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CNBC’s Jim Cramer said Thursday that he believes the main solution to bringing inflation under control is to bring the coronavirus pandemic under control, suggesting that traditional monetary policy levers are ill-equipped to stamp out rippling price pressures. on the economy.
“For all comparisons with Weimar Germany or the stagflation of [1970s], our current inflation surge is unique, “said the host of” Mad Money, “saying that many of the root causes of semiconductor shortages, supply chain disruptions, rising prices higher house prices and wages are linked, in various ways, to Covid and the fear of disease.
“Prices are going up everywhere because people don’t want to die; they don’t want their families to die; they don’t want long-term health complications,” Cramer said. “I think you are curing this inflation not with higher rates, but with Pfizer, Moderna and J&J,” he added, referring to the trio of companies behind the Covid vaccines available in the United States.
Federal Reserve Chairman Jerome Powell recently acknowledged that inflation had not calmed down as quickly as he thought when the economic reopening of Covid closures. However, the country’s main central banker is confident that price pressures will eventually ease, as supply chain bottlenecks improve and pent-up consumer demand declines.
Critics say the Fed is wrong in assuming inflationary pressures will improve on their own and believe its very accommodative monetary policy, which includes an asset purchase program and near zero interest rates , is no longer appropriate.
Cramer, who has consistently championed Powell’s conciliatory approach throughout the pandemic, pointed to the shortage of truck drivers as an example where the Fed’s impact would be limited. The challenges of the trucking industry have only been exacerbated by the Covid crisis, but health concerns have added another barrier to hiring, Cramer said.
“The advantage of a labor shortage is that it’s easy to solve – you just have to offer people more money,” Cramer said. “Of course, it’s expensive. This is a structural problem, not a transitory one. But just because it’s not transitory doesn’t mean the Fed can fix it. On the contrary, it could get worse in a future. weaker economy, which means you can’t solve this shortage with higher rates no matter what the hedge funds tell you. “
Inflation in the housing and auto markets – both for new and used cars – are concerns for many observers, Cramer said. However, Cramer said he believed those buying decisions were largely driven by health concerns that would remain independent of Fed policy.
“You have this combination of a fear of death and relentless innovation that drives housing and auto inflation,” Cramer said. “If the Fed is to cool the overheated housing and auto markets, well, it has to find a cure for Covid.”
“What we are seeing now is a revolution in the way people live their lives and this revolution cannot be stopped by higher rates,” Cramer added.
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