In a startling development, a prominent financial journalist has alleged governmental manipulation of currency markets. In his report, Richard Russell has accused Central Banks around the world of covertly intervening in gold and forex markets, as a form of monetary policy. Russell cites a memo published by an advisor to President Clinton that directed large banks to support the USD in the wake of the collapse of a prominent hedge fund. Russell also purports an agreement between US and Japanese officials to stabilize the Yen-USD exchange rate, which coincided with the two countries becoming allies in the Iraq war. If such allegations are true, investors should beware. CBS Marketwatch reports:

Sprott [a prominent Canadian money manager] doesn’t necessarily oppose government intervention in principle — the apparent interventions after 9/11 or the 1987 crash, for instance — but says such intervention requires “the most stringent safeguards and transparency.”

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