July 23 (Bloomberg) -- On March 22, 1699, the forger William Chaloner was dragged to the execution grounds at Tyburn, London, and hanged in front of a cheerful crowd, while his nemesis puttered away in his offices at the Mint.

That would be Isaac Newton, the famed inventor of calculus, apple dropper and author of the “Principia,” once a hot seller.

A terrific new book, “Newton and the Counterfeiter,” describes the scientist’s little-known later years when, luckless in love and alchemy, he left Cambridge for London to become warden of the Royal Mint. Forgers, chiselers and melters had seriously undermined Britain’s money supply. To deal with the shortfall, King William had ordered up the Great Recoinage, which wasn’t going so well when Newton arrived to take up his post.

How the Cambridge don laid the groundwork for modern banking makes for a riveting story told with verve and humor by Thomas Levenson, a professor at Massachusetts Institute of Technology in Cambridge, Massachusetts.

We spoke on the phone.

Hoelterhoff: All those years hoping to turn lead into gold must have been pretty good preparation?

Levenson: Newton’s alchemical work was a perfect preparation for a post that demanded an understanding of the processes of working metal. He had built his own furnaces, melted down plenty of substances, weighed, combined, assayed -- all the skills one could hope for in a mint official.

Silver Coins

He was also one of the most rigorous observers of his day. If you wanted someone who could watch the flow of precious metal from the melting houses to the final coin presses, Newton was your man -- and in fact his accounts at the end of the Great Recoinage demonstrate that he managed the passage of millions of pounds worth of silver through the mint with scrupulous honesty.

Hoelterhoff: What did the Great Recoinage entail?

Levenson: Recalling the old coins and re-minting them into new currency. Newton took up his post just as the first crucial milestone in the recoinage was about to pass. That was the moment when the Treasury would cease to accept the old coinage as legal tender for the payment of taxes.

By that time, the recoinage effort was in a shambles, with almost none of the new silver coins needed to keep daily business going yet produced.

Money Supply

Before he arrived, the Mint failed to meet even the modest goal of producing 15,000 pounds sterling worth of currency a week -- a drop in the bucket against a total silver money supply of several million (roughly seven by most counts).

By late summer, after Newton had been on the job for about four months, the Mint hit a then-European record of 100,000 pounds sterling minted in a six-day week. Not too shabby.

Hoelterhoff: What was the urgency?

Levenson: As the shortage of ready money persisted, minor riots broke out, and such sober men as John Evelyn, a founder of the Royal Society and one of that era’s great diarists, worried seriously about the possibility of a more general insurrection.

Hoelterhoff: Why had silver disappeared?

Levenson: For the fundamental reason that any mispriced commodity disappears. The amount of silver that was legally required to be in say, a shilling, was worth slightly more melted down: three or four percent more -- despite the fact that it was against the law.

Hoelterhoff: That was enough to ship coins to where? Amsterdam?

Levenson: Which was a big banking center.

Drawn and Quartered

Hoelterhoff: Then there were clippers who shaved coins for their silver or what? Turned them into fake gold coins?

Levenson: Some counterfeiters would use silver as a gilding material or to coat a base metal.

Hoelterhoff: Chaloner comes off as a dashing, reckless talent who hopes to the end his facility and connection will save him. Considering the horrific punishment for counterfeiters -- you were lucky if you just got hung and not also quartered -- I’m amazed how many people chose this line of work.

Levenson: One of the funny things is that because the penalties were so severe, they were less likely to be imposed. And you might get a reprieve for offering information.

At this time, there was a huge criminal world running in parallel to the respectable world and it was sometimes quite porous.

And London was a hard place to be poor, a horrible town to be poor in. If you had any talent, you tried in any possible way to better yourself, and Chaloner was smart and capable.

Hoelterhoff: How many counterfeiters did Newton catch? Any sign that he ever regretted sending his nemesis to his death?

Loses Millions

Levenson: Maybe a couple of dozen were sent to the gibbet. There’s no record he had any feelings about Chaloner, though his handwriting becomes increasingly cramped and angry in some of the notes he took for the case.

Hoelterhoff: How much fake money did Chaloner make?

Levenson: In prison, Chaloner boasted of having counterfeited about 30,000 pounds of false guineas and other denominations. That’s between four or five million pounds, or around $7 million in today’s currency.

Hoelterhoff: Newton ends up getting a promotion from warden to Master of the Mint, which made him rich. Then, in 1720 he lost millions in today’s currency in the infamous South Sea Bubble. It seems incredible that his brain didn’t tell him the returns were nuts.

Levenson: I try not to preach, but it is one of the arguments for intelligent and robust regulations when even someone as brilliant as Isaac Newton is taken.

He hated being reminded of any mistake. The only reference that people have found to his South Sea losses is in the comment: “I can calculate the orbit of a comet, but I cannot calculate the madness of the people.”

He was swept up in the mania of the moment.

“Newton and the Counterfeiter: The Unknown Detective Career of the World’s Greatest Scientist” is published by Houghton Mifflin Harcourt (318 pages, $25). Levenson has also written the similarly engaging “Einstein in Berlin.”

(Manuela Hoelterhoff is executive editor of Muse, Bloomberg’s leisure and arts section. Opinions expressed are her own. This interview was adapted from a longer conversation.)

To contact the writer on the story: Manuela Hoelterhoff in New York at mhoelterhoff@bloomberg.net.

Last Updated: July 23, 2009 00:01 EDT