Newton and the Counterfeiter (24 page)

It is important to remember, however, that while many of his biographers have drawn portraits of a swarm of different Newtons—the magician, the mathematician, the experimental genius, the young Newton as a cloistered professor, the older man in charge of the Royal Society, conducting the running war with intellectual enemies on the Continent—the real Isaac Newton was one man living one life, whose parts as he lived them were thoroughly conformable to the whole. Within each role, every job he did, each problem he set himself, that one Newton remained—and the constant theme of that singular life was his hunger for contact with the Godhead.

That same man understood the disquieting fact that the new science, in the wrong hands, had the potential not to prepare men for "beliefe in the Deity," but to undermine their faith. Into that knowledge enter Chaloner, whose every action reeks of a kind of practical atheism: what need for God to act in the world when a smooth enough operator can produce passable imitations of His works?

Whatever its precise root, the fact is that following Chaloner's release in February, Newton's anger was never more intense. From that moment, the Warden of the Mint pursued single-mindedly and relentlessly the man who had managed to offend him in every conceivable way.

F
OR ALL OF
Newton's secret rage, William Chaloner had more pressing problems—or he thought he did—in the spring of 1698. He remained very poor—perhaps the one wholly true statement in his last petition to Parliament. It had been more than a year since any of his schemes had produced a real return. The gang he had assembled the previous summer had been broken up, its members jailed or fled. His parliamentary allies had failed him; whatever else had happened, he recognized that the faction supporting the existing administration of the Mint—Newton—had prevailed over those who had backed him as part of their campaign to return to power.

Compounding his difficulties, even counterfeiters need money to make money, and Chaloner had no capital left. In June he set out to lever himself out of his predicament, starting by making a few crude shillings—enough, perhaps, to fund more ambitious plans. The whole mean affair revealed just how far Chaloner had tumbled down the criminal ladder. The Knightsbridge house was long gone, and he now lived in a rented room over the Golden Lyon on Great Wild Street, near Covent Garden. No longer able to keep physical distance between himself and his coining operation, he did what he could over the fire in his own grate. A witness reported that he watched Chaloner "bring out of his Clossett 2 pieces of white earth like Tobacco pipe Clay of the consistence of Dough or paste." Chaloner had stuck a shilling coin between the two pieces of raw clay, and "pulling them asunder he took out the Shilling and laid the pieces of earth to dry by a fire and ... at last upon the fire to dry and bake them throughly and after they were could [cold] they rung like burnt earthen ware."

This was almost literally child's play, the kind of slipshod work that routinely doomed amateurs making their first attempts. Chaloner knew better, of course, but he simply could not afford the fine craftsmanship that he had previously used to keep himself out of trouble. Instead, he persuaded his old partner Thomas Carter to give him three shillings, and then "meltd them down with some pewter and Spelter in an Iron Ladle and cast abot. ½ a Score Shillings in the earthen mould." It was a tedious exercise: "he cast but one at a time and as often as he cast a bad one he threw it back into the Iron Ladle." This was no way to get rich.

Even at this low ebb, Chaloner did not try to pass his crude fakes himself. But Carter would not take them either, "being afraid to have them abot. him." The next day, Chaloner tried them out on a metal dealer, John Abbot, who had not been above selling Chaloner silver and gold in better days, but the new fakes did not pass muster with him either, because "they were so light." A week went by, and Carter finally agreed to see what he could do. He sent his maid, Mary Ball, to pick up half a dozen samples. Chaloner handed them over, telling Ball that if Carter "did not like them he would do some better." Then, as quickly as he could, he turned to a new and much more profitable opportunity.

This time it was King William's seemingly endless war that gave him his opening. The cost of the war, combined with the shortfall in tax takings created by the coinage mess, had forced the government to experiment with almost any gimmick that anyone could invent to raise funds. With sixty thousand or so soldiers tramping through Flanders, neither the Bank of England's notes and checks nor the early form of government debt called Exchequer bills raised sufficient funds. To fill the gap, clever men cast about for ever more exotic financial ideas. Of them all, perhaps none was as strange as the Malt Lottery scheme.

The Malt Lottery was actually the sequel to an earlier attempt to play on the English love of a flutter, a scheme put together three years earlier by someone who understood the get-rich-quick impulse all too well: the Master of the Mint, Thomas Neale. In 1694, Neale's "Million Adventure" had offered 100,000 tickets priced at ten pounds, each with a twenty-to-one shot at prizes that ranged from ten to one thousand pounds. Even better, each ticket carried with it a sweet interest payment: one pound a year through 1710, for a guaranteed minimum return on the "Adventure" of sixteen pounds.

Neale did well for himself on the deal. He kept ten percent of the proceeds, a fairly modest cut by the standards of the day. (Promoters of a similar lottery in Venice skimmed one-third of the receipts off the top.) He knew his customers too. He kept the price of tickets low to attract "many Thousands who only have small sums and cannot now bring them into the Publick, to engage themselves in this Fund." In fact, while at ten pounds apiece whole tickets were still too pricey for most, they were just cheap enough for speculators to buy and syndicate, selling shares in tickets to the kind of democratized financial customer Neale had in mind.

It all worked, for a while. The Adventure sold out to a much wider range of people than had ever before voluntarily lent their money to the state—tens of thousands of individual investors, according to some estimates. The diarist Narcissus Luttrell recorded that a stonecutter named Mr. Gibbs and his three partners took home one of the five-hundred-pound prizes, and a Mr. Proctor and a Mr. Skinner, a stationer and a hosier,
respectively, won another. These were hardly the usual sort of people involved in high finance, but here they were, new men and women seeking, and occasionally finding, wealth in these strange new forms of money. The Adventure pushed further into unknown territory after the prizes were distributed shortly after the initial sale of the tickets, with the emergence of an informal bond market. Traders who had waited until the lottery prizes had been distributed bought tickets below par—paying as little as seven pounds, or seventy percent of face value—to secure the best possible return on their capital.

It all ended in tears, though. The government had got its sums wrong. The Adventure tickets carried an impressive rate of return, over and above the prizes paid out to the lottery winners. Unsurprisingly, the cash-poor Treasury had trouble meeting its payments. The first signs of a shortfall came as early as 1695, less than a year into the putative sixteen-year life of the ticket-bonds, and by 1697, the fund that was supposed to pay off the notes was running almost a quarter of a million pounds behind its obligations. Angry ticket holders petitioned Parliament, demanding that the government defend the "Credit and Honour of the Nation," but there simply was not enough money on hand to resume payments until peace finally came in 1698.

Before that, as the war ground on, King William's army needed yet more money. It made sense—at least to Neale—to try another lottery. To deal with any lingering unpleasantness over the default on the Million Adventure, Neale tied this new lottery to the excise tax on malt (in effect, a tax on beer). The Malt Lottery opened for business on April 14, 1697. The Treasury issued 140,000 tickets, with a face value of ten pounds each, to be sold to the public. Those tickets, which were supposed to bring in 1.4 million pounds, were chimeras: part bond, part bet, part paper money. The lottery promised cash prizes and an ongoing stream of interest, just like the earlier venture, but the new tickets were not merely bonds, to be bought and sold like any other investment. They were actual bills of exchange, cash, legal tender from the moment they hit the London streets.

At least that's how it was supposed to work. Neale apparently believed that the thrill of the game, combined with the fact that these new tickets could pass for cash, would overcome the public's lack of faith in their ever more indebted government. The Chancellor of the Exchequer, Newton's old patron Montague, had his doubts, complaining that "nobody does or will understand the Lottery Tickets and the Merchants will not meddle with them." Montague was right. No one trusted the strange new paper, and in the end, just 1,763 tickets found their way into the hands of the public.

Nonetheless, the government desperately needed the money the lottery was meant to raise. So the Treasury simply treated the remaining 138,237 tickets as ten-pound notes—cash held by the government, to be paid out to anyone who could be forced to accept them. Astonishingly, it worked—sort of. In accounts for 1698, the Royal Navy reported that it held almost forty-five thousand pounds' worth of Malt Lottery tickets to cover the pay due to sailors and marines—exactly the kind of captive creditors who did not have a lot of choice in the matter.

So it happened that, without admitting it, the Treasury invented a parallel English currency to the bits of metal still passing from hand to hand. This new paper was not the equivalent of true fiat currency. The fact that the issue was tied to a specific asset, the revenue stream from the tax on malt, gave it a hybrid character as both cash and secured debt. But if it was not quite the same as modern paper notes, it was still radically unlike anything Englishmen had ever known as money.

That was as far as it went for the time being; lotteries did not play a significant role in government finance in the years after the failure of the Malt issue. But it had become obvious not just to the King's bankers, but to almost everyone—stonecutters,
maids, hosiers—that the nation's financial system had not kept up with what was actually happening in England's economy. Chaloner grasped much more quickly than most that hard cash—the material reality of silver and gold—was no longer the only, or even the most important, form that money could take.

Among the great mass of men and women outside the learned societies, the scientific revolution was making inroads on understanding as the world of money came fully into being. Paper money, exchangeable promises, bonds, and loans are all abstractions. To understand them, to accept them—even to suborn them—took a capacity for the kind of mathematical reasoning that was just beginning to infiltrate all kinds of new ideas, including that demanded by the new physics. Figuring out the present value of a bond, for example, or how to price the risk (likelihood) of government default, demanded and demands a quantitative, mathematical turn of mind—just as calculating the orbit of a comet did and does. William Chaloner was hardly a scientific revolutionary. But he recognized that a revolution was happening around him, and he had wit enough to seize the opportunities such radical changes in thought and practice created.

Chaloner spent the month of June, 1698, trying to work out how to profit from the Malt Lottery without putting himself in too much danger. To get back into competition with the government he needed some tools: a properly engraved plate, the right ink, and the correct paper—much less than it took to set up a profitable criminal mint. But the blunt, brute fact of his poverty held Chaloner in a vise. Even the modest amount required to set up a print shop was beyond him. He needed help, but he had been as profligate of friends as he had of money. His most trusted partner, Thomas Holloway, was long gone, pushed into Scottish exile. And now there were only a few men left who had worked with him in the fat days of the early 1690s. Ultimately he chose to open his mind to one of them, his occasional collaborator and the reluctant receiver of his bad shillings, Thomas Carter.

Carter told Chaloner that he knew someone with money who was willing to fund counterfeiting schemes. Chaloner was skittish. He knew—none better—how easy it was to make a good living betraying one's co-conspirators. But he had no real alternative, and so he told Carter that he could make contact as long as he kept Chaloner's name out of the proposition.

Near the end of June, Carter met his man, David Davis, promenading on Piccadilly. They talked—apparently out in the open, on the street—for some time. At last Carter stated his business. Davis said Carter told him "he was acquainted with a man which wuld engrave very dexterously," and that his friend had "a Strong inclination to grave a Plate for Malt Tickets." All he needed was a bit of backing, Carter promised, and he and his friends would be rich men.

Carter did his best by Chaloner, warning Davis that he "must ask noe questions," but Davis pressed him harder, saying "no person yt I ever heard off did understand taking the reverse of a fine bill upon Copper besides Chaloner." Carter replied that "if you knew who my friend was you would allow him as great a Mastter as Chalon(er)"—which was, after all, no lie. Finally they agreed: Davis would give Carter money and sample Malt tickets to guide his mystery engraver. In return, Carter promised Davis daily updates until the plate was finished.

It took Chaloner several weeks to complete the fine work, engraving an exact copy of each side of a ticket onto a sheet of copper plates purchased with Davis's seed cash. Carter kept his end of the bargain, providing "an accot. of the every day's proceedings until the plate was finisht." He did make one mistake, however: at some point he allowed Davis to discover the identity of the third man in the scheme. As Davis later boasted, "All this time I had sufficient assurances that Chaloner was the person which engraved the plate."