Hot Money and the Politics of Debt. 2nd ed.


532 pages
Contains Bibliography, Index
ISBN 1-895431-94-8
DDC 364.1'68






Reviewed by Jane M. Wilson

Jane M. Wilson is a Toronto-based chartered financial analyst in the
investment business.


The world balance of payments does not balance. This is the story of
statistical errors and omissions, i.e., the billions of stateless
dollars controlled by money-laundering drug traffickers, the Vatican,
the CIA and its counterparts, tax evaders, political and religious
cults, and deposed rulers, often in unholy alliances. This “hot
money” roams the world unseen, surreptitiously shaping the political
and economic history of many countries.

Naylor’s sardonic and fascinating exposé of financial black markets
culminates in the international debt crisis of the mid-1980s that
threatened the entire banking system. In Naylor’s view, this financial
cataclysm was largely the result of capital flight, the scale of which
“make[s] nonsense of conventional financial statistics, and the
economic policy prescriptions based on them.” The malversation of
foreign aid in developing countries is so prevalent that he advises
agencies to deposit their largesse directly into Swiss banks. Naylor
considers the banks’ subsequent losses on sovereign loans to be
well-deserved retribution for their immoral role in helping such
“absconding autocrats” as Ferdinand Marcos to loot their countries.
The banks’ complicity in capital flight is made credible, though their
subsequent relending of these funds to the bankrupted countries suggests
stupidity, rather than improbity. Naylor also blames U.S. monetary
policy, particularly the “crank lessons” of the University of
Chicago, for kindling the debt crisis.

Economists, international bankers, and diplomats may frown on the
author’s treatment of the incendiary question of the legitimacy of
developing countries’ debts and his creative and somewhat sarcastic
recommendations. Nonetheless, Naylor’s analysis of covert finance is
the financial equivalent of the cosmological big bang theory, calculated
to shake their assumptions.

To this second edition of Hot Money, containing the text of the 1987
edition, Naylor adds an introduction by Leonard Silk, a scrutiny of the
Iran-Contras affair and the BCCI debacle, and commentary on today’s
preoccupation with financial engineering and speculation.


Naylor, R.T., “Hot Money and the Politics of Debt. 2nd ed.,” Canadian Book Review Annual Online, accessed March 29, 2023,