Part IV of IV—A Brief History of World Credit & Interest Rates • 1775 – Present The World Revolution | Armstrong Economics

As with most wars, noble motives are usually portrayed in some slogan that attempts to hide the true underlying financial incentives. The English Crown’s attempt to control and prevent irresponsible paper money issues among the Colonies, was a major cause of the Revolution. Of course, England for nearly 70 years, practiced extracting gold and silver from the Colonies in payment for taxes, leaving the colonists with less valuable coppers as well as a large barter system. Some argue that the Crown had left so little hard currency within the Colonies that it had forced them to issue paper currency. But if we look at the first two specific accusations, as set forth in The Declaration of Independence, we find that they centered on the paper money question. The first deals with the King’s refusal to give “assent” (consent) to laws permitting additional paper money issues. The second accuses the King of forbidding his Governors to pass laws on the issue of paper money for emergency purposes without obtaining his consent before hand.

“He has refused his Assent to Laws, the most wholesome and necessary for public good. “He has forbidden his Governors to pass laws of immediate and pressing importance unless suspended in their Peration till his assent should be obtained; and when so suspended he has utterly neglected to attend to them.”

With the breaking of ties with England, the Colonies began to issue paper money like the floodgates had just been opened. Backing was, of course, not there. In fact, on one paper currency issue in 1778 in Georgia, reference to its backing of the currency was plainly stated on its face. The notes stated that they were payable or redeemable from the proceeds of properties confiscated from Tories. Gold, silver and even copper coins disappeared completely from circulation once the war began. Paper money began to be printed for decimal coinage denominations as well. At first the money circulated freely and with support of the people. However, in 1777 what would become one of economic history’s most drastic examples of paper money depreciation began. Below are the official exchange rates as published by each Colony and the Federal Government. These rates were used for $1 worth of gold or silver as originally valued in 1775. However, it should be pointed out that those who held Continental Currency were, for the most part, unable to exchange them even at the official rates. Eventually, holders of this currency received nothing in return which prompted the saying, “not worth a Continental.”

Continental Cur $40.00 for $1 April 1780
N.Y. & Conn $40.00 for $1 April 1780
South Carolina $52.50 for $1 May 1780
Mass., NH & RI $100.00 for $1 June 1781
New Jersey $150.00 for $1 May 1781
Penn. & Delaware $225.00 for $1 May 1781
Maryland $280.00 for $1 June 1781
North Carolina $800.00 for $1 Dec 1782
Virginia $1000.00 for $1 Jan 1782
Georgia $1000.00 for $1 Feb 1785

Despite the fact that the Continental Currency ceased to circulate in April 1780 and the official exchange rate was set at $40 to $1, holders of this currency were unable to redeem it. Yet Continental Currency became a form of speculation. Even though the Articles of Confederation had promised payment, it was not until seven years later when the Constitution of the United States in 1787 recognized that there was an obligation to redeem these otherwise worthless scraps of paper. By October of 1787, Continental Currency was being traded at the going rate of $250 for $1 in gold. This meant that the 1780 official rate had further depreciated raising the value of gold from $800 an ounce in 1780 to $5,000 an ounce in 1787 in terms of Continental dollars.

The government was in no position to exchange the Continental Currency at any rate. The economy and lack of faith were simultaneously taking a nosedive straight down. Eventually, gold peaked in late December 1790 but only after Congress passed an Act on August 4th, 1790. This Act provided a means for refinancing debts and from October 1st, 1790 to September 30th, 1791, Congress agreed to redeem $100 in currency for $1 in bonds of indefinite maturity. Through this method of dealing with the worthless currency, Alexander Hamilton, Secretary of the Treasury averted a prolonged U.S. economic depression.

Many people refrained from exchanging their Continental Currency for bonds that paid 6% interest because the Act of 1790 provided that the currency would still be redeemed and that it was not mandatory to exchange it for bonds. The bonds were eventually paid in 1813 and those who held their currency in hopes of getting something more than a 1% return on what they had, received nothing!

Depending upon where you were and what colonial currency you held, the exchange rate between paper currency and one ounce of gold varied from $800 to $10,000 per ounce. Despite Ben Franklin’s early warning in his publication of 1729, “A Modest Enquiry into the Nature and Necessity of Paper Currency,” America’s game with paper-economics was far from over. Before this experience with credit and money would end with the British Depression of 1815, many new economic theories would emerge from great men such as Adam Smith in his publication, “The Wealth of Nations.” In 1809 a pamphlet entitled, “The High Price of Bullion a Proof of the Depreciation of Bank-Notes” was published by a London broker named David Ricardo who was 37 at the time. This pamphlet eventually established Ricardo as a major economic theorist who became influential in shaping the 19th Century.

The final years in late 1700’s were filled with turmoil and speculation along with rising interest rates and inflation to varying degrees worldwide. In the United States, the year 1786 was marked by Shays’ Rebellion in Massachusetts during September. The uprising was aimed to prevent further foreclosures of farms in the country’s continuing economic depression that had followed the war and the debt crisis that resulted from the deep depreciation of the currency. State militia at the time prevented seizure of the Springfield arsenal in confrontation with over 800 armed farmers. This rebellion did succeed in having the state supreme court adjourn without returning indictments against the farmers. However, the entire affair only served to bring the attentions of the state to the severity of the depression at the time.

As economic hardship continued along with financial uncertainty, Benjamin Franklin was moved to write in a letter to a French acquaintance in which one of his immortal sayings was given birth – “Nothing is certain but death and taxes.” During 1791, the U.S. money markets collapsed following the failure of some land companies organized by the famous New York speculator William Deur. The failure of his land scheme to settle the Ohio Valley resulted in a $5 million loss to New York investors, which was equal to the total value of all the real estate in New York City at the time. Speculation had been quite rampant in numerous ventures and shares. United States bank script, originally offered for $100, had risen to $195 on the New York market but crashed back to $110. Alexander Hamilton authorized the Bank of New York to step in and buy government bonds and debt in an effort to inject cash into the system and lower interest rates.

By 1796, France suffered ruinous inflation as her assignats (currency) of 1790 declined in the face of nearly 2000% inflation within the past six years. Flour rose dramatically from 40 cents a bushel in 1790 to over $5 in 1796. Wood advanced from $4 a cartload to $250 while a pound of soap jumped from 18 cents to $8. Eggs, which had cost 24 cents a dozen in 1790, soared to $5. Interest rates in France skyrocketed. The 5% rentes of the government fell in price driving the effective yield on government debt to 40% on average. The implied yield of French government securities began to ease somewhat dropping back to 30.1% in 1798. But in 1799 there was some renewed fear and the implied yield rose once again to 34% as the price of government securities declined.

This devastating inflation in France led to the French Revolution which brought Napoleon to power. In 1800, Napoleon immediately reduced government spending and established the Banque of France. The implied yield on government debt issues (5% rentes) declined back to 16.28% in 1800 and continued to fall to 9.3% in 1801, 9% in 1802 and finally down to 8.8% in 1803. Napoleon was proclaimed emperor in May 1804 after selling the Louisiana lands to the United States in 1803 for $15 million in an effort to raise capital to fund his military ambitions.

In 1806, Europe was engulfed in war with Napoleon. The Holy Roman Empire that had existed since the year 800 came to an end on July 12 under French auspices. Napoleon occupied Berlin and placed his older brother on the throne in Naples while his younger brother assumed the throne in Holland. Britain announced a blockade of Europe that sent U.S. commerce falling by 66%. President Jefferson introduced a bill to exclude many British goods in retaliation.

In 1807 a British man-of-war fired upon the U.S. frigate Chesapeake and removed four alleged deserters. President Jefferson closed U.S. ports to all armed British vessels. By 1810, duties on U.S. customs fell to $6 million as a loss of trade with Britain and France drastically reduced revenue to half that of its 1806 level. That same year, a bullion report issued by the British government economists established the “intrinsic value” theory of money. Bank notes may be useful as a medium of exchange, however the notes must bear a definite ratio to the amount of coin and bullion in the vaults. The report proclaimed that government cannot create money, which is in reality, a token of labor performed. Government can acquire money only through taxation or by borrowing. For government to issue irredeemable paper money is to violate the sanctity of contracts, to cheat creditors, to increase prices and to disrupt business. Largely the economic theory that was published that year supported Smith and Ricardo.

By 1812 Napoleon invaded Russia and the beginning of a series of defeats caused Napoleon to retreat from Russia on October 19th. The British defeated Napoleon’s forces in Spain during July of that year. Despite these events, interest rates in France declined to their lowermost level of 5.98% in 1808. Confusion over Britain’s 1807 ban on U.S. imports eventually forced the US to declare war on Great Britain as an economic depression widened due to the serious loss of trade with Europe.

Interest rates in the United States on long-term government bonds had declined from the 8% high of 1799 down to their lowest level of 6.02% in 1802. The peak in British government interest rates came in 1798 at 6.35% and had also declined to their lowest point of 3.8% in 1802.

The Rothschilds began to become quite prominent during the early nineteenth century. Back in 1801 the German moneylender Meyer Amschel Rothschild, 58, became financial adviser to the landgrave of Hesse-Casal. Rothschild served as an agent of the British Crown in subsidizing European opposition to Napoleon. In 1812, the Duke of Wellington was financed with gold coin smuggled south by the eight sons of Meyer Rothschild. With no language other than Yiddish, the Rothschilds used fake passports, false names, disguises, and bribes to elude the French in what became one of the great international loans of modern times. One of the sons, Nathan Meyer Rothschild, 38, established a banking house in London. In 1815, he used carrier pigeon reports from Belgium that advised him of Napoleon’s defeat at Waterloo. Rothschild depressed the price of British consols by selling aggressively short on London markets. He then used his agents to buy the consols back at distressed prices and when the news reached London of the British victory, prices soared reaping himself a huge fortune as consols rose in price from 61 to 72.

By 1814, Europe’s 22 years of war came to an end along with America’s 3 year War of 1812. In the aftermath, depression began to set in moving into 1815. British government interest rates fell from 5.49% in 1814 down to their lowest level of 3.56% in 1817. The first U.S. Panic of 1818 was initiated in part by the failure of the Baltimore branch of the second Bank of the United States. The U.S. entered an economic depression in 1818 that had led to appeals by U.S. manufacturers for higher protective trade tariffs. The depression became worldwide sparking political repression in Spain, Latin America and Great Britain as illustrated by the Peterloo Massacre which was a public appeal to reform the tax laws. Britain instead passed laws banning public speaking and private training in the use of firearms. In Spain the infamous Spanish Inquisition was put to an end as the result of revolution. In Greece a war of independence broke out in 1821 that continued into 1831. Mexico declared independence from Spain in 1821 and Guatemala and Peru soon followed. Riots appeared in Ireland and the Ashanti War broke out in 1822 in Africa. Brazil proclaimed independence in 1822 from Spain and in 1823 the Monroe Doctrine was proclaimed in the U.S. that opposed European influence in the Western Hemisphere. In 1823 France invaded Spain and the Burma Wars involving Britain emerged in 1824. By 1830 cries were being heard from the south within the U.S. for secession. Clearly, war broke out in the aftermath of economic hardship as history had so often revealed.

In 1837, the United States entered another economic depression following the failure in March of the New Orleans cotton brokerage firm of Herman Briggs & Company in the wake of yet another wild speculative boom. Inflated land values, speculation and wildcat banking contributed to the crisis which became known as the “Hard times” of 1837-1843. New York banks suspended payments in gold on May 10th and financial panic ensued. At least 800 U.S. banks suspended gold payments in total and 618 banks failed before the year was out. Gold completely disappeared from circulation and employers were forced to pay their help with what became commonly referred to as a “shinplater” which was private bank currency of dubious value and far too often outright counterfeit. Over 39,000 Americans went bankrupt loosing some $741 million as the depression reduced many to starvation. The depression spread to Britain and the rest of Europe as well. Congress authorized the issue of U.S. treasury notes not to exceed $10 million on October 12th in a move to help ease the devastating economic financial crisis. By 1839 the depression had not improved very much. Within the next few years, the states of Pennsylvania and Maryland defaulted on their bond issues.

As the U.S. debt crisis expanded, interest rates soared once again. From the 4.25% yield on government securities, which had been the low established back in the 1820’s, government yields rose to 6.14% by 1842. Eventually, government yields declined falling back to 4.02% in 1853. But the Panic of 1857 succeeded in sending government yields back up to the 4.81% level by 1858.

In California, the gold rush of 1849 had brought unbelievable levels of inflation and some outstanding records in interest rates as far as American history is concerned. The gold rush only complicated the transition from Mexican to American ownership at the time and a speculative bubble had developed going into the Panic of 1857. Cattle prices in particular multiplied rapidly at times reaching 400% gains or more depending upon the locality. The Mexican cattle rangers of Southern California became extremely wealthy overnight and borrowed against the substantial rise in land values. Interest rates up until 1854 were COMMONLY trading at the 60% level per annum with some isolated historical records illustrating 96% rates per annum. The creditors were some Eastern Yankees but mainly the Swiss, German and French financiers. Needless to say when the bubble burst, the large Mexican cattle ranchers went bankrupt losing vast portions of land that ended up in the hands of some wealthy families that lasted well into the 20th century.

With tensions remaining high in the East, U.S. government interest rates remained well above the 4% level. As the Civil War began, government yields in the North rose to levels in excess of 7% by 1861. Interest rates rose sharply during the Civil War but they did not reach the extreme levels that had been established during the War of 1812. This was largely due to the strong financial position in the North combined with heavy issues of non-interest-bearing legal tender currency called “greenbacks” – a term referring to the lack of backing other than the green ink on the reverse side of the note.

The greenbacks were traded as if they were a commodity on the New York Stock Exchange relative to gold. So although interest rates did not reach new highs – currency depreciation did! A gold panic struck in 1864 sending the value of the greenback down by nearly 80%. Another gold panic struck in 1869 which prompted the coining of the term “Black Friday” as gold soared once again and the stock market crashed.

Meanwhile, the Confederacy also used paper money to finance up to 60% of their war expenditures and 5% was funded through taxation while only 30% were actually raised through the sale of bonds. Initially, Confederate government bonds were floated in 1861 bearing an 8% yield. With some military successes under their belt, the issue of 1862 saw government bond yields decline to 6%. However, Confederate currency began to depreciate significantly. From the 100-par level of December 1861, the trading range of the Confederate bonds in 1862 was 103-104. The 1863 trading range moved to 109-200 illustrating a 50% depreciation in the currency. The Confederate government began to restrict the purchase of its bonds according to the issue date of the currency itself. Notes issued prior to April 20, 1863 could be used toward the purchase of 8% bonds, but after August only 7% bonds. From August 1863 thereafter, paper currency was no longer valid in the purchase of government bonds at all.

In 1864, the Confederate government forced the population to convert the currency into 4% yielding bonds by imposing a taxation rate of 10% per month on anyone holding large bills that had not been converted. The Confederate government issued a 6% bond backed by cotton at 8 pence per pound, which became known as the “Cotton Loan” issues. Of course the South lost the war and all Confederate currency, notes and bonds became worthless.

The Panic of 1873 in the U.S. was aided when Jim Fisk, the leading member of the gold ring from 1869, was killed by Edward Stokes. In the aftermath, it came to be known that Fisk had been raiding the treasury of the Erie Railroad. The famous Wall Street banking house of Jay Cooke & Company failed on September 18th creating what became known as “Black Friday” on the stock exchange. On September 19th, the stock market tumbled fiercely forcing the New York Stock Exchange to close for 10 days. By year-end, over 5,000 business firms failed while tens of thousands came close to starvation as soup kitchens opened in New York. But the financial panic was not limited to the United States. Panic also struck in Vienna during May 1873 causing European investors to withdraw capital from the United States as panic spread to other European nations.

Interest rates in the United States had risen moving into 1873. The yield on government securities moved back to the 5% level following a low of 4.07% in the wake of the Panic of 1869. Municipal bond yields rose to 5.58% while high grade railroad bond yields jumped to nearly 6.5%. Interest rates on French 3% rentes moved up to 5.25% in 1873 while British 3% consols moved up moderately to 3.21%. Interest rates in Switzerland moved up on an annual average basis from 3.22% in 1868 to 5.34% by 1873 while extreme intraday highs reached 7%. German interest rates at the Reichsbank moved up from the 1867 low of 4% to as high as 6% in 1873 but this was still significantly below the levels of 1866 when German rates topped at 9%. The discount rate officially rose in Belgium from the 2.5% low in 1867 to as high as 7% in 1873 but Dutch rates for the same period rose from 2.5% up to only 6.5% in 1873.

The economic depression in the United States following the Panic of 1873 continued well into 1878. Nearly 10,500 U.S. business firms failed in the process. In 1879, the United States resumed specie payments for the first time since 1861 in an attempt to help boost foreign trade and bring an end to the economic depression.

Following the major depression of the 1870’s, additional serious panics still inflicted the world economy in 1881, 1890, 1893, 1895, 1896, 1899, 1901, 1903, 1907, 1914, 1920 and 1929. Depression took place during 1883-1885, 1893-1894, 1896-1897, 1920-1921 and the Great Depression of 1929-1939. Periods of prosperity were the Gold Resumption Prosperity of 1879-1883, the Railroad Prosperity of 1886-1893, the 1895 Recovery, the Corporate Merger Movement of 1899-1903, the 1905-1907 Recovery, 1915-1919 World War I Boom, the New Era of Prosperity 1922-1929, also known as the Great Bull Market and the Roaring 20’s, and at last the 1940-1944 World War II Boom.

Although interest rates remained highly volatile during the later part of the nineteenth century, the shift in capital concentration was clearly underway. Each new panic that sent interest rates higher found U.S. peaks significantly lower than those in Europe with the exception of Britain. Government yields reached their lowest level on a global basis going into 1900 and private corporate rates began to command premiums well above those of government. This was not the case during the later part of the eighteenth century and certainly not during the early part of the nineteenth century.

By the mid twentieth century, capital continued to shift from Europe in the direction of the United States. Now even British rates were at a premium to those of America. As the inflation increased following World War II, capital concentration in the United States peaked by 1966 and began a trend of disbursement throughout the world. As capital concentrated in Switzerland on the back of excessively rising world taxation, Swiss rates became the lowest in the industrialized world. The sharp rise in interest rates following the birth of the world floating exchange rate system in 1971 began a clear and decisive new trend that was normal by all historical standards as the shift in capital flows began to realign national wealth on a global scale.

The lessons of history have a lot to offer us. To governments, history warns of the perils that await fiscal irresponsibility. Clearly, a little debt or the excessive use of credit now and then is not dangerous to the financial future of any nation. But when such irresponsibility continues without a view toward the future, that nation will perish in financial ruin. Thus far no nation or empire has ever resisted the temptation of credit. The question that history has left mankind is simply when will we ever learn from the mistakes of our past? When man borrows against his future income, he robs himself of the fruits of his own labor.

 

Source: 1775 – Present The World Revolution

NORTHCOM Commander Gen. Glen D. VanHerck Conducts Press Briefing on North American Aerospace Defense Command and U.S. Northern Command Global Information Dominance Experiments

General Glen D. VanHerck, commander, NORAD and U.S. Northern Command

https://www.defense.gov/Newsroom/Transcripts/Transcript/Article/2711594/northcom-commander-gen-glen-d-vanherck-conducts-press-briefing-on-north-america/

STAFF: Okay, good morning, ladies and gentlemen. It is our pleasure to welcome the commander, U.S. Northern Command, General Glen D. VanHerck to the press briefing room today. General VanHerck is here to provide an update on how NORAD and NORTHCOM, in collaboration with all 11 U.S. combatant commands, has executed the third in a series of Global Information Dominance Experiments, also known as GIDE.

With that, I’ll turn it over to General VanHerck for his opening comments.

Sir, the floor is yours.

GENERAL GLEN D. VANHERCK: Great. Thank — thank you very much, and good morning. It’s great to be here with you. And thanks for joining me here in person, and those of you that are on the phone.

I’d also like to welcome and point out over here the commands, NORAD and USNORTHCOM have a new command senior enlisted leader, Sergeant Major James Porterfield, United States Marine Corps, and we’re happy to have him for the past few weeks, and he’s joining me today, so it’s good to see you.

I’m honored to serve as the commander of two distinct commands, North American Aerospace Defense Command, turned 63 year old — 63 years old in — in May, and the commander of the United States Northern Command, with two incredibly noble missions: defending North America primarily in the air domain for NORAD, also providing maritime warning; and obviously, defending our homeland, to include Alaska, for North — for United States Northern Command; and providing defense support of civil authorities on a routine basis, and the coordination we do with the nations in the NORTHCOM AOR with Canada, Mexico and the Bahamas.

Today, our peer competitors hold the homeland at risk in every vector and every domain. The Global Information Dominance Experiment that we’re going to talk about, and more specifically, the recent Global Information Dominance Experiment 3 was a cross-command event seeking to leap forward our ability to maintain domain awareness, achieve information dominance and provide decision superiority in competition and crisis. GIDE 3 included representatives from all 11 combatant commands, and later today, I’ll conduct an outbrief with most of the commanders and certainly, their representatives. And I can tell you, each combatant command is very excited about what we’re doing, and I look forward to that outbrief.

As the secretary of defense recently said, integrated deterrence is about using the right mix of technology, operational concepts and capabilities, all woven together in a networked way that — so — that is credible, flexible and formidable that will give any adversary pause, especially to think about attacking our homeland. So I fundamentally believe that integrated deterrence, which you’re hearing the secretary talk a lot about today, allows for the increase of decision space, and that GIDE, the Global Information Dominance Experiments, embodies a fundamental change in how we use information and data to increase decision space for leaders from the tactical level to the strategic level — not only military leaders, but also gives opportunity for our civilian leaders.

GIDE also makes a concerted effort to create global integration, shifting the department away from today’s regionally-focused plans, strategies, the way we do force management and force design paradigms, and budgetary and acquisition processes. We’re shifting our focus away from pure defeat mechanisms for homeland defense towards earlier, deter-and-deny actions well outside a conflict. GIDE spurs faster decisions and provides proactive options by making new technologies more accessible and more effective.

Right now, the threats we face and the pace of change in the geostrategic environment continues to advance at really alarming rates. We’ve entered a era of new and renewed strategic competition, and this time, we’re facing two peer competitors, both nuclear-armed, that are competing against us on a daily basis. We must outpace our competitors by accelerating our own efforts to transform our culture, including factoring in homeland defense into every strategy, every plan, force management, force design decision, as well as aspects of acquisition and budget so that we can deter in competition, de-escalate in crisis and if required, defeat in conflict.

In addition to the work we’re doing with global information dominance as we defend our homelands, United States Northern Command has been actively executing our defense support of civil authorities mission, whether supporting our whole-of-nation effort that we recently wrapped up in June with COVID support, not only medical support, but vaccinations, we’re actively engaged in fighting wildland firefighting today, supporting the Department of State with Afghan special immigrants as well.

We’re also building military-to-military partnerships, outstanding relationships with key neighbors such as Mexico, Canada and the Bahamas. And I look forward to discussing all of these important efforts and topics with you.

So thanks again for being here and also being on the phone. Let’s get to your questions.

STAFF: Thanks, sir. So we’ll go to questions. (Patrick ?), we’ll start with you.

Q: Thank you.

(Patrick ?) from Defense One. Good to see you again, General.

Can you tell us what happened in the GIDE experiment? And can you also address how you used artificial intelligence in the experiment and your plans for that going forward?

GEN. VANHERCK: Absolutely.

So the experiment — we won’t name nations but let’s just say it was focused on a peer competitor. This time in GIDE 3 we focused a lot on contested logistics, to give us a scenario where maybe a line of communication such as the Panama Canal may be challenged. It enabled us to rapidly collaborate amongst all 11 combatant commands and across the department to see that data and information. We’re taking sensors from around the globe, not only military sensors but commercially available information, and utilizing that for domain awareness.

Specific to your question about artificial intelligence and what I call information dominance, we would take artificial intelligence and use machine learning to take a look and assess, for example, the average number of cars in a parking lot that may be there in a specific location to a competitor or a threat. And we monitor that over a period of time.

The machine learning and the artificial intelligence can detect changes in that and we can set parameters where it will trip an alert to give you the awareness to go take another sensor such as GEOINT on-satellite capability to take a closer look at what might be ongoing in a specific location.

Does that — does that make sense?

Q: Yes. Did that — was it something specifically that you did as part of this experiment —

GEN. VANHERCK: Absolutely. We’ve been doing that for over a year now.

What — what we’ve seen is the ability to get way further what I call left, left of being reactive to actually being proactive. And I’m talking not minutes and hours, I’m talking days.

The ability to see days in advance creates decision space. Decision space for me as an operational commander to potentially posture forces to create deterrence options to provide that to the secretary or even the president. To use messaging, the information space to create deterrence options and messaging and if required to get further ahead and posture ourselves for defeat.

Please.

STAFF: Hey, (Ram ?) go ahead.

Q: Thank you so much. Thanks for taking my question, General.

In this experiment you said all of the 11 combatant commands were involved. Can you talk about how you worked with SPACECOM and what sort of capabilities came online that showed you how you’re going to be able to solve problems moving forward that you wouldn’t be able to solve as easily before?

And then I have a second question.

GEN. VANHERCK: Well, SPACECOM was intimately involved. And SPACECOM is a crucial partner to United States Northern Command and NORAD. We rely on Space Command sensors and capabilities for our threat warning, our attack assessment and the domain awareness that we need to conduct our missions.

SPACECOM was intimately involved in providing sensor awareness, that domain awareness that we talk about. But just as importantly, as you’re creating and coordinating globally to create global dilemmas, to create deterrence, SPACECOM offers unique capabilities for deterrence in the space environment as well. And so the — they work closely to provide deterrence options and de-escalation options against a peer competitor in an experiment like this.

Q: Any specifics to that?

And also, sir, can you give an update on the status of the radars and the missile interceptors that coming online in Alaska?

GEN. VANHERCK: So I can give you specifics.

So for example, SPACECOM can come up with options to potentially hold at risk a competitor’s — not only their terrain on Earth their space capabilities, but also potentially taking a look at domain awareness of space capabilities, where a competitor may be attempting hold our capabilities at risk.

Q: Sorry, and then the update for the radars and the — and missile interceptors in Alaska?

GEN. VANHERCK: So give me the specific question. When — when you —

Q: Oh, sure. The new middle — missile interceptors are coming online in Alaska and new radars that are — that are coming online up there, could you give us an update? Are they on schedule? And what type of capabilities would that bring —

GEN. VANHERCK: Sure, I’ll talk about the interceptors first. But the Missile Defense Agency is really your best point of contact for that.

But the next-generation interceptor is, I think, what you’re talking about. That’s planning on being fielded in 2028. To my knowledge it is absolutely on schedule at this time.

I’m encouraged by the — the — the process that they’ve set up that creates competition and actually rewards innovation and pulling further left to field the capabilities sooner. I’m looking forward to that.

The Missile Defense Agency’s also focused on a new long-range discriminating radar which will be crucial for the missile defense capabilities. And they’re on track with that. They’re in the stages right now of moving into their initial operations capability. I look forward to that coming on line here in the near future.

Q: Thank you, sir.

STAFF: Okay. And let’s go to the phones. (Jack ?), FedScoop.

Q: Yes, thank you. Thank you very much for taking my question — I’ve got a multi-parter here.

But broadly, I’m hoping to know: what’s the difference between what you can take away from the experiments being North America-based versus what other COCOMs can take away on a — on a technical level? And do you have more capability be it in cloud storage or other type of technical abilities that you can have being based here in the U.S. versus a more (austere ?) environment or environment outside the U.S.?

And secondly, what are the cloud capabilities that supported this experiment? And how would the Joint Warfighting Cloud Capability that’s successor to the JEDI contract change what you could actually implement here?

GEN. VANHERCK: So I’ll answer your first part of that. First of all, all 11 combatant commands are using the exactly same environment, single pane of glass. There’s no difference between what United States Northern Command NORAD have than SOUTHCOM, or SPACECOM, or anybody. We’re all collaborating in the same information space using the same exact capabilities.

As far as the technical questions about the specifics of the — you know, the cloud, I don’t have those details to give you. I can get an expert to get back with you on those.

And as far as the policy aspects of JEDI, I won’t go into that. What we’re doing is utilizing capabilities that are available right now. Okay? These are not capabilities for future technology. These capabilities we could absolutely field tomorrow and, I believe, be significantly more capable to create that decision space that I talked about.

I hope that makes sense.

Q: And if I could just — if I could follow-up on that last point. Would having an enterprise cloud that the Joint Warfighting Cloud Capability would provide — is that going to expand the aperture of possibilities here of what, maybe, you could experiment with or eventually implement? And what would that change be to having a (fully enterprised ?) warfighting edge cloud?

GEN. VANHERCK: So to make sure I understand — so the question specific to the cloud and what advantages that would bring in future competition, crisis, and conflict. Is that right?

Q: Correct.

GEN. VANHERCK: Yes, so the cloud brings significant advantages and we’re — we are utilizing cloud. You can actually use multiple clouds and share information, and we’ve demonstrated that.

You know, there’s been a significant focus on having data standards and getting the data right before you share it. What we found, by using the cloud and innovative solutions with innovative companies out there, is that as long as you make the data and information available in the cloud today, we can then share that information from a cloud to any user.

The other advantages, they’re — they’re significant. You can limit who gets access, whether you want foreign nations to have it or select foreign nations. Those are things that you can do with today’s software technology that you can almost do in a matter of hours and days vice months and years through the processes that we’ve typically utilized.

So I’m really encouraged with where we’re going with soft base — software-based capabilities utilizing the cloud.

For my homeland defense design, allies and partners have to be part of the homeland defense design. I don’t want to defend starting in the homeland. I want to defend starting forward.

And using a cloud with an architecture that you can decide, by who logs in, what information they’re going to get and capabilities they’re going to see. That’s incredibly powerful today that you can utilize right now.

STAFF: All right. Jason Sherman, Inside Defense.

Q: Thanks very much. General, what is the — what is the key material component here? What’s the new technology that was demonstrated that — that — that wasn’t available before? Who are the main industry partners supporting you in that? And is there a — is there a trajectory here for a program of record for a new capability that could proliferate across combatant commands?

GEN. VANHERCK: Okay, Jason, thanks. As far as the new technology, I’m not sure there’s new technology here, to be candid with you. You know, Amazon’s been doing it this way — Google. A lot of people have been figuring out how to pool and share data and information.

What — what we’ve done is take it and not approach it from a military or a capability problem. But we approach this from a data and software problem. And we stitched everything together to make this happen.

As far as partners, I’m not going to go into details on what companies. I’m agnostic to who provides these capabilities. We’ve partnered with some exceptional companies out there.

I would also tell you that support from across the department, the Joint Artificial Intelligence Center and Project Maven. Under Secretary of Defense for I&S has been crucial. The Department of the Air Force and their Chief Architect Office provided resources to include funding and personnel, which were tremendously helpful to get us where we are. And of course, all 11 combatant commands.

The last part of your question — I forgot that one. We got the tech and the partners. What was the final portion?

Q: Is — is what — does this package that you’ve put together, like, a definitive shape that leads towards a program of record that you would then kind of replicate across the combatant commands?

GEN. VANHERCK: Yes, so tomorrow I’m going to talk to the Deputy Secretary and we’ll see. And we’ll give her an out brief as well on the way forward.

I wouldn’t think of this as a thing or a — you know, a gadget we’re going to buy and move forward. This is a software-based capabilities utilizing technology that is readily available today.

As far as a program of record, you’re well aware that I’m not an acquisition authority in my combatant command hat. And my ultimate goal would be to hand this off to somebody that can move out, field it sooner than later so that we can collaborate and create decision space and deterrence options for our senior leaders right now.

I don’t know what that’s going to look like, to be candid with you. I’ll talk to the deputy. I’ll talk to the vice chairman. We’ll see what happens in today’s out brief as we move forward.

But I believe in the near future that we can kind of build the bike while we ride it, if you read my recent article.

And what I mean by that is we can use a new paradigm, a new way going forward, and field these capabilities across the combatant commands today, and develop the tactics, techniques, and procedures that oftentimes take us years to develop through developmental testing, operational testing before we field capabilities.

But I believe with software-based capabilities we’re ready to field these and move out. And I think next spring when we do our Globally Integrated Exercise — that’ll be led by the chairman with play across the department — we could validate these capabilities in that exercise.

And those are some things that I’m thinking about and will talk about with the vice chairman and the deputy secretary. But I’m incredibly encouraged that we can move much quicker than we historically have.

Q: Is it fair to say you think there’s a valid requirement for this capability?

GEN. VANHERCK: Absolutely. There’s a — this is JADC2, okay, Joint All-Domain Command and Control. It’s done at the operational and strategic level. You’ve heard the — the vice chairman talk about it. You’ve heard all the services moving out to develop these capabilities.

The primary difference, (Jeff ?), between what I’m doing and what the services are doing is I’m focused at the operational to strategic level. Taking data and information that is available today. That’s key.

This data and information — we’re not creating new capabilities to go get data and information. This information exists from today’s satellites, today’s radar, today’s undersea capabilities, today’s cyber, today’s intel capabilities.

The data exists. What we’re doing is making that data available, making that data available and shared into a cloud where machine learning and artificial intelligence look at it. And they process it really quickly and provide it to decision-makers, which I call decision superiority.

This gives us days of advanced warning and ability to react. Where, in the past, we may not have put eyes on with an analyst of a GEOINT satellite image, now we are doing that within minutes or near real-time. That’s the primary difference that I’m talking about.

STAFF: Thanks, sir. (Oriana ?), military.com.

Q: Thanks so very much. I’m curious how — if you could speak a little bit to this, how this supplements what you all have been trying to do with Canada to upgrade the North Warning System.

I know you had created a bilateral committee to study (what best ?) upgrades you would need. But I’m just curious where that study is and how this may change your framework of how to move forward.

GEN. VANHERCK: Well, the North Warning System is a sensor that provides data and information like any other sensor capability. And so, the North Warning System can be fed into this.

We — we have taken what we developed called Pathfinder and applied that to our North Warning System, not in the data coming out that we get say at our air defense sectors but the raw data. So what we’re doing is now we’re analyzing the physical raw data that comes off those radar sensors.

And that’s very important because what we found is about 98 percent of the data and information was not being actually analyzed or assessed under the prior way we conducted operations.

Now by taking the raw data and applying Pathfinder, which uses machine learning and artificial intelligence, we’re actually able to assess 100 percent of the data. And that gives us a much better capability.

As far as NORAD modernization, those discussions are ongoing. The president — President Biden and Prime Minister Trudeau talked about NORAD modernization in their first meeting. I’m encouraged by that.

Now, we’ve got to move forward at the department level to see what the way forward is for NORAD modernization. Those are policy decisions that I’ll absolutely stay out of. I’ll provide input when asked.

But any sensor capability that NORAD modernization provides such as over-the-horizon radar technology — a polar over-the-horizon radar would be able to fit right into this as long as you make the data and information available to share.

STAFF: All right, (Kristina ?), AWPS.

Q: Thank you for taking my question. So I’m wondering if there are any concerns about self-fulfilling prophecy, where you get into a loop and there’s some assumptions made. Is there a thought about that?

And then I had another question as well — it slips my mind at the moment. So that — that would be the first question.

GEN. VANHERCK: Yes. So I — I think I understand what you’re saying. You’re worried about basically escalating due to use of machine learning artificial intelligence gets us in a loop. Is that correct?

Q: Yes. That — that there is some kind of intrinsic assumptions that are made maybe on — on the human decision-making side. Because you’re getting this information — it’s a lot of information and it’s against a biased perception or a worry that’s about an adversary’s intention.

GEN. VANHERCK: Yes. So, the first thing I would tell you that humans still make all the decisions in what I’m talking about. We don’t have any machines making decisions. Certainly, machines can provide options.

So for example, if you — if you collaborate in real-time and develop deterrence options that utilize force structures such as airplanes or ships, the database can have the information of the readiness, the availability, the capability of those ships available.

So any options you create, you’ll know if they’re available immediately. That’s the advantage of having a cloud and a software environment.

With regards to, you know, the self-fulfilling prophecy, what I’d tell you is I think it’s exactly the opposite.

Today, we end up in a reactive environment because we’re late with the data and information. And so all too often we end up reacting to a competitors move. And in this case, it actually allows us to create deterrence, which creates stability by having awareness sooner of what they’re actually doing.

And you can utilize the information space, pick up the phone, call, and create actual deterrence options by doing so or positioning forces to do that.

So I see this not as something new that would create concern about utilizing this information to escalate. It actually is the opposite.

And — and — and keep in mind that it’s not new information. It’s information that today is just not analyzed and processed until later in the — the — the time cycle, if you will.

And all we’re doing is taking it and sharing it and making it available sooner. So that our key decision-makers will have options vice being reactive where they may be forced to take some kind of escalation option. I hope that makes sense.

Q: Awesome. So my follow-up question is about our international partners. Are there — looking ahead, is there kind of a way in which they would be integrated and there (would be ?) sort of a — a level of integration that would sliding scale, as you might have it, depending on what the scenario is? Or how would that work?

GEN. VANHERCK: Thanks for bringing that up because I didn’t address that. But we actually had partners — our allies and partners play in GIDE 3. So they’re already in with us.

Going forward, as the secretary has said, integrated deterrence is crucial. And integrated deterrence not only relies on all levers of national influence that we have here in the United States but it also relies on a network of allies and partners, which is our asymmetric advantage globally, in my mind.

And so absolutely, they have to be part of this. They have to be brought in. I met with the Supreme Allied Commander Transformation General Lanata as well. And they see it the same way. They’re encouraged by where we’re going. They’re all in with his hat as well from a NATO perspective. I think that is crucial.

From my homeland defense design — and I — I already alluded to this a little bit. You know, I don’t want to be shooting down cruise missiles over the National Capital Region or in our — in our country.

I believe the best way to keep a safe homeland is to have that network of allies and partners — that integrated deterrence that Secretary Austin talks about — and with my fellow combatant commands to have a global and all-domain picture to create deterrence and focus on competition.

But if required, the way you defend the homeland is, prior to that threat becoming a threat to the homeland, you give options to our senior leaders to negate that, whether that be through deterrence, de-escalating, or — if required — defeating.

STAFF: Lara, Politico.

Q: Hey, (Marty ?). Thanks, General, for doing this. I wanted to ask two questions, one on this experiment. Can you tell me — can you provide us any detail on upcoming experiments? I think this is third one. Is there a fourth one planned and when is that happening?

And then, it’s sort of off topic, but hoping you can answer some questions about the COVID response, as NORTHCOM the coordinator for that — that response, I believe.

Can you tell us whether you anticipate mandating the troops get vaccinated? And sort of following on that, if the — if the federal government mandates the vaccine, can you explain whether the troops and DOD civilians are automatically included in that mandate?

Thank you.

GEN. VANHERCK: Okay, thanks, Lara.

First on your question, certainly we’re looking to the future and what a Global Information Dominance Experiment 4 would look like. We haven’t scheduled it.

I’ll figure out the way forward after we meet today with the — at the out brief and I talk to the deputy and the vice chairman in the near future on the way forward. That, kind of, ties back to my overarching question — or comments earlier about the future of fielding this and the way forward. But we look forward to moving the ball down the field.

With regards to COVID, first I can tell you that I’m really proud of United States Northern Command, our team, all of the department for our response.

You know, we had over 20,000 personnel respond across over the last 15, 16 months. Providing support to the lead federal agencies in their response, whether that be from repatriating citizens that were coming from overseas, the cruise ships as you remember, embedding into hospitals, and providing nearly 5 million vaccines across the nation. So I’m proud of that.

With regards to your policy questions, I’m aware of the reports on the street. I’ll defer to OSD on the specific policy on mask mandate and wearing. That’s not my call.

I will tell you though, I’m incredibly proud of what our teammates here at the United States Northern Command and NORAD have done. We’re nearly 90 percent vaccinated in our headquarters. That’s significant, 90 percent. Okay?

When you look across the nation, the vaccine works. If you look hospitalization rates, you look at death rates right now from COVID the vast majority — high percentages are form unvaccinated.

And so, I’m encouraged by that. I’ll defer to policy on the mask wear. CDC obviously will get a piece of that and the department. I have ultimate confidence they’ll put out health protection guidance. And we’ll follow that policy.

Q: So I wasn’t actually asking about the mask mandate. I was asking about a vaccine mandate for — for troops. And I understand if you can’t get ahead of any announcements. But can you say that — if there is a mandate for federal workers, does that mean that U.S. troops and DOD civilians are automatically included in that or would that be a different discussion?

GEN. VANHERCK: Lara, I don’t know from my combatant command position. I’m — my awareness on this is probably just what yours is — what I’ve read in the media.

We’ll see what the president comes out with as far as direction and what that direction is to the department, and I’ll salute smartly to Secretary Austin’s guidance, and we’ll move out. I will tell you, I’ll go back to my comments. The vaccine works. We continue to encourage people to — to take the vaccine, moving forward.

STAFF: Okay, (Anson ?), Asashi Shimbun. Might have lost him.

(Jonathan, DOD News ?).

All right, Abraham Mahshie.

Q: Thank you, sir.

I wonder if you could detail any of the challenges or lessons learned from this experiment. And also, how did you work with INDOPACOM during the experiment?

GEN. VANHERCK: Yeah, so INDOPACOM — I’ll address the second — was absolutely all-in and a great partner in this experiment. We did focus to the West this time. I will tell you that. And INDOPACOM was critical to being part of the overall solution.

As far as — remind me the first one. I should —

Q: Challenges and lessons learned.

GEN. VANHERCK: Challenges, so challenges. Let me just talk real quick about that. So I — I think some of the challenges — we first have to have secure network and backbone to ride on. And so CYBERCOM understands that, National Security Agency — everybody understands that. So going forward, the I.T. infrastructure has to be secure and reliable to execute future data and information capability. So I think that’s something we have to focus on.

I also think that we need to build confidence and understanding of A.I. and machine learning across not only the department, but within Congress and the American people to ensure they understand that machines aren’t making decisions. We’re not relying on computers to take us to create deterrence options or defeat options.

I do think a challenge is that we have to work simultaneously while we build the bike while we ride it, if you will, is to work in the policy aspect and the law aspect, where what we don’t want to do is field capabilities, and the policy and the laws have not kept up with the capabilities that we have, or there’s a lack of competence in the capabilities, or trust, more importantly, with the American people and Congress, and within the department.

So those are things that we’ll continue to work. I’m heavily-engaged when I do my posture hearings and talking to the congressional members on the committees about the — the future of data and information.

Q: When you say policy keeping up, can you be more specific?

GEN. VANHERCK: Policy with regards to the use of artificial intelligence, machine learning to ensure that the data-sharing is available. So for example, in the intelligence communities, you know, historically, we’ve taken that intelligence. We’ve allowed an analyst to pore over that for days, sometimes, before we made that intelligence available. We may have to make that intelligence available sooner in the future by sharing the raw data, the real-time data, and allowing machines to look at that data, things that today, analyst may do. The machine can take a look and tell you exactly how many cars are in a parking lot, or how many airplanes are parked on a ramp, or if the submarine’s getting ready to leave, or if a missile’s going to launch. Where that may have taken days before, or hours, today, it can take seconds or less than minutes. Those are policy issues that we’ll have to sort through and build trust and confidence.

Q: Thank you, sir.

Q: Thanks. This is a question that — that might annoy you. When you go about this cloud environment, the point of the JEDI contract was to move the department away from a federation of little, tiny clouds that didn’t connect well, had bad APIs, to a cloud environment that represented, like, best of what was available in industry, so really, large — a — a coherent cloud environment on par with Amazon, Google or Microsoft. For this experiment, did you use a — a large, coherent, singular cloud environment, or maybe a multi-cloud environment of two large clouds, or was it a multi-cloud environment of lots of little clouds, all stitched together?

GEN. VANHERCK: I don’t that information, but I am not the technical expert on this. I would tell you, I think there’s multiple clouds. I’m agnostic to how we do this, candidly. Ultimately, these capabilities, as long as there’s a cloud to share information that can accept that data and information, the tools that we can utilize for A.I. and M.L. can be applied, and then you can share that data. But I — I don’t have those. I’m — I’m sorry. I don’t have that technical data.

Q: Thank you.

STAFF: All right, sir, over to you for closing comments.

GEN. VANHERCK: Okay, great. Hey — hey, thanks for being here, everybody. I appreciate your time. I’d love to have a — a room full. I think we have an important message at NORAD and NORTHCOM: Defending our homelands is an absolutely noble mission that we do each and every day, and providing support to our civil authorities and the people of our nation, so I think that’s — that’s about as noble as it gets.

You know, I’m really encouraged with where the secretary’s going with the integrated deterrence as he continues to talking about that. I think we — we must shift away from focusing on conflict and create deterrence during competition. I think that’s where the secretary’s going, and that competition involves all levels of national influence. It involves our allies and partners, and it involves all the combatant commands on a daily basis.

My homeland defense design is set up perfect for that, and this experiment, Global Information Dominance Experiment and the capabilities feed right into that to give the secretary exactly what he needs to have that global integrated deterrence, and what our combatant commanders need to create those deterrence options in day-to-day competition, de-escalation options in crisis, and if we have to fight, defeat options in conflict.

So I appreciate your time.