Cramer: Why China Is Key

Cramer believes China's recovery will be crucial to leading the U.S. economy to a rebound.

Four mistakes even the big names made with investment manager Madoff

Bernard Madoff, a 70-year-old, well-respected money manager, handled the investments of people including Wilpon, filmmaker Steven Spielberg, real estate and media magnate Morton Zuckerman, Bed, Bath & Beyond , co-founder Leonard Feinstein, and major financial institutions such as Britain's HSBC Banco Santander of Spain and France's BNP Paribas

Big names, right? But not too big that they couldn't get swindled: Madoff engaged in a typical Ponzi scheme, letting people think they were getting good returns. All the while, the red flags went unnoticed.

Now, some $50 billion of these investors' money has vanished, and whether the families and institutions that had their money with Madoff will even get it back is hardly clear.

So how could this have happened to these people? If it can happen to them, it can surely happen to you. Here are four big mistakes that people make in handing over their money:

If it's good for him, it must be good for me. Same as saying, "I don't need to ask any tough questions because my buddy over there says it's good." You simply can't assume that someone else has asked all the tough questions of an adviser, nor can you assume that they're asking questions about your personal situation.

Believing good actors. Madoff was apparently a great actor. He always played down his businesses and shrouded his business and "magic formula" in secrecy, creating an aura of exclusivity. The bottom line: Don't assume that what you see is what you get.

Failing to mind the store. I can't blame people for failing to keep their finger on the pulse when they've hired "experts" to manage their money. Especially when the "experts" have "experts" like accountants to ensure the books are clean. Still, it's up to you to look at your investment statements, question them and have the confidence to ask about items you don't understand. And watch out for advisers who can't be reached when the markets go south -- that's a big red flag.

Giving up personal responsibility. Too often, people simply wash their hands of their own finances. This latest scandal -- coupled with the multibillion-dollar bailout of the financial industry -- is just another testament to the fact that consumers must take control. By coming together, at places like WeSeed, America can share what they know, get smarter about the financial products they use and steer clear of scandals.

If there's one thing this fiasco has underscored, it's to take charge, be wary of things you don't understand and, if you are getting other people's help, make sure you understand what's behind it. It also reminds us that "experts" like accountants and even mortgage lenders aren't infallible. Anyone can claim to be a financial adviser, so be careful. Do your homework.

World Financial in the dark ages to come

International finance leaders delivered a grim forecast for 2009 on Sunday, warning next year could be even worse than this one despite a slew of government stimulus plans.

International Monetary Fund chief Dominique Strauss-Kahn predicted a "very dark" 2009 which could be worse than expected if states failed to take sufficient action to fight the crisis, facing economies big and small.

"Our forecasts are already very dark, but they will be even darker if not enough fiscal stimulus is implemented," he told BBC radio in London, predicting recession for advanced economies and decreasing growth for emerging ones.

"I can see that some measures have been announced, but I'm afraid it won't go far enough," he said.

The IMF has called for global fiscal stimulus of about two percent of GDP, equivalent to roughly 1.2 trillion dollars.

The governor of the Bank of Spain was even more pessimistic, warning the world faced a "total" financial meltdown unseen since the Great Depression of the 1930s.

"The lack of confidence is total," Miguel Angel Fernandez Ordonez said in an interview with Spain's El Pais newspaper.

He noted that the inter-bank lending market was not functioning, spawning "vicious" cycles with economic activity among consumers, businesses, investors and banks essentially frozen.

"There is almost total paralysis from which no-one is escaping," he added.

Still, there was fresh movement to stop the meltdown, with a decision by US president-elect Barack Obama to boost by 500,000 jobs a three-million-job creation goal to kickstart the world's biggest and ailing economy.

Vice president-elect Joseph Biden also confirmed the Obama team was working on a second economic stimulus package which could top a trillion dollars according to some media reports.

"What we're doing is putting together what we think will be the economic package that will do two things. One, stem the haemorrhaging of the loss of jobs, and begin to create new jobs," Biden told ABC television's This Week programme.

"At the same time, we provide continuing liquidity for the financial markets."

Biden put no firm figure to the package that would follow the 700-billion-dollar Wall Street rescue deal inked by President George W. Bush in October -- and which has failed to reverse the plummetting US economy.

"There's going to be real significant investment, whether it's 600 billion dollars or more, or 700 billion dollars. The clear notion is, it's a number no-one thought about a year ago," he said.

Japan, too, took another step to jumpstart its moribund economy, drafting a record 88.55-trillion-yen (1.01-trillion-dollar) budget for fiscal year 2009 -- up 6.6 percent from the initial budget for this fiscal year.

The increase reflects an emergency economic package that Prime Minister Taro Aso announced earlier this month in a fresh bid to stave off a prolonged recession in the world's second-largest economy.

In Europe, the Irish government said it was injecting 5.5 billion euros (7.6 billion dollars) to recapitalise three major banks: Anglo Irish Bank, Bank of Ireland and Allied Irish Banks.

The government's move follows revelations last week that Anglo Irish's chairman and former chief executive, Sean FitzPatrick, failed to disclose an 87-million-euro loan from the bank. He resigned on Thursday.

The Luxembourg subsidiary of embattled Icelandic bank Kaupthing got a rescue offer from a group of Arab investors, the Luxembourg government has confirmed.

"Besides the signature of the Belgian state, this agreement needs the acceptance of the creditor banks," the government said in a statement Saturday about the offer.

Kaupthing Luxembourg was placed in suspension of payments in October following the near collapse of Iceland's once-booming financial sector under the weight of the worldwide credit crunch. Deposits in both Luxembourg and Belgium have been frozen ever since.

At least one German banker, however, thinks the doom-and-gloom forecasts are overblown.

"Some compare the situation to that of 1929, others talk about the worst crisis in near memory," said Wolfgang Sprissler, head of the German bank HypoVereinsbank (HVB) in an interview with the Sueddeutsche Zeitung to appear Monday.

"It bothers me that the institutes in their studies try to outdo each other with more pessimistic scenarios," he said, adding that what is needed are signs of "optimism."