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If you are one of those investors who thinks that if interest rates go higher, that it means to sell everything—then Jim Cramer thinks you are brainwashed. Sorry.
"That's why I want to spend some time on the notion that when positive things happen to economies around the world, you tend to get markets that go higher, not lower," the "Mad Money" host said.
Higher interest rates are good! Cramer explained his reasoning when he shared that he likes to start his day by monitoring the German bond market. Right now German bonds are going down in price, which means their interest rates are going up. This has caused major worldwide market turmoil.
Yet about a month ago the German bond yield was so low, that you had to be crazy to buy these bonds and hang on to them for ten years. Now that it has gone up tremendously, those investors holding the bonds are panicked, thus causing S&P futures in the U.S. to get hit hard.
Cramer suspects that hedge funds are making accurate short term judgment, but inaccurate long-term judgment. They assume that as rates go up in Europe, they will also go up in the U.S. Thus, stocks must come down.
But the "Mad Money" host finds this logic hogwash. Europe rates are rising because the European economy is getting better, thus there is higher demand for loans and more demand for money. That's a good thing!
Cramer sees three positive implications for higher interest rates:
No.1 This is good for U.S. companies that do business in Europe, that have taken a beating recently.
No. 2 A strong economy abroad means there is a stronger currency. So when Europe gets stronger, it becomes a magnet for money.
No. 3 This means that China can be resurrected, too. Europe's weakness has been a big drag on China, as a quarter of its exports generally go to Europe. So if Europe can be awoken from the dead, so can China.
Ultimately the wave of selling on Tuesday subsided during the day and the averages managed to regain some of the losses, which show that some of the panic subsided.
"We could freak out that our interest rates hit six month highs, but I have the benefit of age and I can tell you that rates have plenty of room to rise before this economy gets derailed," Cramer added.
Read more from Mad Money with Jim Cramer
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With that said, what should you be doing?
"We're nowhere where interest rates can hurt the real economy, either here or in Europe, which is why you need to take advantage of those sellers who went to college to get stupid, because they're selling precisely what you should be buying," he added.