Are the interventions any effective?

Following a serie of government stimulating packages currently taking place around the world, ranging from the US $825bn following the $700bn package announced earlier, the UK 250bn GBP following the 500bn GBP package announced in October, the German $80bn package, all aiming for tax cuts, loan insurance and buying up shares in the loss-making giant banks. All these efforts, as we all know, aim to cure the effects of credit crunch, which starts from November 2007, results from the mortgage delinquency, foreclosure of assets, the house value deterioration, both US and UK housing market, and later on, the collapse of Equity markets.
The stimulus packages were initially released in the US, then is followed in a large number of countries, but the question is, are they really having the impact the governments want to? Are they targeting the root of problems? Are the governments using the tax payer's money efficiently? Several articles have shown different analysis, which I will be mentioning here, along with my own view. My entry will focus on the UK stimulus package.
Opposition MPs argued that the government's measures were inadequate and too many details remained unknown. While Mr Brown is still throwing massive amount of tax-payer's money to the market, the outcome remains uncertain, as all we can see are the steady fall of house prices, dating from very far last year, low oil price, low sales across all the retailers. Christmas 2008 experienced London's worst Christmas sale in history, the bankruptcy of one of the top retailers, Woolworths, and the CPI in December drops a full percentage point to 3.1%, facing the threat of deflation, has all signalled that demand is very low and is still decreasing.
Meanwhile, unemployment has begun to rise. Last quarter of 2008 showed a 6.0% level of unemployment, up 0.4% from last quarter and 0.7% from last year's quarter. This is understandable, as low demand causes firms to respond, with lower production demand, to cut cost and production scale by reducing the number of employees.
Low demand, high unemployment bring low economic growth. The government's attempt is to boost production by encouraging lendings via banks, therefore, hopefully, increase employment and bring the economy back to the boom. However, there is a big issue here.
High unemployment is caused by low demand, and is also the cause of low demand. With no income to spend, the consumption demand is low, therefore it is hard for firms to expand productions, even with the low interest rate and all the insurance potential bad loans, as the low demand simply means there are little hope in making profit. Firms are therefore reluctant to borrow, even if the banks are offering loans at an incredible rate. In this economic situation, even the firms who invest very riskily, and normally would not borrow will borrow, as the cost of borrowing is too low. This raises the possibility of losses when operating businesses, but even not succeeding, both the firms and the banks face no losses, as the money lent out was insured by the government's huge bail-out budget. This feels like free money, and of course, creates moral hazard, a temptation for banks to just lend without having too much thinking. To prevent this, banks have to make "very specific legally binding agreements to lend more money", quoted Chancellor Alistar Darling, but they are actually causing more troubles to lend, therefore there is a threat to the loan activities from the banks. The close-to-nationalisation of giant banks, most significantly RBS the forthcoming nearly 70% government stake after the 5bn GBP preference share converted to standard share, will result in the banks operating at smaller scale and be more cautious with the tax-payer's money. The most recent result is the RBS's withdrawal of 1.6bn GBP in share from Bank of China, as the tax payers don't want their money invested offshore, even though the Emerging market such as China still perform steady growth within this economic turmoil.
So targeting banks might not be as efficient as the government think it might be. The problem lies with low demand, not the lack of lending activity. It is the tightness of credit that causes the economy to fall, and low demand is the cause of the credit tightness, also the root of all the troubles. The government in an attempt to boost the economy, must definitely boost demand, and the best way is, I think, via tackling unemployment.
In the UK, high unemployment is being tackled, though it is not as in high priority as the insurance on bank lending. The whole stimulating package includes the tax cut and the promise of 2500GBP for every more-than-six-months unemployed person joining the company. However, the tax cut does not apply for everyone before April 2009, especially those on flat rate scheme, and for some, tax cut doesn't apply. The joining of the more-than-six-months unemployed will require trainings before they can get to work, and this might be the reason why unemployment is still high. I think that the government needs to put unemployment a higher priority tarket to tackle the economic downturn, rather than tackling the banks, which are proving to be an unefficient tactic, after the massive bail-out and stimulating funds from the government still results in the 45bn GBP loss of RBS and the repayment of loan to the government from Northern Rock having to extend.