Stocks tanked on Thursday because people are finally realizing that the Federal Reserve has the power to hurt stocks and slow the economy, CNBC's Jim Cramer said after the Dow Jones Industrial Average fell more than 300 points.

"This is one of those moments where it's dawning on people that maybe all the assurances that we don't need to be afraid of the Fed are being proven to be totally bogus," the "Mad Money" host said.

Behind those assurances are two "lousy" theories, Cramer said: the idea that more rate hikes are necessary because the U.S. economy is close to full employment, and the idea that the rate hikes won't hurt the market because they're already "baked in."

Doubling down on his earlier comments, Cramer argued that full employment "is a great thing as long as inflation's not out of control, and right now the statistics indicate it's not, so what's the big deal?"

If hourly wages were skyrocketing, Cramer said he would understand the need to raise interest rates four more times, as the Fed has said it plans to do. But with millions of workers at risk of losing their jobs from bankruptcies — see Sears' recent turmoil — or new technological applications that make certain jobs redundant, he didn't see the incentive.

"There's no cause for the Fed to tighten four more times. None," Cramer said. "This is what all this turmoil's about in the market. They're taking preemptive action because they're afraid of potential inflation. I think that's a mistake. The labor market's taken a decade to recover from the financial crisis. Why not give it some more time?"

The "Mad Money" host understood Fed Chair Jerome Powell's concerns about the economy. Between the Trump administration's immigration crackdown and a strong job market, some small businesses are seeing their labor costs surge.

"If you run a restaurant in a place like New York, it's crushing your margins," Cramer, who owns a small restaurant in Brooklyn, explained.

"Is that a real reason to cause a slowdown, though?" he asked. "Does the Fed exist to protect the bourgeoisie from the scourge of paying people a decent living? Sorry, something about Jerome Powell wakes up my long-dormant inner Marxist."

And with regional bank and homebuilding stocks only just starting to unravel as loan growth slows and the cost to build creeps up, Cramer had a hard time believing the theory that the rate hikes were already priced into the broader market.

"Stop kidding yourself if you think all the bad news is baked in. You don't get these kinds of declines if it is — and I'm not even including the Italian budget crisis, which I'm sure the bears will call out tomorrow," he said. "And you've got to accept that we could be buying a stock of the Fed's next victim if we're not careful. That's a frightening place to be, and until people accept that fear, the market will not find its long-term footing."