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In 1695, Isaac Newton--already renowned as the greatest mind of his age--made a surprising career change. He left quiet Cambridge, where he had lived for thirty years and made his earth-shattering discoveries, and moved to London to take up the post of Warden of His Majesty's Mint. Newton was preceded to the city by a genius of another kind, the budding criminal William Chaloner. Thanks to his preternatural skills as a counterfeiter, Chaloner was rapidly rising in London's highly competitive underworld, at a time when organized law enforcement was all but unknown and money in the modern sense was just coming into being.! Then he crossed paths with the formidable new warden. In the ! courts a nd streets of London--and amid the tremors of a world being transformed by the ideas Newton himself had set in motion--the two played out an epic game of cat and mouse.
A Q&A with Thomas Levenson, Author of Newton and the Counterfeiter
Q: Why did you decide to write Newton and the Counterfeiter?
A: I first encountered the connection at the heart of Newton and the Counterfeiter when I was working on a very different project in the mid '90s. A long out of print book quoted from one of the few letters between my counterfeiter, William Chaloner, and Isaac Newton--and on reading it I wondered: what on earth was such a scoundrel doing in correspondence with the greatest mind of the age? The question stuck with ! me for a decade, and finally I made the time to dig a little deeper. Once I did, I discovered two things that made this book both possible, and from a writer's point of view, inescapable. The first was a trove of original documents that chronicled Newton's involvement in the pursuit and prosecution of not just Chaloner, but dozens of other currency criminals. The second was the insight this one story gives into Newton himself--and of the real extent and impact of the revolutions (plural deliberate) which he so prominently led. Isaac Newton is best remembered, of course, as the man at the vanguard of the scientific revolution--a status established by his discoveries: the laws of motion, gravity, the calculus, and much more. But I found that this story gave me a sense of what it was like to live through that revolution at street level. It provided an example of Newton's mind at work, for one, and for another, it involved Newton in the second of the great 17th century transfo! rmations, the financial revolution that occurred in conjunctio! n, and w ith some connection to the scientific one.
Newton, I found, was a bureaucrat, a man with a job running England's money supply at a time with surprising parallels to our own: new, poorly understood financial engineering to deal with what was a national currency and economic crisis. He was asked to think about money, and he did--and at the same time, he was given the job of Warden of the Mint, which among other duties put him charge of policing those who would fake or undermine the King's coins. So there I had it: a gripping true crime story, with life-and-death stakes and enough information to follow my leading characters through the bad streets and worse jails of London--and one that at the same time let me explore some of critical moves in the making of the world we inhabit through the mind and feelings of perhaps the greatest scientific thinker who ever lived. How could I resist that?
Q: Are there comparisons to be made to the financial times ! we are living in today in this country?
A: When I started writing this book, (c. 2005) the American and the global economy was seemingly in robust health. The American housing market was booming; financial markets the world over were trading happily back and forth, the Dow in June, when I started working in earnest on the project, stood comfortably over 10,000, with a 40% rise to come through the first and second drafts of the work. And then, of course, things changed--and by that time (too late to do my own financial situation any good) I realized that in the story of Newton's confrontation with Chaloner I could see many of the pathologies that define our current predicament. England's currency and its system of high finance--the big loans and big banks behind them needed to fund government--were both under increasing strain when Newton arrived at the Mint.
Part of the damage was being done through imbalances of trade, as silver flowed out of! England to the European continent and ultimately to India and! China. (Sound familiar?) That loss of metal had huge economic consequences when you remember that money itself was made of silver back then. No silver, no coins. No coins--and how are you going to buy a loaf of bread, a pound of beef, a barrel of beer (which was a staple, and not a luxury given the state of London’s drinking (sic) water). At the same time, England was waging a war it could not pay for. (Sound familiar?) The Treasury was broke. Financial engineering got its start in the ever more desperate attempts by the government to raise the money it needed to keep its army in the field against France. Newton and his counterfeiting nemesis William Chaloner both found themselves operating on unfamiliar territory, with paper abstractions standing in for what used to be literally hard cash. This was when bank notes were invented--and Chaloner forged some. This was when the government began to issue what were in essence bonds--and Chaloner forged some of those too. Personal chequ! es were coming in, and--you guessed it--Chaloner passed a couple of duds. Most significantly, the Bank of England invented fractional reserve lending--lending out a multiple of the actual cash reserves it held at any one time. This was the birth of leverage. Put it all together and you have most of the crucial ideas in modern finance appearing at almost the same instant. These are fantastically useful tools; the enormous expansion of wealth, of material comfort, of human well being that we’ve seen over the last three centuries, derives in part from the fact that the English and their trading counterparties were so impressively inventive in those decades. But at the same time, as we know now all too well, each and every one of those financial ideas are capable of abuse. Now add to the usual temptations to financial sin the besetting danger of ignorance, of the sheer unfamiliarity of the new instruments, and you have the makings of an almost inevitable disaster.
! In 2009, we are dealing with that double trouble: deliberate ! frauds c ombining with the larger problem that the complexity and sheer deep strangeness of new financial products allowed a lot of so-called smart money to make big bets they didn’t understand. Exactly the same kinds of pressures were building in Newton's day, and the financial crisis that Newton helped resolve in the 1690s kept spawning sequels, until in the 1720s, Newton himself got caught up in a disaster that in many ways eerily anticipates the one we are living through now. The South Sea Bubble of 1720 was born of a good idea--what we would now call a debt-for-equity swap--but rapidly turned into a fraud and then at the last a Madoff-style Ponzi scheme. What I found most striking is that Newton, who of all men had the mathematical chops to figure out that the South Sea promises couldn't possibly be met, still got sucked in by the promise of outsize returns. Avarice, desire, or perhaps in Newton's case just the agony of the thought that others were getting richer while he was ! not, propelled him into investing in the bubble at its very peak. According to his niece, he lost 20,000 pounds in a matter of months--which in today’s money would be roughly three million pounds, or close to five million dollars. The moral, at least the lesson I took from this personally? No one, not even Newton, and certainly not me, is smart enough to be smarter than one's own emotions. And that grim fact, as much as any specific financial innovation, lies behind our current economic woes, and surely caught that great thinker Isaac Newton in its grip as well.
Q: Tell us about your research.
A: I was fortunate in this project--in fact, I only took on the book--because there was a rich lode of little-known documents that told the story of the clash between Newton and Chaloner. Five large folders survive of Newton's own notes, drafts and memos covering his official duties at the Mint. Examining them, especially drafts of replies to som! e of Chaloner's most audacious attacks on him at Parliamentary! hearing s, it is possible to see across time to Newton's mounting frustration and anger at his antagonist: his handwriting gets worse, more cramped, swift, and in general ticked off as he works through his responses. I was also able to find the handful of documents that can be unequivocally attributed to Chaloner: a couple of pamphlets he had printed to display his expertise in the making and manipulation of coin, and to allege incompetence, or worse at Newton's Mint. To that I added a marvelous, if not entirely reliable, moralizing biography of Chaloner, hastily written and published within days of his execution. That was one of the early examples of what became a staple pulp genre--edifying and titillating accounts of the wicked, in which any admiration for the rascals being chronicled were carefully wrapped up through the appropriate bad ends to which all the subjects of such works were doomed.
But of all the wellsprings of this book, none were more important than the ! file it took me over a year to find. I knew that some of the records Isaac Newton's criminal interrogations survived, because I found reference to them in a couple of the older biographies and other secondary sources. But in the reorganization of British official records that took place in the decades after World War II, the cataloguing systems for Mint files had undergone enough changes that this crucial set of documents had slipped out of sight of the contemporary Newton scholarly community. I managed to track it down to its current location in the Public Records Office, and then I had writer's gold: more than four hundred separate documents, most countersigned by Newton himself, that allowed me to retrace his steps as a criminal investigator informer by informer. Most fortunately--Newton’s nephew-in-law reported that he helped his wife's uncle burn many of his Mint interrogation records. But the entire Chaloner case remained in the one surviving folder, and it made for! fascinating, gripping reading. Once Newton realized how formi! dable an opponent he had in Chaloner, he proved relentless in reconstructing not just particular crimes, but the whole architecture of counterfeiting and coining as it was practiced in London in the 1690s. You get to see, smell, hear how the bad guys worked, in their own words, as elicited by a man who (surprise!) proved to be exceptionally good at extracting the evidence he needed to solve a problem.
(Photo © Joel Benjamin)
The lively and enthralling tale of three notorious counterfeiters offers insights into the makings of the American financial mind.
In Moneymakers, Ben Tarnoff chronicles the lives of three colorful counterfeiters who flourished in early America, shedding fresh light on the country's financial coming of age. The speculative ethos that pervades Wall Street today, Tarnoff suggests, has its origins in the craft of counterfeiters who first took advantage of a turbulent American ! economy.
Few nations have as rich a counterfeiting history as the United States. Since the colonies suffered from a chronic shortage of precious metals, they were the first place in the Western world to use easily forged paper bills. And until the national currency was standardized in the last half of the nineteenth century, the United States had a dizzying variety of banknotes, making early America a counterfeiter's paradise.
In Moneymakers, Tarnoff recounts how three of America's most successful counterfeiters-Owen Sullivan, David Lewis, and Samuel Upham- each cunningly manipulated the political and economic realities of his day, driven by a desire for fortune and fame. Irish immigrant Owen Sullivan (c. 1720-1756) owed his success not just to his hustler's charm and entrepreneurial spirit, but also to the weak law enforcement and craving for currency that marked colonial America. The handsome David Lewis (1788-1820) became an outlaw hero in backwo! ods Pennsylvania, infamous for his audacious jailbreaks and ad! mired as a Robin Hood figure who railed against Eastern financial elites. Shopkeeper Samuel Upham (1819-1885) sold fake Confederate bills to his fellow Philadelphians during the Civil War as "mementos of the rebellion," enraging Southern leaders when Union soldiers flooded their markets with the forgeries.
Through the tales of these three memorable counterfeiters, Moneymakers spins the larger story of America's financial ups and downs during its infancy and adolescence, tracing its evolution from a patchwork of colonies to a powerful nation with a single currency. It was only toward the end of the Civil War that a strengthened federal government created the Secret Service to police counterfeiting, finally bringing the quintessentially American pursuit to an end. But as Tarnoff suggests in this highly original financial history, the legacy of early American counterfeiters lives on in the get-rich-quick culture we see on Wall Street today.
Q: Can you explain the significance of the title Moneymakers?
A: “Moneymaker†was the colonial word for counterfeiter. When Owen Sullivan, the first counterfeiter profiled in my book, gets into a drunken fight with his wife in Boston in 1749, she calls him a “forty-thousand-pound moneymaker.†The neighbors overhear this remark and tell the police, who discover fake bills and printing materials at Sullivan’s house and arrest him. I liked the word “moneymaker†because it’s so literal: of all the ways to acquire money, only “moneymaking†involved actually manufacturing it. A disgruntled silversmith could disappear for a week and return richer than the city’s wealthiest merchant.! Getting rich quick inspired as much awe and envy back then as! it does today. For those riches to be fabricated by hand, and not earned the old-fashioned way, made counterfeiting seem like magic. It’s easy to see why counterfeiters became the outlaw celebrities of their day. They embodied the enduring fantasy of instant wealth. Their fortunes were, in every sense, self-made.
Q: What initially drew you to the topic of counterfeiting?
A: When I started reading about the subject, I became fascinated with the stories of the individual counterfeiters. Very few began as professional criminals. Most started out as craftsmen: silversmiths or engravers, usually. Creating a plate for printing counterfeit bills required tremendous dexterity. The success of an entire operation essentially rested on one pair of hands. So counterfeiters tended to be talented artistsâ€"but they were also aggressively entrepreneurial. They needed to think on several levels: quality of the craftsmanship wasn’t the only factor determining ! the success of a counterfeiting enterprise. There was the sale of the notes themselves, whether to regional distributors or to gangs of “passers.†There was the geographical question of which communities to target. Perhaps most importantly, counterfeiters had to elude law enforcement and, as their notoriety grew, the prospect of lifetime imprisonment or execution. For these reasons they came to understand the political and economic landscape of early America far better than most criminals of the era.
Q: Do you think your book has special relevance today?
A: The financial crisis reminded us how rapidly wealth can evaporate. It reminded us that, despite huge advances in technology, we still live in a very precarious system. What Moneymakers brings into focus is that financial volatility hasn’t been the exception in American history: it’s been the rule. It’s tempting to think of our economic trajectory as one continuous ascent! since the 18th century. But America’s path to prosperity ha! s been a nything but linear: it’s run from boom and bust, through wars and political upheavals, and impoverished people at least as often as it’s enriched them. Men and women two hundred years ago were not substantially different from us. They were just as delusional about the prospect of inexhaustible growth in the 19th century as we were in the early part of the 21stâ€"and just as shocked and angry when those delusions gave way. Of course, many specific circumstances have changed since then. Counterfeiters were once ubiquitous in American life; today, they’ve virtually disappeared. Until the final decades of the 19th century, counterfeiters provided a significant portion of the nation’s money supply, feeding America’s addiction to paper credit with fresh infusions of fake currency. These days, counterfeit bills account for a negligible portion of the total in circulation. But though physical counterfeiting has declined, the spirit of counterfeiting endures. Counterfeite! rs’ core insight was that confidence creates value. If a paper rectangle carried the right marks in the right places, and the person holding it appeared trustworthy, then it became valuable. Much of today’s financial trickery proceeds from the same principle.
Q: What surprised you most while researching and writing?
A: There was a lot that surprised me. Maybe the most surprising single fact was how many different private paper currencies circulated in the United States before the Civil War. I’d thought we’d always had a single federal currency, but it wasn’t until the 1860s that it became politically possible for Congress to phase out the bills of some sixteen hundred state banks and replace them with national notes. More surprising than this, however, was how long the American people enduredâ€"and in many cases, endorsedâ€"a system with so many evident flaws. From the Revolution until the Civil War, they dealt with hundreds, and e! ventually thousands, of different banknotes, each fluctuating ! in value . They were victimized by predatory lenders, speculators, and a banking sector that swung from prosperity to panic, with devastating effects. The federal government could’ve stepped in to simplify and stabilize this state of affairs. But the American people generally resisted the idea of a federal government powerful enough to make meaningful interventions in the economy and the currency, even if it would be to their benefit. The resistance to federal power was rooted in a particular interpretation of the Constitution and a long legacy of limited government. It led people to act against their economic self-interest, en masse and for long periods of time. Outdated notions of proper governance proved remarkably persistent, even when modern circumstances demanded something very different.
Q: Your book focuses on three counterfeiters. What made you decide on these people in particular?
A: With this subject there’s no shortage of colorful char! acters and engaging anecdotes. But I wanted to focus on people who, in some way, illustrated the story of America’s financial evolution. These three men stood out because they intersected with the broader currents of their respective eras in exceptionally interesting ways. They were each active at moments of major change in the American monetary landscape. For example, Owen Sullivan launched his counterfeiting career in 1749, the same year that the Massachusetts legislature passed a highly controversial bill phasing out the colony’s paper currency within the next two years. Decades later, David Lewis picked a similarly momentous time: just as the rapid proliferation of note-issuing banks flooded the early United States with new bills, with obvious benefits for counterfeiters. Samuel Upham took advantage of the unique circumstances brought about by the Civil War. He forged Confederate money with impunity from the safety of Philadelphia, peddling his fakes openly to soldi! ers and smugglers headed South. Sullivan, Lewis, and Upham gav! e me a w ay to connect the story of American counterfeiting with the story of America as a whole.
Q: What did you learn about America through writing this book? What did you learn about Americans?
A: When you write history, you begin to see a lot of common ground between the past and the present. Almost every day, I would encounter a fact or a story that called to mind current events. America may look a lot different in 2010 than it did in 1690-1865, which is roughly the period covered by my book. But there are certain resonances. One theme that seems to have persisted, despite the major realignments of the last century, is the notion of getting “something for nothing.†America’s first settlers thought of this country as a blank: “vacuum domicilium,†in John Winthrop’s words, or vacant land. This was a fantasy, of course: the land wasn’t vacant, and clearing it involved a centuries-long struggle. But the idea of forging value in a void ! remained a powerful one.
Paper money belongs to this tradition. It makes something out of nothing by investing an otherwise worthless material with monetary value typically reserved for gold or silver. In fact, the American colonies were the first governments in the Western world to print paper currency. The notes first appeared in 1690 in response to the severe shortage of precious metals that plagued colonial life. Faced with a scarcity of coin, colonial America needed a way to fund wars and collect taxes and conduct trade: more broadly, it needed a way to convert the ambitions of its inhabitants into real economic growth. Paper currency met that need. It provided a country with few natural resources and little political or economic leverage the fuel to colonize an entire continent. Our economy ran on paper promises that, in many cases, couldn’t be keptâ€"yet our collective faith in these promises helped produce real things, like canals and railroads. By ! postponing the present in anticipation of the future, paper pr! omises h elped America grow.
Q: Did you develop a new appreciation or understanding of the American economy through writing this book?
A: Our economy has grown so much in scale and sophistication that it’s hard to draw exact parallels. But there are certain patterns that feel very familiar. In the book I write a lot about confidence. It sustains the economy by underpinning the value of our currency; it also enriched counterfeiters over the centuries, who grew very adept at cultivating it. In the period covered by the book, Americans tended to have a confidence problem: they either had too much of it, taking risks as everything surged, or too little, fleeing the market as everything crumbled. As long as everyone believed something had valueâ€"whether a piece of colonial money or a stock certificateâ€"it did. But when that faith faltered, mistrust spread throughout the system, triggering a panic. The essential features of our most recent crisis would be! familiar to people living through the Panics of 1819 or 1837 or any of the several subsequent disruptions in the following decades. The issue of how crises are created is very contentious, and I’ve tried to be careful about not drawing unfair comparisons. Without diminishing the complexity of the debate, though, there are fascinating convergences between past and present when it comes to America’s turbulent finances.
Q: What do you hope readers take away?
A: I think the most exciting thing about history is that it’s filled with real people. They felt pain when they lost their life savings in financial panics. They argued bitterly about the role of government in the economy, just as bitterly as we do today. The more time I spend reading about the past, the more I’m reminded of people I know today. The correspondences aren’t perfect, but enough of them exist to suggest human that nature hasn’t changed much in the last three cen! turies. If there’s a larger lesson to the book, that might b! e it. < /p>
