Hot Money and the Politics of Debt

RT Naylor

McGill-Queens University Press (2004)

Book Review

Hot Money is about the trillions of dollars of global financial activity that is never recorded in official economic statistics. Corporate money laundering of illegal narcotics profits is the form of “hot money” that gets the most publicity. However according to Naylor, it accounts for a relatively small proportion of “hot money” percolating through offshore banks and dummy corporations.

Most “hot money” starts out as funds generated via “legitimate” business which rich elites sebd offshore to avoid taxes or in anticipation of economic calamity or regime change. All the world’s most ruthless dictators stashed funds in Swiss banks or similar financial havens prior to being deposed.

A sizeable chunk of hot money is generated from other illegal enterprises, such as gun running, illegal arms deals, prostitution, phony charities and religious groups (eg Reverend Moon’s Unification Church and L Ron Hubbard’s Church of Scientology) and government agencies (eg CIA) who use “hot money” to finance coups and insurgencies.

For me, the high point of Hot Money  is the excellent history Naylor provides of the CIA role in the world heroin and cocaine trade, especially their move to make Afghanistan the major global supplier of heroin.

Nalylor also provides a detailed history about the role of the Vatican Bank as a “hot money” center, the rise and fall of Propaganda Due (P2), a secret collaboration between the CIA, Mafia and right wing Masonic lodges that infiltrated all aspects of Italian public life in the 1970s; the role of Nazi war criminals Klaus Barbie and Josef Mengele in setting up Latin American death squads and cocaine networks; the rise and fall of the two biggest CIA banks, Australia’s Nugan Hand Bank and the Bank of Commerce and Credit International;  and the importance of “hot money” in the Iran Contra scandal, in which the Reagan administration illegally sold weapons to Iran to finance the Contra war against Nicaragua.

The most shocking chapter describes the role of the Nugan Hand Bank in funding a bloodless coup US Naval Intelligence carried out against Australia in 1972 – to remove a prime minister whose political views were inconsistent with US interests. Most Americans are totally unaware of this heinous attack against a close US ally. I’ve only learned of it since moving to New Zealand (Australia is New Zealand’s closest neighbor).