Jim Cramer: Here’s what we need to beat coronavirus

As the markets keep getting pummeled this week in reaction to further fears over the coronavirus and dropping oil prices, the one word now on everyone’s lips is recession. And we are definitely headed there, says CNBC’s Jim Cramer, who argues there are constructive steps US legislators should be taking to lessen the pain up ahead.

Markets continued to sink on Thursday as the negative sentiment towards this year’s economic outlook grows. Worries are that COVID-19 will be a long and hard battle for countries worldwide, including the US and Canada which are now bracing for the virus’s full impact.

But even through the gloom and doom, there’s space for optimism about the year ahead, said Cramer, host of CNBC’s Mad Money, speaking on Wednesday.

“The corona virus is the ultimate exogenous event. It's a public health crisis and it's wreaking havoc all over the country —and it hasn't even impacted that many people yet,” says Cramer. “As it kept spreading we were told this was no big deal, there were so few cases [in the United States] and a lot of authority figures including the President seemed incredulous. Then everything fell apart. We started getting reports of people being stricken who hadn't even been in China. We discovered the term community spread.”

“I've been bearish for month and a half that I started to warn you about the coronavirus from the moment I first heard this,” Cramer added.

Last week, the US Federal Reserve along with the Bank of Canada took the step of lowering key interest rates by half a per cent, aimed at spurring economic activity, but the immediate market reaction both north and south of the border was negative.

Cramer said that was the wrong approach.

“You can’t solve a public health crisis with monetary policy, you just can’t,” he said. “Honestly, I'm not even sure the President can help if the only thing he can get done is a payroll tax cut and some loans to tide sick people over — those aren't bad ideas but they probably won't be enough to move the needle. A payroll tax cut, well, you’ve got to be on the payroll to get cut. We need massive fiscal stimulus to save us from the even deeper recession that I think we’re going to have.”

Cramer said the consequences of non-action on the part of the government will be worse.

“I want the government to put itself on war footing to stop this thing,” he says. “Get a Manhattan Project going for heaven's sake, offer a huge prize to anyone who comes up with a cure, but more realistically we need to flood local community health organizations with the billions of dollars they're going to need to do their jobs.”

“We need something major from federal government, something really brilliant. We need to pay people to not work, maybe give them $1500 bucks each and some kind of moratorium on student loans, how about that? That's $7 trillion, a moratorium. How about a sovereign wealth fund to buy companies that get bankrupt by the disease for pennies on the dollar?”

“At this point you need to think outside the box none of the other stuff the tired stuff that doesn't work,” Cramer said.