Cramer believes inflation won’t end up crushing the US economy
CNBC’s Jim Cramer on Monday fought back fears that the U.S. economy could experience problematic inflation levels as it recovered from the recession induced by the coronavirus pandemic.
Host “Mad Money” said there is no doubt that pricing pressures are felt across a range of products and industries. However, Cramer said that hardly means America is heading for a period of runaway inflation akin to the 1970s or even Germany after WWI.
“The economy will not be destroyed by ruinous inflation, the stock market will not collapse because of government debt,” Cramer said. “I think we’re more likely to see a soft landing for this booming economy once supply chain issues are addressed and enhanced unemployment benefits expire in September.”
Cramer said there were a number of economic bright spots that make him confident that forecasts for extreme inflation are unlikely to materialize, such as solid data on consumer spending and savings rates.
“The savings seem stronger than the spending, so even with prices rising across the board, the consumer is in better shape than any time I can remember in my life,” Cramer said.
The rise in commodity prices for materials such as steel, aluminum and lumber is remarkable, Cramer said. But he added that all three countries are subject to tariffs and that simply reducing these import levies could improve the situation in the short term.
And while the semiconductor shortage is disruptive for many industries, including the automotive industry, Cramer said he won’t bet on the shortage that will last this year. He also highlighted comments from Foot Locker management that port congestion will improve as well.
“Look, I’m not saying this will all work out on its own. On Friday Deere had some shocking things to say about rising commodity and freight prices,” Cramer admitted.
However, he stressed that there always seem to be forecasters sounding the alarm on inflationary risks. “These guys have always been wrong for decades,” Cramer said. “We can finally have real inflation, but I don’t think their dire predictions of financial disaster will suddenly start to come true.”