How Bernanke's Plan Could Work, Pt. 5

This column was originally published on RealMoney on Aug. 13 at 1:14 p.m. EDT. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

This is the conclusion of Jim Cramer's series of posts on Ben Bernanke's plan for the Federal Reserve during the current credit crunch. Read Part 1, Part 2, Part 3 and Part 4.

At what point will actual business be hurt by all of this?

Maybe it won't. Or maybe it will be hurt for a quarter or two and then Bernanke can cut rates.

Either way, the Wall Street firms that abetted this process will be hurt extremely. I figure one of them will go, maybe two, and they merge. The hedge funds that did these trades will all be wiped out. All of them.

The homebuilding industry, all $35 billion of it, should be wiped out.

But the rest of the economy, including 28 of the 30 companies in the Dow Jones Industrial Average, should not feel a thing if Bernanke is right. Which is why I have been saying that if we are in a 1990 scenario, we only have about 500 to 1,000 points more to go down on the Dow, and I think it will be closer to the former.

I am concerned that things won't be that rosy, that the real economy will be more impacted than that. Bernanke could be right, though.

In fact, I believe that there will be parts of the economy that could be crushed by the collateral damage, particularly retail, which must be avoided until the rate cuts, and autos, which, despite the valiant attempts of American car companies to stem losses, simply won't be able to pull off their turnarounds in an investable way during this period. In short, they will go down. Airline traffic and tourism will take a hit.

Without a global business that's immune to the U.S., you will get hit, even if it is only short-term owing to the Fed's eventually letting go of the jugular when the speculators are crushed, the marginal banks fail and 7 million homeowners have been turned into home squatters.

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