Year: 2026

Note: I am travelling with limited equipment and internet access. Postings will thus be sporadic.

Trump Vows 25% Tariff on Countries Doing Business With Iran

Trump posted on social media on Monday that the new duty would be “effective immediately,” without providing details about the scope or implementation of the charges. The action has the potential to disrupt major US trading relationships across the globe. Iran’s partners include not only neighboring states, but large economies including India, Turkey and China.

“Any Country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America. This Order is final and conclusive,” he said. (…)

An additional 25% tariff hitting products from Beijing risks upsetting the trade truce Trump negotiated with Chinese President Xi Jinping late last year. China is the world’s top buyer of Iranian crude and the nation’s independent refiners were increasing their intake of the oil as of last month. (…)

I’m curious how China will interpret “conclusive”.

Trump Administration Nears Trade Deal With Taiwan The deal would cut tariffs and include a commitment from Taiwanese Semiconductor Manufacturing Corporation, the island’s chip giant, to build more manufacturing plants in the United States.

(…) The deal would reduce the U.S. tariff rate, to 15 percent, for goods from the island, the people said. That rate is in line with imports from Japan and South Korea, Asian allies that struck deals last year.

As part of the deal, TSMC would also commit to building at least five more semiconductor facilities, or fabs, in Arizona, roughly doubling the number of plants it has in the state, one of the people said. The timeline for the investments was not immediately clear. (…)

TSMC, the world’s pre-eminent chipmaker, has completed one plant in Arizona since 2020; is completing a second, which will open in 2028; and has promised to build four more in the coming years. But as part of the U.S.-Taiwanese trade talks, it agreed to add at least five more.

US Small-Business Optimism Edges Higher on Economic Outlook

The National Federation of Independent Business optimism index rose 0.5 point to a four-month high of 99.5, according to figures released Tuesday. Two of the 10 components that make up the gauge increased, while three decreased. Five were unchanged.

A net 24% of owners said they expect business conditions to improve in the next six months, the primary driver of the overall index increase. That was 9 percentage points higher than in November, but just the first increase since July.

Meanwhile, both actual and planned price increases fell in December. The net share of owners raising average selling prices fell 4 points to 30%. Though this remains well above the historical average of a net 13%, it suggests that inflationary pressures eased somewhat.

The National Federation of Independent Business optimism index rose 0.5 point to a four-month high of 99.5, according to figures released Tuesday. Two of the 10 components that make up the gauge increased, while three decreased. Five were unchanged.

A net 24% of owners said they expect business conditions to improve in the next six months, the primary driver of the overall index increase. That was 9 percentage points higher than in November, but just the first increase since July.

Meanwhile, both actual and planned price increases fell in December. The net share of owners raising average selling prices fell 4 points to 30%. Though this remains well above the historical average of a net 13%, it suggests that inflationary pressures eased somewhat. (…)

Lawfare for Dummies, Monetary Edition DOJ’s criminal subpoena to Fed Chair Jerome Powell is a self-defeating fiasco.

(…) In the annals of political lawfare there’s dumb, and then there’s the criminal subpoena federal prosecutors delivered Friday to Federal Reserve Chairman Jerome Powell. President Trump would do himself and the country a big favor by firing those responsible for this fiasco. (…)

Mr. Trump said this weekend he didn’t know about the subpoena, which would be the first time he hasn’t been involved with DOJ decisions regarding his opponents. He has long signaled his dislike for Mr. Powell. This episode smacks of loyal underlings trying to curry favor with the President by doing what they think he would want.

Mr. Trump has made a routine of criticizing Mr. Powell for not cutting interest rates fast enough, despite having cut three times in recent months. Mr. Pulte is an especially eager toady, having led the campaign to unseat Fed Governor Lisa Cook on unproven allegations of mortgage fraud, in hopes of stacking the board with more accommodating members.

This brings to mind the medieval episode of England’s King Henry II idly importuning some knights to rid him of Archbishop Thomas Becket, only to be surprised when they actually did it. That historical episode proved self-defeating for the king (Becket became a saint and Henry lost his fight for supremacy over the church), and this one may not work out better for Mr. Trump.

His saner advisers are worried that Wall Street will view this as an attack on the Fed’s institutional independence, which it is. Markets reacted calmly on Monday, though the dollar fell and bond yields rose as a bet on more inflation. Whatever you think about Mr. Powell or central-bank independence, the way to change the Fed’s legal status is through legislation, not a criminal prosecution of dubious merit.

This ploy may backfire on Mr. Trump’s plans for the Fed. Mr. Powell’s term as chairman ends in May, but his seat on the Board of Governors doesn’t expire until 2028. He issued a defiant statement about the subpoena Sunday night, describing it as a pretextual political assault on the Fed.

Mr. Powell isn’t required to leave the Fed when his chairmanship ends, and Mr. Powell may now feel he needs to stay to avoid the appearance that the White House can bully Fed officials. That would deny Mr. Trump a second appointment to the Fed board.

Mr. Trump also is alienating Senators who will judge his nominees for confirmation. Sen. Thom Tillis (R., N.C.), a member of the Banking Committee, said Sunday he’ll block a Trump nominee for Fed Chair until this legal matter is resolved. Mr. Trump needs to call time on this self-defeating scheme, with a message to Ms. Bondi to halt the legal harassment. Firing Mr. Pulte before he can cause any more embarrassment would also help.

Americans elected Mr. Trump to reduce inflation, and he and Republicans have 10 months until the elections to show progress. Picking a fight with the Fed—and the bond market—over an issue that voters will find confusing and irrelevant is lawfare for dummies.

AI ROADBLOCKS: POWER PLAY

America’s Biggest Power Grid Operator Has an AI Problem—Too Many Data Centers Increasing demand from tech industry threatens to max out generation capacity in 13-state region; rate increases anger consumers

America’s AI boom is pushing the nation’s largest power-grid operator to the brink of a supply crisis.

Sixty-seven million people in a 13-state region stretching from New Jersey to Kentucky get their power from a market operated by nonprofit PJM. So, too, do the many AI data centers springing up in Northern Virginia’s “Data Center Alley,” which have a bottomless appetite for electricity.

Rates are going up for consumers. Older power plants are going out of service faster than new ones can be built. And the grid’s capacity is in danger of maxing out during periods of high demand, which could force PJM to call for rolling blackouts during heat waves or deep freezes to avoid damaging grid infrastructure.

Mark Christie, former chairman of the Federal Energy Regulatory Commission, said that a few years ago he considered the PJM blackout threat to be on the horizon. “Now I’m saying that the reliability risk is across the street,” he said.

PJM expects power demand to grow by 4.8% a year, on average, for the next decade—an astonishing pace for a system that hasn’t had substantial demand growth in years.

Consumers are furious about the rate increases. And tech companies, including Amazon, Alphabet and Microsoft, have fought against proposed rules that would require data centers to build their own power sources or go dark during demand surges.

Potential solutions to PJM’s problems are complex, controversial and nearly impossible to implement quickly. Adding to the challenge: The organization’s longtime chief executive, Manu Asthana, stepped down at the end of 2025 with no successor yet in place. PJM board chairman David Mills will serve as interim CEO until a replacement is chosen.

“The reliability challenges facing the grid are real, but they are not unsolvable,” Mills said in a written statement. PJM is coordinating with policymakers, regulators and industry, he said, to align investments in power generation and transmission with increasing demand. (…)

Other regions of the country are also seeing a surge in power demand tied to data centers. West Texas and the parts of the Southeast and the Southwest are becoming home to massive facilities. Power demand forecasts vary widely, but analysts expect significant growth in the coming years. An analysis by consulting firm ICF forecasts U.S. power demand in 2030 will be 25% higher than it was in 2023, largely because of data center needs. (…)

“One of the fundamental problems that PJM faces is political,” said Christie, the former FERC chairman. “You’ve got 13 different states with 13 very different policies about what kind of generation they want, and about who can build generation.” (…)

In September, PJM released proposals meant to balance data-center needs with those of other customers, including one that would cut power to data centers during times of extreme strain on the grid. That one included possible exceptions for data centers that either arrange for their own power supplies or volunteer to participate in demand response.

Amazon, Google, Microsoft and others said parts of that proposal discriminated against data centers. They opposed almost every facet of it, expressing concern about the prospect of being cut off from the grid, the cost of building power plants and the feasibility of powering down.

Tech companies put forward counterproposals that would make building power plants or going offline strictly voluntary for data centers within PJM.

In November, efforts to establish new rules for data centers stalled when PJM executives, tech companies, power suppliers, utilities and the independent monitor that oversees the market couldn’t agree on a plan. PJM’s board of managers is now working to propose one.

The market monitor, Joseph Bowring, has urged federal regulators to intervene. In a complaint filed with the Federal Energy Regulatory Commission, the monitor said PJM should stop admitting new data centers to the grid unless there are enough power plants and transmission lines to serve them.

Bowring’s firm, Monitoring Analytics, has been sounding the same warning for months.

Unless data centers bring their own power supply, the firm said in a letter to the grid operator in November, “PJM will be in the position of allocating blackouts rather than ensuring reliability.”

• Trump Takes Populist Economic Platform to Battleground Michigan

(…) “Late Monday, Trump said in a post that he wanted to ensure that “big Technology Companies” don’t leave consumers with higher utility bills as the result of a surge in data center construction linked to the artificial intelligence boom.” (…)

Polling shows that Trump’s approval ratings have declined since he took office. About 40% of voters approve of the way he’s handling the presidency, compared with 54% who disapprove, according to a Quinnipiac University poll released last month. Just over one-third of voters characterized the state of the economy as “excellent” or “good” while 65% described it as “not so good” or “poor.” (…)

It’s not clear if Trump plans to increase his travel to battleground states after Michigan. Ten months out from the midterms, a Republican close to the White House expressed confidence that the party could hold the Senate, but was more skeptical about maintaining a majority in the House. The White House should have been more sensitive to the significance of prices and cost-of-living issues to voters, given that similar frustration over the economy drove voters toward Trump in 2024, the person said.

Microsoft warns that China is winning AI race outside the west DeepSeek’s technology is being rapidly adopted across Africa and beyond, tech group’s research shows

Microsoft has warned that US AI groups are being outpaced by Chinese rivals in the battle for users outside the west, as China combines low-cost “open” models with hefty state subsidies to gain an edge. Brad Smith, Microsoft’s president, told the FT that the rapid adoption of Chinese AI start-up DeepSeek’s technology in emerging markets such as Africa underscores the competition American firms face around the world. 

“We have to recognise that right now, unlike a year ago, China has an open-source model, and increasingly more than one, that is competitive,” he said. “They benefit from subsidisation by the Chinese government. They benefit from subsidies that enable [them] to basically undercut American companies based on price.”

In contrast, US tech groups such as OpenAI, Google and Anthropic have instead focused on maintaining full control of their most advanced technology, profiting from it through customer subscriptions or enterprise deals.

Microsoft’s research, which is based on usage data from the tech group’s products, estimated the Chinese group has an 18 per cent share of the AI market in Ethiopia and 17 per cent in Zimbabwe. 

Smith said African countries would need broader investment from “international development banks” or “lending facilities” in order to build data centres and subsidise electricity costs. “If we rely on private capital flows alone, I don’t think that will be sufficient to compete with a competitor that is subsidised to the degree that Chinese companies often are, especially in those parts of the world,” he said. 

However, Bright Simons, vice-president at the IMANI think-tank in Ghana and an expert on AI, said there was no “scientifically rigorous way” to determine whether DeepSeek was forging ahead in Africa, but that open-source Chinese AI systems offered cheap alternatives.

“Africans can’t afford very expensive solutions apart from open source, so you have to go to [Meta’s] Llama or Chinese options,” he said.

They were also using homegrown small language models, such as Masakhane, a pan-African model, and the South African InkubaLM, he said.

Microsoft’s research also found that in countries where US technology products are limited or restricted, DeepSeek had gained a considerable lead, with a 56 per cent market share in Belarus, 49 per cent in Cuba and 43 per cent in Russia. (…)

Microsoft’s research showed that AI adoption is currently concentrated in developed countries, with nearly a quarter of the global north using AI in the fourth quarter of 2025, compared to 14 per cent of the global south, and 16 per cent globally. (…)

“What we do have is, as American companies, a stronger reputation for trust. We have access to better chips than the Chinese companies do . . . [but] you always have to compete on price,” he added. (…)

Not just a question of price and “subsidies” Mr. Smith. Open source is clearly winning. In this chart OpenAi is the only closed LLM.

December Jobs Report: Deteriorating Trend Continues

Nonfarm payroll growth registered 50K in December, a bit weaker than the consensus forecast, while revisions to job growth in the prior two months were a combined -76K. (…)

The cooling in the labor market still appears to be proceeding, but at a gradual and orderly pace. This likely will leave the FOMC on hold at its upcoming meeting on January 28. (…)

Source: U.S. Department of Labor and Wells Fargo Economics

The three-month average pace of net new job creation was -22K in December after incorporating revisions. (…)

Source: U.S. Department of Labor and Wells Fargo Economics

Wage growth finished 2025 up 3.8%, a reading that is in the “sweet spot” in our view. Average hourly earning growth is running about a percentage point faster than inflation, helping to propel growth in consumer spending, but it is not so strong that we view it as an upside risk to inflation. The solid pace of labor productivity growth over the past few years is a major help. (…)

Employers added 584,000 new jobs in 2025, about 49,000 jobs a month, on average vs 168,000 in 2024.

Private sector job gains over the past three months averaged 29k vs the 6 month average of 43k, the 2025 average of 61k and vs the 2024 average of 130k. The pre-Covid average was 177k per month. Manufacturing employment logged its eighth straight month of declines, meaning the U.S. has steadily lost 72,000 manufacturing jobs since Trump announced “Liberation Day” tariffs.

Over the three-year period since January 2023, private education and healthcare services, leisure and hospitality and government together accounted for 93% of the 5.2m jobs added in the US economy.

All other sectors, (tech, construction, manufacturing, business services, financial services, retail, transport and logistics, nearly 60% of all employment and generally the most dynamic sectors) created only 7% of the jobs during that period. In December, this group actually lost 51k jobs and has only seen one up month out of the past eight. 

Private employers’ so called “no hiring-no firing” policy is making them cut the average workweek to its historical low ex-recession. Worryingly, the only two job creating private groups in 2025 significantly cut average hours since 2024 well below historical levels, actually reaching the depth of the 2009-09 recession.

Labor demand (jobs x hours) for these two groups is slowing rapidly, from +2.9% in 2024 to +2.1% in H1’25 to +1.8% in Q4’25. Hiring while reducing hours can only go so far.

The BLS revised the previous 2 months down 76k, validating Powell’s estimate that the Bureau is overestimating payrolls growth by around 60k per month. Looking over the past six months, non-farm payrolls growth has averaged just 14,500, so adjusting for Chair Powell’s assessment on the measurement error, this implies the US is losing more than 45,000 jobs per month.

This economy is not as solid as the GDP numbers suggest. Thank the 76 million baby boomers for aging…

… and spending as Ed Yardeni says that this large and growing cohort is helping bring the US savings rate down.

But a recent study by the Teachers Insurance and Annuity Association of America suggests caution on this belief:

The study finds that contrary to standard economic life-cycle theoretical models that predict gradual asset decumulation to support consumption in retirement, many retirees retain substantial financial wealth in later life.

The median retiree retains approximately 68% of their age-65 wealth by age 72, and 40% of 65-year olds increase their wealth holdings by age 72.

Financial literacy emerges as a crucial factor, with highly literate retirees beginning retirement with more wealth, decumulating more slowly, and being significantly more likely to accumulate additional assets during retirement.

Asset type matters more than overall wealth level in determining decumulation speed and patterns.

From a consumer spending viewpoint, job growth, looked at quarterly, has disappeared, and even turned negative in Q4, leaving only wages to keep labor income growth near 4.0% annualized.

Labor income growth has slowed from 5.3% YoY in the spring of 2025 to 4.3% in Q4 while inflation has crept up from 2.3% to 2.8%. Real consumer spending is thus likely slowing below 1.5% entering 2026.

In fact, wage growth could slow to or below 3% in 2026 per this KKR chart:

Three percent wage growth, stable hours and zero job gains would likely slow consumer spending near stall speed unless inflation recedes meaningfully.

Trump’s efforts to increase affordability for the mid to low classes may be politically motivated but the economy actually needs it more than most people think. Not that the measures are all smart though…

• President Calls for 10% Cap on Credit-Card Interest Rates

• Trump’s $200 Billion MBS Order Asserts New Power Over Markets The purchases could exert meaningful pressure on mortgage rates.

• Trump Blindsides Wall Street Allies With Crackdown on Housing Investors

• The president said he would unveil more details on housing

• The US ended the year with an effective tariff rate of more than 10% — the highest since WW2 (Financial Times)

  

… nor usual for a truly capitalistic country.

BTW, “The US government hasn’t taken a direct stake in a healthy commercial firm since at least the 1950s. This year, it’s taken FOURTEEN, and more are on the way.” (@scottlincicome)

Trump’s Investigation of Powell Is Also a Warning to the Next Fed Chair The investigation reflects the lengths to which the president will go to control the central bank

The criminal investigation into Federal Reserve Chair Jerome Powell isn’t ultimately about the Fed’s headquarters, or Powell, or even interest rates. It’s about power. President Trump intends to take control of the central bank, no matter what the law or the courts say.

In that sense, the investigation is also a message to whoever succeeds Powell, likely either Trump adviser Kevin Hassett or former Fed governor Kevin Warsh. Both claim they will be independent. But if either sets interest rates contrary to Trump’s desires, they can expect the same treatment as Powell. That’s a powerful incentive to stay in line.

Since returning to power a year ago, Trump has steadily obliterated the lines that once separated the president from other sources of federal authority. He fired Democratic members of agencies such as the Federal Trade Commission contrary to law, sacked career officials in justice, defense and law enforcement deemed insufficiently loyal, and trampled on Congress’ authority over spending and revenue.

The Fed was an exception. Because politicians always want lower interest rates, which can lead to inflation, the Fed, by law and tradition, operates independently from the president and Congress. Presidents have pressured the Fed anyway, but usually behind closed doors, while publicly claiming to respect its independence.

Not Trump. He insists he should have some say over interest rates, and many in his administration consider independence antithetical to the president’s supreme authority over the executive branch. (…)

The Supreme Court signaled it wouldn’t allow Trump to fire Powell or any of the other six governors without cause.

Undeterred, Trump has simply sought to engineer a cause. In August he tried to fire governor Lisa Cook for alleged mortgage application misrepresentations. Cook denied the allegations and has remained on the Fed while awaiting the Supreme Court to rule on the legality of Trump’s action.

Trump made it clear his goal was to replace Cook with a loyalist in order to get control of the seven-member board of governors, who, along with five of 12 reserve bank presidents, vote on interest rates. “Once we have a majority, housing is gonna swing and it’s gonna be great,” he said at the time.

This latest attack looks similar in design and intent. “Trump wants not just lower rates, but control of the board,” Mark Spindel, a Fed historian, said Sunday. Treasury Secretary Scott “Bessent and Trump want their hands on the institution” to make more sweeping changes, such as to how the Fed supervises banks or uses its balance sheet to intervene in markets, he said.

Bill Pulte, director of the Federal Housing Finance Agency and one of Trump’s most partisan officials, kicked off the campaign attacking Powell for cost overruns on renovations to the Fed’s headquarters. The DOJ is scrutinizing Powell’s testimony to Congress on the project.

Powell said this is a pretext for his refusal to bend to Trump’s wishes. Trump denied that to NBC News Sunday. Still, it is hard to explain the ferocity with which the administration has attacked Powell any other way.

Federal projects, including Trump’s, routinely go over budget, without comparable recriminations. The price tag on Trump’s White House ballroom has already doubled, to up to $400 million from $200 million (albeit to be paid by private donors). He said before his first term that a border wall would cost $8 billion to $12 billion and Mexico would pay. Mexico didn’t pay, and more than $60 billion has now been earmarked for the project.

Legislators often complain that witnesses lie or mislead. Yet that seldom results in prosecution—especially of the administration’s own appointees.

To secure conviction, prosecutors must prove a falsehood was made “knowingly and willfully” and be “materially” false, fictitious or fraudulent. 

Two former allies of Trump were accused of lying to Congress during his first term. Last year Trump pressured the Justice Department to indict former Federal Bureau of Investigation director James Comey, a Trump adversary, for lying to Congress. A federal judge dismissed the charges, ruling that the prosecutor Trump chose to bring the cases was unlawfully appointed.

It is unclear whether Powell will ultimately be indicted, much less convicted. Powell’s statement Sunday signaled he is refusing to be cowed, which means, for now, interest-rate policy shouldn’t change.

That Trump officials are going after Powell without awaiting the Supreme Court’s decision on Cook’s removal reflects their determination to break the Fed’s independence. They may succeed, even if they fail in court. The message to all Fed officials is that defying Trump is an invitation to have their backgrounds and public statements investigated for a pretext for removal. Given that, who would wish to serve? Presumably, only someone ready to deliver what Trump wants.

Bloomberg:

President Donald Trump faced immediate bipartisan pushback Sunday night after Federal Reserve Chair Jerome Powell accused the Department of Justice of launching a grand jury investigation as a pretext to pressure and intimidate the central bank.

Senator Thom Tillis, a key Republican on the Banking Committee who isn’t running for reelection, vowed to oppose any Trump nominees to the Fed until the matter is resolved.

“If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis said in a statement. “It is now the independence and credibility of the Department of Justice that are in question.”

“I will oppose the confirmation of any nominee for the Fed — including the upcoming Fed Chair vacancy — until this legal matter is fully resolved,” said Tillis, who also sits on the Judiciary Committee, which has oversight over the Justice Department.

Iran Edges Closer to a Revolution That Would Reshape the World If the uprising succeeds in toppling the Islamic Republic, it would upend global geopolitics and energy markets — with the risk of widespread chaos.

As protesters pour into the streets of Iran night after night, leaders across the region and around the world are grappling with the possibility that the Islamic Republic could be overthrown — a seminal event that would transform global geopolitics and energy markets.

The regime of Supreme Leader Ayatollah Ali Khamenei has weathered bouts of protests many times, but demonstrations that began two weeks ago are spreading — by some accounts, hundreds of thousands of people defied authorities’ threats and a brutal crackdown to take to the streets over the weekend, from the capital Tehran to dozens of other cities across the nation of 90 million.

They are being cheered on by President Donald Trump, fresh off the capture of Venezuela’s Nicolas Maduro, and the US leader has in recent days repeatedly threatened to strike Iran, suggesting that America is back in the regime change business. (…)

Brent crude surged more than 5% on Thursday and Friday to over $63 a barrel as investors priced in the possibility of supply disruptions in OPEC’s fourth-biggest producer. (…)

More than 500 protesters have been killed in the past two weeks, according to the AP, citing the US-based Human Rights Activists News Agency, and more than 10,000 have been arrested in demonstrations triggered by a currency crisis and economic collapse, but now also focused on the regime.

Authorities have tried to block the internet and telephone networks since Thursday, as they seek to quell Iranians’ growing outrage over government corruption, economic mismanagement and repression. Foreign airlines have canceled flights to the country.

Trump’s repeated warnings to Iran that the US will strike if it kills peaceful protesters come as the president escalates his assault on the post-World War II global order in a stunning assertion of American power that’s included claiming Venezuela’s oil after seizing Maduro, and threatening to take over Greenland from NATO ally Denmark.

Israel, which battered Iran during a US-assisted 12-day air war in June, is liaising closely with European governments about the situation on the ground, according to a senior European official, who asked not to be named discussing private talks.

If the regime does fall, it would be a blow to Russian President Vladimir Putin, who would lose another foreign ally after Maduro this month and the overthrow of Syria’s Bashar al-Assad just over a year ago, the official added. (…)

On Saturday, Reza Pahlavi, the son of the former shah who’s exiled in the US and positioning himself as an opposition leader, urged petroleum workers to strike. Oil strikes in 1978 were one of the death knells of his father’s monarchy because of how they immediately hit the economy. (…)

Trump may well be tempted, for all the risks, to try to topple a government that’s been an archenemy to the US and Israel for over 45 years.

“The balance of power would change dramatically,” Mark Mobius, the veteran emerging markets investor, said of the downfall of the Islamic Republic. “The best outcome would be a complete change in the government. The worst outcome would be continued internal conflict and a continuing rule by the current regime.” (…)

Iran has warned that if it’s attacked, American assets in the region — where it has deep commercial ties and tens of thousands of troops stationed — and Israel will be “legitimate targets for us.”

The Islamic Republic has been severely weakened in the past two years, thanks to its stagnating economy, rampant inflation and Israel striking both it and its proxies. But it retains a large and sophisticated arsenal of ballistic missiles able to hit targets across the Middle East, from military bases to oil installations, and the regime still has the backing of the country’s myriad security forces, including the all-important Islamic Revolutionary Guard Corps.

For the GCC and the likes of Turkey and Pakistan, the worst outcome would be chaos in Iran, said Ellie Geranmayeh, deputy program director for the Middle East and North Africa at the European Council on Foreign Relations. It’s an eventuality made more possible by the sheer diversity of Iranian protesters, who include everyone from urban, secular elites to religious conservatives and lack a unifying leader. (…)

US and Israeli strikes might even strengthen the government and reduce the appeal of the protest movement. In June, there was a surge in nationalism as the Jewish state and Washington rained down bombs.

The Islamic Republic probably won’t survive in its current form by the end of 2026, according to Dina Esfandiary, a Middle East analyst at Bloomberg Economics. The most likely scenario, she said, is a leadership reshuffle that largely preserves the system or a coup by the IRGC, which could mean greater social freedom — the organization is run by generals rather than clerics — but less political liberty and a more militaristic foreign policy.

The chances of a revolution are still fairly low, she said.

“A collapse appears unlikely for now,” she said. “Iranians are frightened of chaos, having seen it wreak havoc in neighboring Iraq and Syria. More importantly, the government is cracking down hard.”

“I don’t think a collapse of the regime would be pretty,” said Usher, the former CIA analyst. “Short-term, I could imagine some fracturing of the country as ethnic minority groups and some provinces pursue autonomy from Tehran. The IRGC will fight vigorously to save the regime so I think there’d be strong possibility for large-scale violence.”

Meanwhile in the US of A,

1. Trump to The New York Times, when asked if there are any checks on his global ambitions: “Yeah, there is one thing. My own morality. My own mind. It’s the only thing that can stop me.”
2. Stephen Miller to CNN’s Jake Tapper: “[Y]ou can talk all you want about international niceties and everything else. But we live in a world, in the real world, Jake, that is governed by strength, that is governed by force, that is governed by power.”

A while ago, upon the foundation of the Republic:

• “the very definition of a Republic, is ‘an Empire of Laws, and not of men.’”
• “the best republican design is the one that secures an impartial and exact execution of the laws.”
• “disorder tends to rise with despotism, where the will of one man, is the only law.”

(John Adams in in Thoughts on Government in 1776).

Abraham Lincoln took this further by proposing that “reverence for the laws” should become the “political religion” of the nation. In his Lyceum Address, he urged that this respect for law be:​

• “Breathed by every American mother to the lisping babe”

• “Preached from the pulpit”

• “Proclaimed in legislative halls, and enforced in courts of justice”

Lincoln warned that if the laws are ignored, the people will lose their attachment to the government, eventually welcoming a dictator who promises order.

‘Ho-Hum’ Canada Jobs Report Shows Unemployment Reverting to 6.8%

Employment rose by 8,200 in December, bringing cumulative job gains to 188,800 over the past four months, Statistics Canada reported Friday. The jobless rate, however, jumped 0.3 percentage points to 6.8%, mostly reversing a decrease the previous month.

An influx of 81,000 people into the labor force in December, the biggest jump since late 2024 and concentrated in Ontario and Quebec, helped push unemployment higher. The participation rate rose to 65.4%.

Most of the people who joined the labor force last month didn’t find jobs, pushing unemployment up by 72,900, the biggest monthly increase since August 2022.

The relatively weak report comes after three straight months of surprisingly strong job gains, which reversed steep losses over Canada’s summer months. Taken together, the data point to an economy clearly feeling the strain of the trade dispute with the US.

In total, Canada added 226,300 jobs in 2025, a 1.1% gain that was the weakest annual pace for a calendar year since 2016, excluding the pandemic. Job vacancies also fell through most of the year, pointing to softer hiring demand, the statistics agency said.

Yearly wage growth for permanent employees decelerated to 3.7%.