Arnold Kling ably sums up the core issue in a Ken Rogoff piece that has taken the econoblogosphere by storm this morning:
His view is that rising commodity prices are a message that demand is rising too rapidly. In the U.S., inflationary fiscal and monetary policy is to blame. In many developing countries, government subsidies that insulate consumers from rising commodity prices are at fault. As Rogoff sees it, markets will eventuall adjust to tame the commodity boom, but the process could take years. Meantime, an economic slow-down is in order.
This is an interesting point of view. Rogoff, not known as a right-winger, seems to have broken sharply from other Keynesians, notably Robert Shiller.
Think of this disagreement in terms of the textbook aggregate supply metaphor (which I don't care for, but that's another story). On the left-most (horizontal) segment, the economy is in recession, and expansionary policies raise output without adding to inflationary pressure. On the right-most (vertical) segment, the economy is near capacity, and expansionary policies add to inflation without doing much to increase output. Shiller fears that we are on the left-most segment, and Rogoff is arguing that we are closer to the right-most segment.
Another way to put this is that stimulus works when you have a demand shock, but doesn't when you have a supply shock.
In 2001, we had a demand shock. The real productive capacity of the economy had changed very little, but several psychological blows had (at least arguably) reduced aggregate demand. But now we're facing at least one supply shock: scarce oil. We can't stimulate our way out of a real shortage.