The Next Fed Chair: Trump's High-Stakes Economic Choice

Spain is launching a €10.5 billion ($12.2 billion) sovereign investment fund to sustain economic momentum as the European Union's post-pandemic recovery program concludes.

Prime Minister Pedro Sanchez announced the initiative, designed to ensure Spain's growth trajectory continues after the EU's Next Generation funds expire in 2026.

"We're going to create a major sovereign fund that will take over from the Next Generation funds and extend their momentum, making their legacy endure beyond 2026," Sanchez stated at an investor event in Madrid.

The "Spain Grows Fund": Key Objectives

The new fund will be backed by "European funds" and is engineered to attract significant private capital from both domestic and overseas investors. The government's goal is to leverage the initial state investment to generate a total of up to €120 billion.

Key sectors targeted for investment include:

• Energy

• Infrastructure

• Housing

• Security

This strategic focus aims to modernize critical areas of the Spanish economy while building on the foundation laid by previous EU support.

A Shift from EU Lifeline to National Strategy

Spain has been one of the primary beneficiaries of the EU's NextGeneration program, a massive effort to help member states recover from the economic impact of the COVID-19 pandemic.

In exchange for implementing key legal reforms, Spain was allocated nearly €80 billion in grants and another €83 billion in loans. The government strategically declined a large portion of the loans, citing its strong access to capital markets.

These funds have been a cornerstone of Sanchez's economic policy, acting as an alternative budget and helping Spain's economy expand at nearly twice the rate of the Eurozone average.

The new fund marks a deliberate pivot. As Sanchez explained, "If the NextGen funds were an exercise in European sovereignty, the Spain Grows Fund will be an exercise in national sovereignty."

At first glance, Donald Trump seems poised to achieve what was once unthinkable: creating a new oil cartel to rival OPEC. By asserting control over Venezuela and a potentially new government in Iran, the U.S. could theoretically influence 42% of global oil production, giving it a kill switch on China's energy-importing economy.

But this theory overlooks a fundamental rule of the global energy market. While diplomatic pressure can change leaders, it rarely breaks the deep-rooted commercial ties between oil producers and their biggest customers. History shows that those who try to control these flows almost always fail, and China's strategic position makes it particularly resilient.

The Illusion of a US-Led Oil Cartel

The idea that the U.S. could choke off China's energy supply hinges on its influence in key producer nations. After the capture of former Venezuelan President Nicolás Maduro on January 3, and with hypothetical backing for regime change in Iran, Washington appears to hold powerful cards. Since China is the top importer for both Venezuela and Iran, Beijing looks uniquely vulnerable.

However, this view is too simplistic. The underlying relationships that drive the oil trade are far more durable than political alliances. China's role in Venezuela's future is already central, and its relationship with Iran is even more deeply entrenched, making it unlikely to crumble under U.S. pressure.

Why Iran Won't Ditch Its Partnership with China

Even if a new government in Tehran sought better relations with the West, abandoning its strategic alignment with China is not a realistic option. The two nations are connected through a complex network of economic, diplomatic, and security interests.

Key pillars of the China-Iran partnership include:

• A 25-year strategic pact signed in 2021, outlining $400 billion in potential Chinese investments that provide a lifeline against international sanctions.

• Military cooperation, including joint naval exercises with other nations like South Africa and the United Arab Emirates.

• Shared geopolitical goals, with President Xi Jinping backing Iran's entry into the Shanghai Cooperation Organization (SCO) in 2023 and the expanded BRICS bloc to challenge U.S. dominance.

Beijing's approach is pragmatic. While Chinese officials express concern over recent protests in Iran, their primary position is to support stability. This allows China to position itself as a rational global actor, contrasting with what it portrays as an unreliable and predatory U.S. foreign policy.

History's Lesson: Oil Embargoes Rarely Succeed

Fears of oil being used as a geopolitical weapon are common, but history shows that producers rarely cut off customers for political reasons. The 1973 Arab oil embargo is a famous example, but its stated goal—to end Western military support for Israel—ultimately failed, demonstrating the limits of such tactics.

More recent examples reinforce this pattern:

• The U.S. continued to import Iranian oil intermittently for eight years after the 1979 Islamic Revolution.

• The European Union is not expected to phase out Russian gas imports completely until late next year, five years after the invasion of Ukraine.

The case of Venezuela further proves the point. Instead of being locked out, China is already being courted as a principal customer for post-Maduro oil by commodity trading giants Trafigura Group and Vitol Group. The market finds a way.

Why 2024 Isn't 1941 for China's Energy Security

There was one instance when an oil embargo had a decisive geopolitical impact: in 1941, when the U.S. halted oil exports to Japan. At the time, America supplied roughly 90% of Japan's fuel, and the cutoff directly precipitated the attack on Pearl Harbor.

Today, Trump has no such leverage over China. Russia is the only country that supplies more than 10% of China's crude oil, and most other major suppliers are middle powers unlikely to bow to U.S. demands.

Furthermore, China is actively reducing its vulnerability. The rapid adoption of electric vehicles is projected to cut Chinese oil demand by 1.76 million barrels this year. This figure is roughly equivalent to the combined oil imports from Iran and Venezuela, effectively neutralizing the threat of a supply cutoff from those two nations.

The Unstoppable Flow of Global Energy

Oil is a fungible commodity that always finds its level, seeping through the narrowest cracks to connect sellers with buyers. The fundamental laws of trade and geopolitics have not been suspended. Anyone betting that a single leader can suddenly control the global flow of energy is likely to be disappointed.

Recent rhetoric from President Donald Trump has renewed discussions about US control over Greenland, forcing a serious strategic question: if the US were to take military action, what would that actually look like? While a US invasion of Greenland would be a relatively simple military exercise, the political and diplomatic fallout would be catastrophic.

Greenland's Strategic Importance in a New Arctic Era

Greenland is the world's largest island—vast, sparsely populated, and strategically invaluable to the United States. Its location is critical, sitting astride the Greenland-Iceland-UK (GIUK) gap, a key chokepoint for transit routes in the Arctic and North Atlantic.

This geography makes the island essential for early warning systems, missile defense, and broader Arctic operations. The US already operates space and missile warning assets from Thule Air Base in Greenland. As Arctic ice recedes, the island's value is increasing, and the Trump administration has grown concerned about denying Russia and China access to the region.

Denmark's Limited Power to Defend the Island

Denmark, which governs Greenland as a territory, maintains a minimal permanent military presence. The Danish forces on the island consist of small patrol units, Arctic command elements, and limited surveillance assets. There are no fighter jets, missile defenses, or heavy ground troops.

Essentially, Denmark maintains its sovereignty through administration, not military force. Realistically, Copenhagen cannot defend Greenland from a major power. The island's defense relies on NATO, diplomacy, and the fragile assumption that allies will not act against one another.

What a US Military Operation Would Look Like

A US move to take control of Greenland would not be a traditional invasion with beach landings and large-scale combat. Instead, the operation would focus on rapidly securing key infrastructure like airfields, ports, and communication hubs. The primary military effort would be centered on access, control, and logistics. Given Greenland's sparse population, this would likely not require a large US military footprint.

Resistance to an American takeover would be fierce, but it would be political, not military. The biggest challenges for the US military would be battling the harsh weather and managing the international fallout, not overcoming Danish forces.

The Real Cost: Political Fallout and Alliance Collapse

Following a hypothetical US seizure, Denmark's response options would be severely limited. Copenhagen would issue diplomatic protests, appeal to NATO, and pursue international legal action, but any military response would be symbolic at best. While Denmark could raise the issue at the UN, enforcement mechanisms are weak, and the US has consistently asserted its sovereignty over UN requests.

Denmark's only real leverage is political—an appeal to the norms of alliance and diplomacy. Retaking the island by force is not an option.

The ripple effects would devastate NATO cohesion and undermine trust in American leadership. While NATO has no formal mechanism to resolve disputes between members, a US action against Denmark would force allies to question the value and reliability of aligning with the United States, imposing significant strategic consequences.

A Cost-Benefit Analysis: Why Seizure Makes No Sense

So, would the US actually proceed with military action? It already enjoys strategic freedom in Greenland, with access and bases secured. A formal takeover offers marginal military gain at a gargantuan political cost. Overtly seizing the massive territory would almost certainly not be worth the diplomatic headache.

The question the Trump administration must answer is not whether it can take Greenland by force, but whether it makes any strategic sense to do so.

A Cycle of Unrest and Misunderstanding

Iran is once again gripped by widespread protests. For the last month, citizens have filled the streets demanding fundamental change, triggered initially by soaring inflation but quickly escalating into calls for an end to the Islamic regime.

As speculation mounts, the outcome remains uncertain. Popular uprisings are inherently unpredictable. Yet, to many observers, this wave of protest feels different from those in 2009, 2017, 2019, and 2022. Whether it truly is different or simply appears so because Western policymakers have misunderstood the Islamic Republic for decades is the critical question.

With so much at stake, now is the perfect time to reexamine the flawed assumptions that have guided Washington's—and the West's—failed approach to Iran. Even if the current regime survives, the country will not be the same as it was before the protests began on December 28, 2025. This analysis aims to learn from past mistakes without assigning blame, providing a necessary update for a foreign policy community facing a changing Iran.

The Faulty Blueprint: America's Core Beliefs About Iran

For three decades, U.S. policy toward Iran was built on a set of core assumptions that recent events have proven to be fundamentally flawed. These beliefs shaped everything from diplomatic outreach to nuclear negotiations.

The central pillar of this thinking was that the Iranian regime is ultimately pragmatic. Its revolutionary rhetoric was seen as a public front for a realistic and practical leadership. This led to several key conclusions:

• Susceptibility to Incentives: It was believed that Iran's leaders could be influenced by American and Western diplomacy and financial offers.

• Desire for Integration: The supreme leader and his advisors were thought to prioritize integration into the international community over repressing their population and dominating the region.

• Dismissal of the Opposition: Supporting the Iranian opposition was framed as self-defeating and counter to U.S. interests, partly because the opposition was seen as too divided to be a viable alternative.

These ideas formed the foundation for President Bill Clinton's "dual containment" strategy, the nuclear negotiations under President George W. Bush, the Obama administration's Joint Comprehensive Plan of Action (JCPOA), and even Vice President J.D. Vance's "America First" approach.

How Washington Built Its Iran Echo Chamber

These persistent misconceptions didn't appear out of thin air. They were cultivated and reinforced within Washington's foreign policy ecosystem, shaped by who holds power, who they listen to, and how they view the world.

The Influence of Insiders

Certain Iranian expatriates have consistently had the ear of senior U.S. officials, giving them a platform in the media and in government simulations. These war games often portray Tehran's decision-making as supremely pragmatic in ways that clash with real-world events. Nonetheless, this is the perspective frequently presented to military officers and intelligence analysts.

While other Iranian expats hold far more critical views of the regime, they are rarely given a seat at the table. This selective access reinforces the dominant narrative that the supreme leader is open to accommodation with the United States.

The Lingering Shadow of Iraq

The 2003 invasion and subsequent occupation of Iraq left a deep scar on Washington. Haunted by the high costs of regime change in Iraq, the foreign policy community adopted the view that a similar outcome in Iran must be avoided at all costs.

This aversion wasn't just a strategic preference; it evolved into a rationale for why regime change was unnecessary in the first place. This narrative conveniently relied on the same flawed assumptions: that the Iranian leadership was pragmatic and willing to strike a deal with Washington.

The JCPOA and the Partisan Divide

President Barack Obama was not the first U.S. leader to extend an olive branch to Tehran. President George H.W. Bush signaled a desire for better relations, and President Clinton sought reconciliation after Mohammad Khatami’s election in 1997. Even President George W. Bush, famous for his "axis of evil" speech, supported European diplomatic overtures and multilateral nuclear talks with Iran late in his presidency.

Obama’s outreach, however, went further and culminated in the JCPOA. Despite official denials, the deal was widely seen by his administration as a pathway to a new relationship with the Islamic Republic. There was little evidence the Iranian leadership shared this goal, but the White House set the agenda.

Support for the JCPOA became widespread within the foreign policy community, partly due to a social network effect in the Beltway. To remain in good standing, many analysts and former officials praised the deal, regardless of its shortcomings. Ben Rhodes, Obama's deputy national security advisor, claimed the Washington establishment was united against the JCPOA, but the reality was the opposite; while critics were vocal, a far larger contingent was in favor.

This dynamic contributed to the political polarization of Middle East policy. Countries that opposed the deal—namely Saudi Arabia, the United Arab Emirates, Bahrain, and Israel—became identified with the Republican Party. Their security concerns, highlighted by Israeli Prime Minister Benjamin Netanyahu's 2015 address to Congress, were often dismissed by Democrats as bad-faith arguments rather than genuine strategic assessments. In retrospect, their skepticism about the nature of the Iranian regime appears to have been more accurate than Washington's.

A Time for Clarity on Iran

The debate over President Donald Trump's withdrawal from the JCPOA may never be resolved, but it is clear that America’s regional partners had a better grasp of the Iranian regime than many in Washington. It is long past time to reframe our understanding.

A new approach must recognize the direct link between the clerical system's domestic repression and its aggressive foreign policy. These are not separate issues; they are core components of the Islamic Republic's identity. U.S. diplomacy and goodwill cannot change the fundamental nature of the regime.

Once this is understood, it becomes obvious that the current negotiations offered by Iran's foreign minister are a ruse—a lifeline for a regime that has lost its credibility and legitimacy. Engaging in these talks not only harms U.S. interests but also undermines the Iranian protestors fighting for change.

For decades, U.S. policy on Iran has failed because its assumptions have been detached from reality. The ongoing uprisings offer a golden opportunity to finally see the regime as it is, not as the United States wishes it to be.

Federal Reserve Bank of Kansas City President Jeff Schmid argued that interest rates need to remain high enough to continue pressuring the economy and ensure inflation cools down completely.

"With inflation pressures still evident, my preference would be to keep monetary policy modestly restrictive," Schmid stated in remarks prepared for a Thursday event in Kansas City.

He also addressed the labor market, noting that while it has cooled, some of this slowdown is necessary to prevent inflation from worsening.

A History of Dissent and the Current Rate Outlook

Schmid's cautious stance is consistent with his past actions. He dissented against the Federal Reserve's final two interest rate cuts in October and December of 2025, warning at the time that strong economic growth could reignite inflation.

Looking ahead, the Fed is widely expected to hold rates steady at its next meeting. Investors are not anticipating another cut until at least the middle of the year. The current benchmark federal funds rate sits in a range of 3.5%-3.75%, a level many Fed officials consider "neutral"—meaning it neither stimulates nor restricts economic activity.

Labor Market Woes vs. Inflation Risks

Schmid reiterated his belief that further rate cuts would be ineffective in boosting hiring, which was sluggish in 2025. He contends that the slowdown is driven by deep-seated structural issues rather than a cyclical downturn that the Fed could easily address.

"I do not think further cuts in interest rates will do much to patch over any cracks in the labor market—stresses that more likely than not arise from structural changes in technology and immigration policy," Schmid explained.

He warned that premature cuts could have dangerous long-term consequences. "I worry that cuts could have longer-lasting effects on inflation as our commitment to our 2% objective increasingly comes into question."

In Defense of the Fed's Structure

Schmid also commented on the Federal Reserve's independence and its unique federal structure, which includes officials in Washington and at 12 regional reserve banks across the country. The system has faced increased scrutiny from the Trump administration, with some calling for a reexamination of the reserve banks' role.

Schmid framed this decentralized model as a key advantage.

"The decentralized Fed also allows for differing views on the correct course of monetary policy," he said. "This is a strength of the system. Policy discussions are stronger when they incorporate a diversity of views."

San Francisco Federal Reserve President Mary Daly stated on Thursday that the central bank's monetary policy is currently positioned to adapt to any future economic developments.

In a public post, Daly affirmed that the Fed’s policy is "in a good place to respond to however the economy evolves," providing a flexible foundation for navigating the path ahead.

A Look Back at Recent Fed Actions

Daly noted that the Federal Open Market Committee (FOMC) had previously cut its policy rate by 75 basis points last year. This move was a direct response to two key factors: a significant slowdown in the labor market and inflationary pressures that were milder than anticipated.

Promising Data Tempered by Uncertainty

Looking at the current landscape, Daly described incoming economic data as "promising." She pointed to several positive indicators:

• Solid projections for economic growth

• A stabilizing labor market

• Inflation expected to improve through 2026

Despite this optimistic outlook, she stressed that significant uncertainty remains. Daly highlighted that risks persist for both sides of the Fed's dual mandate—maintaining price stability and achieving full employment. This means the central bank must remain "deliberate" as it calibrates policy to meet both objectives.

A Broader Approach to Future Decisions

According to Daly, future policy decisions will require more than just a narrow focus on individual data releases. She emphasized the importance of gathering direct input from businesses, households, and communities to gain a comprehensive understanding of economic conditions.

While models, data, and analysis are crucial, Daly argued that direct feedback provides invaluable insight into how people are planning for the future. By combining all available information, she concluded, the Fed can craft monetary policy that responds effectively to changes in the economic outlook and remains appropriate for the challenges ahead.