On September 12, 1857, 156 years ago today, an early paddle steamer called the S.S. Central America sank in a hurricane about 230 miles east of the coast of South Carolina. This disaster was unbelievably harrowing for the ship’s passengers and crew, who fought an epic two-day battle against rising water, gale-force winds and the pounding ocean after a leak sprang in the paddle wheel seals and the boiler went out. At the end of this fierce and ultimately unsuccessful battle, the Central America sank by the stern in about 8,000 feet of water, taking 425 people to the bottom with her. 153 were saved. It was one of the worst maritime disasters of the 19th century.
The ripple effect of the Central America sinking went far beyond the loss of the ship and its crew, however. The ship, which plied the waters between New York City and Panama, was carrying $1.6 million in gold–coins, ingots and other forms–mined from the California gold fields, during the largest gold rush in American history which began in 1849. I know $1.6 million doesn’t sound like a lot, but that’s about $400 million worth of gold in 2012 dollars. The 30,000 pounds of gold aboard the Central America was equal to about 20% of the gold held in New York banks at the time. This was an era when the currency system was not regulated by the federal government, and thus was subject to highly dangerous fluctuations, speculation, runs, and other financial hazards.
William Lewis Herndon (1813-1857) was the captain of the Central America, and he went down with the ship. His daughter ended up marrying Chester Arthur, later (1881-85) President of the United States, although she was dead by the time he entered office.
The problem with the Central America‘s gold winding up on the bottom of the Atlantic Ocean was that, a month before she sailed from Panama, the U.S. economy collapsed, triggered by the failure of a single company, the Ohio Life Insurance and Trust Company. The economy was already dangerously unstable due to over-speculation, a decline in imports and grain prices, and political uncertainty surrounding the issues that would eventually cause the Civil War. Failures of financial institutions in the 19th century usually triggered runs on banks–and remember, there was no Federal Reserve or FDIC in the 1850s to stop the bleeding and prevent bank closures from wiping out the rest of the economy. If the Central America’s gold had made it to New York, the gold supply might have been enough to withstand the inevitable bank runs, or might at least have made them less severe. But thanks to the hurricane–an environmental disaster–the financial disaster that became the Panic of 1857 ran unchecked.
In a country as divided over the issue of slavery as the United States was in 1857, the financial depression only made things worse. The North, where most of the banking and industry was located, went into an economic tailspin, where the South, dependent on agricultural exports (mainly cotton), withstood the storm. This told Southern political leaders that slavery was a sounder economic basis than manufacturing and finance, and also told them that, economically, the South did not need the North. These erroneous lessons surely played into the Southern states’ decisions for secession in 1860-61, after the political crisis came to a head with the election of Abraham Lincoln.
As for the Central America herself, the wreck of the ship was discovered in September 1987 and the cargo of gold partially salvaged. What the salvors managed to bring up was worth $100 to $150 million–easily the most lucrative treasure ship recovery of modern times. The ship herself remains on the ocean floor, presumably with the rest of the gold–and probably many other secrets of history–still hidden in her wrecked hull.