THE PANIC OF 1857

The Panic of 1857Today, we are bombarded by ads seeking to buy gold. The demand for gold has risen by a combination of the high-value of gold, $1,600 per ounce and rising, and the volatility of the Stock Market. From there, other causes such as corporate downsizing and unemployment kick in. Rarely, does one single event kick off a financial depression. One exception to this is the sinking of the ship S. S. Central America in 1857.On September 11, 1857 the ship S. S. Central America left port from Panama heading to New York City. On the second day of a hurricane the ship sprang a leak at 9 a.m. Passengers were ordered to assist the crew in bailing. The ship sank at about 8 p.m. on Saturday, September 12, about 160 miles east of Cape Hatteras, South Carolina, drowning a total of 426 passengers and crew, including Captain William Lewis Herndon.
Although the loss of the ship, passengers, and crew was a major catastrophe, it was the cargo that that had a larger rippling effect. The precious cargo included approximately 5,200 recently-minted $20- denomination, Double Eagle, gold pieces produced in 1857 at the San Francisco Mint. The gold for these coins was mined during the California Gold Rush. There also was a quantity of other historic gold coins that circulated in the Wild West. The cargo also contained privately-made gold coins and ingots produced by such historic, government-supervised San Francisco Gold Rush-era assayers as Blake & Co.; Kellogg & Humbert; Wass Molitor & Co.; Harris, Marchand & Co.; and Justh & Hunter. The largest ingot was an astonishing gold brick that weighs 933 ounces, nearly 80 pounds, made by assayers Kellogg & Humbert. The value of the cargo was two-million 1857 dollars.
When the ship sank, it triggering a panic in the stock market. People began to withdraw their money from Wall Street in droves. During that panic, stock prices dropped by half or more, most banks suspended payments of specie, bankruptcies were widespread and rioting in New York City resulted in the militia being activated.
Unable to meet payrolls or pay creditors because of the loss of the gold cargo, New York banks began to fail and stores and factories began to close, touching off a financial crash in the United States and Europe. It was "The Panic of 1857."
Land speculation had also gotten out of control in the US, leading to an unsustainable expansion of the railroads. When investment money dried up, the land speculation collapsed, and this wrecked many of the railroads.
The federal government tried to remedy the situation, partly by declaring a bank holiday in October, 1857. Secretary of the Treasury Howell Cobb recommended the government should sell revenue bonds and decrease the tariff. In 1859, the country was slowly pulling out of the downturn, but was feeling the effects until the start of the Civil War.
In 1987, one-hundred-thirty years after the S. S. Central America sank, a group of scientists and investors found the ship 160 miles off the coast of South Carolina. On Sept. 11, 1988, they found the SS Central America’s flywheel. A month later the ship’s bronze bell was recovered and the ship was conclusively identified.
Recovery operations began in 1989 and in the next several years, more than a ton of gold, silver and other artifacts valued at more than $400 million were recovered, including 7,500 gold double eagles