cards. Every day we don't achieve resolution, the odds just get worse." Don't fool yourself into believing anything less.

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