The biggest news of the day or perhaps yesterday, was that the CFTC will begin taking a closer look at the commodity exchanges to see if there have been any improprieties behind the massive increases in the price of oil and until more recently many other commodities.

For once, I think our regulators may be doing the right thing.  Invariably, the pattern of bubbles is always the same.   Whenever there is a parabolic increase in the price of anything — technology stocks, housing stocks, mortgage brokers, commodities(?) —  it is nearly universally the case that criminal activities or civil improprieties are later discovered.  Excess profits almost invariably attract unscrupulous characters.  

While I have no idea if there is anything improper going on in the derivatives markets, I do know that at the very least they are still relatively new products and like packaged mortgage loans, capable of blowing up in ways that we can not foresee.  

Where there is smoke — in this case huge profits — there is often fire.  We’ve learned this in every recent bubble.  And so, from this perspective, while we don’t know if the rise in commodities has involved criminal improprieties, now would be the time to take a closer look.  

Innocent until proven guilty?  Always.  But it is also better to be safe than sorry, to be proactive than reactive..  We don’t need more rules, we just need to make sure what we’ve got on the books already is being enforced.