The Mysterious Decline of U.S. Whaling?

In 1820, the U.S. whaling industry was just a blip, generating about $1 million in revenue per year. Thirty years later, it had grown nearly 1,000%, making the U.S. the global leader in whaling. By 1900, U.S. whaling revenues had declined an astonishing 90%. What happened?

The Mysterious Decline of the U.S. Whaling Industry?

The rise and fall of America’s whaling business is a fascinating tale. It exploded in the mid 1800s thanks to a series of new technologies and rising worker productivity. Almost as immediately as it came together, the U.S. whaling industry fell apart. Many historians blame its fall on lower demand for whale oil (thanks to the rise of petroleum oil) as well as reduced supply (due to fewer whales in the ocean). But the real story behind the decline in the whaling industry is something else entirely. Here’s more on the mysterious decline in U.S. whaling from The Atlantic:

One hundred and fifty years ago, around the time Herman Melville was completing Moby Dick, whaling was a booming worldwide business and the United States was the global behemoth. In 1846, we owned 640 whaling ships, more than the rest of the world put together and tripled. At its height, the whaling industry contributed $10 million (in 1880 dollars) to GDP, enough to make it the fifth largest sector of the economy. Whales contributed oil for illuminants, ambergris for perfumes, and baleen, a bonelike substance extracted from the jaw, for umbrellas.

Fifty years later, the industry was dead. Our active whaling fleet had fallen by 90 percent. The industry’s real output had declined to 1816 levels, completing a century’s symmetry of triumph and decline. What happened? And why does what happened still matter?

…The thesis of Leviathan, the ur-text of whaling economics, is that the source of our dominance in the 19th century will feel familiar to a 21st century audience: a triumph of productivity and technology…The standard explanation for the decline of whaling in the second half of the century is a pat two-parter consisting of falling demand (from alternative sources for energy) and falling supply (from over-hunting). But according to Leviathan, the standard explanation is wrong…

(See The Atlantic for more on the mysterious decline of the U.S. whaling industry)

The U.S. Postal War?

In 1844, Lysander Spooner launched the American Letter Mail Company, a private alternative to the government-owned U.S. Postal Service. His young firm took the country by storm, leading to dramatic improvements in delivery time and vast decreases in postage costs. But the U.S. Postal Service didn’t appreciate the competition and fought to regain its monopoly. What was the U.S. Postal War?

The U.S. Post Office Monopoly?

Until 1844, the U.S. Post Office held a monopoly on mail delivery. Service was slow and rates were high.

“It cost 18 3/4 cents to send a letter from Boston to New York and 25 cents to send one all the way to Washington DC. A letter sent from Boston to Albany, NY written on a 1/4-ounce sheet of paper and carried by the Western Railroad, cost 2/3 as much as the freight charge for carrying a barrel of flour the same distance.” ~ Lucille J. Goodyear, Spooner vs. U.S. Postal System

Lysander Spooner Launches the U.S. Postal War

Lysander Spooner knew an opportunity when he saw one. Spooner was an individualist anarchist hailing from Massachusetts. Although partly motivated by profit, his true purpose was to “challenge the constitutionality of the postal monopoly.”

While the Articles of Confederation had empowered Congress with “the sole and exclusive right and power” of “establishing or regulating post offices,” the Constitution was far more vague on the matter. Article I, Section 8, Clause 7 of the U.S. Constitution empowered Congress “To establish Post Offices and postal roads.” But the document was silent on the matter of private competition. With this loophole in mind, Spooner organized his own company, which he called The American Letter Mail Company. And he wasted no time in advertising his new venture, which attacked the idea of a governmental postal monopoly head-on. In effect, he launched the U.S. Postal War.

“The American Letter Mail Company has established post offices in New York, Philadelphia, Baltimore and Boston, and will deliver letter daily from each city to the others – twice a day between New York and Philadelphia. Postage 6 1/4 cents per each half-ounce, payable in advance always. Stamps 20 for a dollar. Their purpose is to carry letters by the most rapid conveyances, and at the cheapest rates and to extend their operations (as fast as patronage will justify) over the principal routes of the country, so as to give the public the most extensive facilities for correspondence that can be afforded at a uniform rate.

The Company design also (if sustained by the public) is to thoroughly agitate the questions, and test the Constitutional right of the competition in the business of carrying letters – the ground on which they assert this right are published and for sale at the post offices in pamphlet form.” ~ New York Daily Tribune Advertisement

Spooner’s company and the U.S. Postal War caused considerable angst among politicians. The U.S. Post Office earned gigantic profits, but often reported losses. That was because the profits were distributed by politicians via patronage to politically connected groups, namely: “(1) coach contractors, (2) rail and steamboat companies, (3) postmasters, (4) publishers of printed matter, (5) officials with the franking privilege, and (6) rural voters.

The U.S. government fought back in the U.S. Postal War, initiating lawsuits against Spooner. They threatened to jail him and pressured railroad operators to stop delivering his mail. But this proved unsuccessful and by 1845, the Post Office found itself rapidly losing business. The Postmaster General appealed to Congress and received permission to lower postage rates. Undeterred, Spooner lowered his own rates even further, causing even greater distress for politicians.

Alas, Spooner’s efforts and those of others like him (most notably James W. Hale), were in vain. In 1851, Congress lowered the postal rate to three cents per half-ounce letter and enacted laws giving the U.S. Post Office an effective monopoly over mail distribution. The U.S. Postal War was over. Spooner’s company was forced out of business and by 1860, private mail delivery was virtually eliminated in the United States.

Guerrilla Explorer’s Analysis

On December 5, 2011, the U.S. Postal Service announced “major budget and service cuts.” First-Class mail will take a day or two longer to deliver and stamps will rise one cent to $0.45. Despite those changes, the U.S. Post Office is expected to rack up a loss of $14.1 billion next year.

While the rise of email is certainly a factor here, a bigger problem is the postal monopoly itself. Government-enforced monopolies have little reason to cut costs, lower prices, or improve service. Perhaps it’s time we take a page from history and allow true private competition in the mail industry. Between 1845 and 1851, the U.S. Postal War launched by fromSpooner, Hale, and others forced the U.S. Postal Service to cut postage rates by 79%. At the same time, the U.S. Postal War led to service innovations, such as stamp prepayment and small-town intracity delivery. Is there another Lysander Spooner out there, waiting to reignite the U.S. Postal War? We can only hope.

The New York Gold Conspiracy?

On September 24, 1869, the price of gold on the New York Gold Exchange hit $162 an ounce. Shortly after, it plunged to $133 an ounce, ruining scores of investors in the process. What was the Black Friday New York Gold Conspiracy?

Jay Gould & James Fisk: The Plot to Corner the Gold Market?

During the Civil War, the U.S. government began issuing “greenbacks” in order to raise money. Greenbacks were a fiat currency (similar to that used today) and thus, were not backed by gold or anything else. After the war ended, the government began to withdraw the greenbacks from circulation. This was accomplished by buying greenbacks with gold. This allowed the price of gold, which had reached $300 an ounce, to return to a more normal level of $130 an ounce by early 1869.

Around that time, a group of investors, led by Jay Gould and James Fisk, saw an opportunity to generate enormous profits. They wanted to, in effect, “corner the gold market.” But they feared the U.S. government’s tendency to stabilize gold prices. They needed to find a way to temporarily take the government out of the game. And in order to do that, they needed to seize control of its monetary policy.

Gould and Fisk recruited Abel Corbin, President Ulysses S. Grant’s brother-in-law, to their cause. Together, the three men badgered Grant to stop selling government gold, arguing that it would make farmers more competitive in overseas markets and thus, raise farm prices.

Black Friday!

By September 1869, Gould and Fisk were convinced that their plan had worked. They began buying large amounts of gold with very little money, thanks to small margin requirements. As they accumulated a large position, they were able to manipulate the market price higher and higher, making plans to unload it before the inevitable fall. Prices rose and stocks fell. President Grant immediately grew suspicious of his brother-in-law and told his wife to add a note in a letter written to her sister:

“Tell your husband that the President is very much distressed by your speculations, and you must close them as quick as you can.”

On September 23, gold reached $142 an ounce. Gould, who’d learned that Grant was on to the scheme, began secretly unloading his position. Fisk, completely unaware of what was about to happen, did not. The next day, Black Friday, the price of gold ran all the way up to $162 an ounce (the actual blackboard is shown above). Then word reached the New York Gold Exchange that the Treasury was selling $4 million of gold. Abruptly, prices collapsed, sending gold reeling back to the mid $130s.

Many investors, who’d bought gold on margin, were ruined. Gould “was rumored to have cleared $10 or $11 million” although this remains in question. Fisk is believed to have escaped harm by repudiating his trades.

Guerrilla Explorer’s Analysis

Black Friday caused a brief financial panic. But for the most part, no one paid a price for the scandal. Gould and Fisk escaped punishment, thanks to sympathetic Tammany Hall judges. President Grant was accused of being involved in the Black Friday scheme. However, it didn’t stop him from being reelected in 1872.

Over the years, others have tried to corner various types of financial markets. But Gould’s and Fisk’s Black Friday attempt might just be the most audacious of them all. By enlisting the gigantic hand of government to aid their cause, they took corporatism to a whole new level. On a relative basis, one could make the claim that Gould and Fisk caused the biggest one-day crash of gold in U.S. history on Black Friday, maybe even of all time, and got away with it.

The Debate that Rocked the World?

It was the most important debate of its time, maybe of all time. It single-handedly changed the world and led to a “war” of monumental importance. So, what was this debate of ideas? The Lincoln-Douglas Debate? The Scopes Monkey Trial? No…it was the Socialist Economic Calculation Debate led by the esteemed Ludwig von Mises.

Ludwig von Mises & Economic Calculation?

By 1920, even ardent admirers of socialism (defined as a society in which the government owns the means of production) knew they had “an incentive problem.” A society where man was supposed to produce “according to his ability” yet only consume “according to his needs,” left that man little reason to work hard or perform unpleasant tasks. Socialists attempted to sidestep that problem by declaring that a socialist society would somehow cause people to become less selfish and more willing to work for the “greater good.”

Then in 1920, Austrian economist Ludwig von Mises published Economic Calculation in the Socialist Commonwealth. In the process he dropped a bomb on the heretofore unchallenged socialists and thus, launched the Socialist Economic Calculation Debate. As Murray Rothbard put it in The End of Socialism and the Calculation Debate Revisited:

“Mises in effect said: All right, suppose that the socialists have been able to create a mighty army of citizens all eager to do the bidding of their masters, the socialist planners. What exactly would those planners tell this army to do?” ~ Murray Rothbard

Ludwig von Mises didn’t bother with socialism’s problematic incentive issues. Instead, he argued that “rational economic calculation” couldn’t exist in a socialist economy. Since the government owned all productive resources, there were no market-generated prices. And without prices, it was impossible to know the best use for a piece of land or machinery. That made it impossible for central planners to make rational economic decisions.

The Socialists Strike Back

The socialists knew they had a problem. In fact, the problem was so serious that it vexed them for almost two decades. However, 16 years later, the so-called definitive response was published by the neoclassical economist Oskar Lange. Although he, along with Abba Lerner, acknowledged that prices were essential, Lange argued that they didn’t have to come from free markets. A Central Planning Board could tell “managers” of socialist companies to fix prices. These prices could then be adjusted by the managers via complicated equations and trial and error. Lange’s reply was widely applauded by his fellow Neoclassical economists and considered a damning refutation of Ludwig von Mises.

Around this time, Friedrich Hayek, a pupil of Ludwig von Mises, joined the debate. Hayek essentially conceded that Lange was correct in theory. However, he argued that the scheme was impossibly complicated and based on a “perfect world” that looked nothing like the real one. There was just too much information and too many equations that would need to be solved on a continuous basis. But Hayek’s arguments were largely dismissed by mainstream neoclassical economists as mere practical problems. And with that, the Austrian economists were considered defeated…at least for the moment.

“…there can hardly be any room for debate: of course, socialism can work. On this, Lange certainly is convincing. If this is the sole issue, however, one wonders whether at this stage such an elaborate theoretic demonstration is in order. After all, the Soviet planned economy has been operating for thirty years. Whatever else may be said of it, it has not broken down.” ~ Professor Abram Bergson, Socialist Economics

The Soviet Union Problem?

In 1991, the Soviet Union collapsed. And afterward, the grim reality of the situation in that country became apparent to the world. The Soviet Union had falsified its GNP and production numbers for decades. Its citizens lived in abject poverty. Black markets and bribery were rampant and indeed, these markets were often the only reason that basic needs were met.

So, who won the debate between the socialists and the Austrians? Well, Hayek’s criticisms of Lange’s theories were valid. But if these problems could be overcome, perhaps through computers, then it stands to reason that “market socialism” could work. However, if that’s the case, then why did the Soviet Union collapse?

Guerrilla Explorer’s Analysis

I would argue that neither Lange nor Hayek really won the debate. Instead, I’d give the honor to the economist who started it…Ludwig von Mises. Lange and his supporters were focused on proving that they could duplicate prices for consumer goods. Hayek agreed this was possible, at least on a theoretical level. But that was never Mises’s key problem with socialism.

The real problem with socialism isn’t finding prices for consumer goods. The real problem is finding prices for land, machinery, and other means of production. In a socialist economy there will be endless transactions of capital goods in which the government is both the buyer and the seller. Without real markets, there’s no way to determine the value of these things. This is, as Murray Rothbard put it, “where calculational chaos…reigns.”

Ironically, the only reason the Soviet Union lasted as long as it did was because of free markets. The Soviet Union wasn’t a pure socialist economy. Instead, it “borrowed” prices for its capital goods from nations with free economies. Without those prices, it would’ve never lasted as long as it did.

In the end, Ludwig von Mises won the debate. In fact, no one ever successfully challenged his original position. Instead, the Socialists seized on Hayek’s contention that market socialism was feasible, focused their attacks on him, and ignored the arguments posed by Ludwig von Mises. Today, the ideological battle between the Austrians and the socialists continues. While neither side has conceded, its difficult to imagine the socialists ever being able to counter the problems posed by the brilliant Ludwig von Mises.

The Student Loan Conspiracy?

As I write this, protestors are gathered around the United States as part of the Occupy Wall Street movement. While they appear to lack a common platform, one of their primary concerns seems to be the enormous and growing debt load incurred by many students while attending college. Why is that load so enormous in the first place? Is there a Student Loan Conspiracy at work?

What is the Student Loan Conspiracy?

In 2009, the average college graduate had student loans totaling $24,000, up 6% from 2008. For postgraduate students, this figure rises substantially. Coupled with the challenging economic environment and the difficult job market, this has created a generation of heavily indebted students with few means to pay back their loans. Political circles have erupted with discussions of a “student loan crisis.” Heck, even professors are questioning the situation.

“Thirty years ago, college was a wise, modest investment. Now, it’s a lifetime lock-in, an albatross you can’t escape.” ~ Professor Fabio Rojas, Indiana University

All of this might be forgivable if students were getting good value for their money. However, the facts say otherwise. According to Richard Arum’s and Josipa Roksa’s book Academically Adrift: Limited Learning on College Campuses, 45% of U.S. college students show “no significant gains in learning” after two years in college. 36% of students show no such gains after four years of college. That might be because today’s students spend “50% less time studying compared with students a few decades ago.” And the things that are learned aren’t necessarily helpful. There tends to be a gigantic mismatch between the skills acquired in college and the skills that students need and use after college.

How did we get into this situation? Why are high school graduates spending money they don’t have in order to obtain a college degree that in all likelihood, involves little to no self-improvement?

The Origins of the Student Loan Conspiracy?

The origins of the Student Loan Conspiracy can be traced back to 1944. Prior to World War II, higher education was a small, private, and rather expensive industry. Its services were of little value to most individuals and thus, were only utilized by about 10% of high school graduates. This all changed in 1944 when Congress passed the Servicemen’s Readjustment Act. This Act, more commonly known as the G.I. Bill, gave educational subsidies to former veterans. More importantly, it marked the beginning of a “crony capitalism” relationship between college universities and the U.S. government.

With a precedent in place, it was only a matter of time before the U.S. government expanded its intervention in college education. In 1965, President Lyndon Baines Johnson signed the Higher Education Act of 1965 into law. It established several student loan and grant programs intended to make college more affordable. The increase of subsidies were a boon to the education industry and lifted enrollments. Unfortunately, this also had an unintended consequence. As subsidies increased, colleges realized they could raise tuition prices in response. And as they continued to raise prices, the government continued to increase subsidies, leading to an as-of-yet endless spiraling of education costs. As a result, since 1978, “the price of tuition at U.S. colleges has increased over 900 percent, 650 points above inflation.” Unfortunately, I was unable to find figures going back to 1965 but I imagine that the numbers would show a similar trend.

The Second Piece of the Student Loan Conspiracy Puzzle?

But that merely explains the origin of student debt in America. It doesn’t explain why so many people are willing to incur it. After all, its not like higher education is a necessity for most people.

“…the United States has become the most rigidly credentialized society in the world. A B.A. is required for jobs that by no stretch of the imagination need two years of full-time training, let alone four.” ~ James Engell & Anthony Dangerfield, Saving Higher Education in the Age of Money

This second piece of the puzzle can be traced to a 1971 Supreme Court case known as Griggs v. Duke Power. Up until that time, many companies used aptitude tests as a tool to screen potential employees. However, the Supreme Court, led by Chief Justice Warren Burger (pictured above), changed that when it issued its opinion on Griggs.

“…in 1971 the U.S. Supreme Court issued a ruling (Griggs v. Duke Power) saying that if companies use aptitude testing to screen potential employees, they must be prepared to show that their tests are precisely calibrated to the needs of the job. Otherwise, they will be guilty of employment discrimination if their tests screen out minority workers who might have been able to do the work. Rather than face discrimination suits by the federal government, most employers started using a less precise but legally safe method of screening applicants—college degrees.” ~ George C. Leef, Why on Earth Do We Have a Student Loan Crisis?

So, the Supreme Court basically forced companies to stop using aptitude tests for screening purposes. However, that didn’t end the need for screening. Firms still needed a way to whittle down ever-growing pools of applicants. Thus, companies started to make the “possession of a college degree a requirement for applicants – even for jobs that could easily be learned by anyone with a decent high school education.” And just like that, the cheap, quick, and focused aptitude tests were replaced by ultra-expensive, ultra time-consuming, and ultra-unfocused college degrees.

Guerrilla Explorer’s Analysis

In 1940, just 10% of high school graduates went to college. By 1970, that number was at 40%. And by the 1990s, it had risen to 70%. That’s because a college degree has become little more than a “signaling game.” By attending college, students “signal” to potential employers that they’re smart, hard-working, and easily trained. The ability to send that signal to employers, which was once accomplished via aptitude tests, is the sole reason that most students attend college in the first place.

The Student Loan Conspiracy isn’t a deliberate one. I don’t think any of the politicians or judges who created the current situation ever envisioned the full impact of their decisions. But unintended consequences can be harsh. The result is that many students who wish to work at regular jobs have no other choice but to waste four years of their lives at college. They end up studying subjects with little relevance to their futures and accumulating tens of thousands of dollars of debt for the privilege.

If politicians are serious about reducing student loan burdens (and this seems doubtful at best), they might consider removing themselves from the educational process. By re-legalizing aptitude tests, they can give employers a far cheaper and less time-consuming way of screening for employees. And if they remove themselves from the student loan business, colleges will be forced to slow tuition growth. Only then will the Student Loan Conspiracy finally, at long last, come to an end.

The Double Eagle Scandal

In May 1933, the U.S. Mint printed the very last Saint-Gaudens double eagle. These $20 gold coins were never officially released to the public. A few managed to avoid destruction and the U.S. government has spent more than 60 years and untold millions of dollars tracking them down. Why is the 1933 double eagle the most controversial coin in history?

President Roosevelt Seizes America’s Gold

On April 5, 1933, President Franklin Delano Roosevelt issued Executive Order 6102 which, in effect, forced American citizens to turn in “all gold coin, gold bullion, and gold certificates” to the Federal Reserve. On January 30, 1934, Congress followed up that Order with the United States Gold Reserve Act, which allowed the President to seize the Federal Reserve’s newly-acquired gold supply. The federal government built Fort Knox in 1936 in order to store its newfound treasure.

The U.S. Government Declares War on the 1933 Double Eagles

Suddenly, gold coins became a thing of the past. The director of the Philadelphia Mint ordered the recently pressed 1933 double eagles to be melted down into gold bars and sent off to Fort Knox, a task which would take several years to complete. Only two of the coins were slated to survive. They were sent to the Smithsonian for safekeeping.

But, double eagles began to pop up. One coin made its way into the hands of Egypt’s King Farouk. Another one was offered via auction. The Secret Service quickly decided that someone had stolen the double eagles from the Philadelphia Mint. They actually debated the “advisability of trying to get [the] coin back from King Farouk.” However, since World War II was in progress and Egypt was an important American ally, they decided not to risk infuriating him. However, they did seize the other coin, an act which launched a decades-long war against private ownership of the 1933 double eagles.

“The government has been fanatical about seizing and destroying these coins. They’re famous because the government has been seizing them since the 1940s.” ~ Robert W. Hoge, American Numismatic Society

The 1933 Double Eagle becomes the Most Expensive Coin in History

The Secret Service traced the coins to a Philadelphia-based jeweler named Israel Switt. Switt claimed that he didn’t have any records pertaining to the eagles. However, he did state that they weren’t purchased from a Mint employee. The Justice Department disagreed but was unable to press charges due to the statute of limitations.

For the moment, the investigation was at an impasse. But after King Farouk was overthrown, his double eagle found its way into the hands of a coin dealer named Stephen Fenton. Fenton attempted to sell the coin in 1996 but the end buyer betrayed him. Secret Service agents rushed the room and seized the double eagle.

Incredibly, Fenton was charged with “conspiring to convert to his own use and attempt to sell property of the United States.” No one seemed to care that FDR’s ridiculous and unconstitutional Executive Order had been repealed in 1974 by President Ford. And the fact that there was no proof the coins were stolen in the first place didn’t seem to strike anyone as strange.

Fortunately, the charges were quickly dropped. And eventually, Fenton and the Justice Department agreed to auction off the coin and split the proceeds. After an extended publicity campaign, it sold for a grand total of $7.6 million, making it the most expensive coin in history until the 2010 sale of a 1794 silver dollar. The anonymous buyer lent it to the American Numismatic Society, which in turn lent it to the Federal Reserve Bank of New York.

The Double Eagle Double-Cross?

The story of the 1933 double eagle should’ve ended with that auction. But there was still another chapter to come. In 2004, Israel Switt’s only child Joan Langbord along with her son Roy discovered ten 1933 double eagles in a safety deposit box. She took the coins to the U.S. Mint for authentication. The Mint agreed but ended up pulling a fast one. It refused to return the property and instead told the media that it had “recovered” ten additional coins.

The Langbord family sued. Assistant U.S. Attorney Jacqueline Romero claimed that any 1933 double eagles that left the Mint did so illegally. The Langbord family argued that most of the Philadelphia Mint records, which were ill-kept, had been destroyed in 1978. Also, no surviving witnesses remained. Finally, they identified a “window of opportunity” where Israel Switt could’ve obtained the coins in a legal manner.Shockingly, the jury sided with the government. While the Langbord’s are expected to appeal the verdict, the story has come to an end, at least for now. And government representatives are quite pleased with their success.

“People of the United States of America have been vindicated.” ~ Jacqueline Romero, Assistant U.S. Attorney

Guerrilla Explorer’s Analysis

The government spent more than six decades vigorously pursuing these coins. They confiscated private property. They treated citizens very differently, allowing Fenton to profit from his coin while not giving the same courtesy to the Langbords. And they paid untold millions of tax dollars throughout the investigation as well as during the court case. That leaves me with one question…Do you feel vindicated?

The Ship that Nearly Sank America

On September 3, 1857, the SS Central America left the port of Colón, Panama, en route to New York City. It never arrived. What happened to it? And how did this ship’s failure to reach its destination nearly ruin the United States of America?

The Lost Treasure of the SS Central America?

The SS Central America was a side-wheel steamship that sailed routes between Central America and the east coast of the United States. In 1857, fifteen tons of gold were prospected in California and shipped to Panama via the SS Sonora. Since the Panama Canal was not yet in existence, the enormous gold shipment was transported by train across the country and reloaded onto the Central America.

As the Central America sailed towards New York City, it initially encountered few difficulties. But all that changed on September 9. While sailing off the coast of North Carolina, the steamship found itself engulfed by a Category 2 hurricane. The crew, under the direction of Captain William Lewis Herndon, fought mightily to stave off disaster. But eventually, the hull cracked, sending the gold and over four hundred people to the bottom of the ocean.

The SS Central America and the Panic of 1857?

According to historian Bray Hammond, the ship’s gold represented more than 20% of Wall Street’s gold reserves at the time. As such, the news of the shipwreck caused major financial ramifications throughout the United States.

Early in 1857, agriculture and other industries began drawing against their bank deposits, putting increased pressure on banking gold reserves. The New York Office of the Ohio Life Insurance and Trust Company failed. Other New York banks followed suit as they found themselves unable to pay employees or creditors. A delay in gold shipments from California only added to the bleak situation. And when the SS Central America sank, it ended the last hope of New York bankers to stave off a major financial crash. The Panic of 1857, as it is known today, was perhaps the worst economic depression of the 1800’s. Some historians even consider it a major factor behind the Civil War.

Salvaging the SS Central America?

On September 11, 1987, one hundred and thirty years after the sinking of the SS Central America, the Columbus-America Discovery Group located the wreck in 8,000 feet of water using an ROV. Led by engineer Tommy Thompson, the Group excavated gold in the amount of $100-$150 million dollars. This haul included an eighty-pound ingot, which at that time was determined to be the most expensive piece of currency in the entire world.

Guerrilla Explorer’s Analysis

The sinking of the SS Central America was one of the greatest maritime disasters in history. It caused over four hundred deaths and caught off all hope of quickly ending the Panic of 1857. The Panic, in turn, helped bring the country one step closer to a full-blown Civil War. The Central America is not widely known today. But in my opinion, it deserves to be recognized as one of the most significant shipwrecks in American history.