America's special relationship with the United Kingdom began at conception. We were born as a nation of British stock and despite periodic tensions and the occasional war, we have built and deepened the relationship until it has become one of the closest on the planet. But being a special relationship and being especially important are two different things and it may be that another special relationship is brewing that in the 21st century could transcend that with Britain.

That said, Brits can take comfort. This newly ascendant relationship remains within the extended family of their former colonies.

Currently, President Obama is on his first official visit to Australia. So far, during his stay, he has sent several clear messages that America's almost always warm relationship with our cousins down under is getting warmer and is being seen by this White House as strategically more important than ever. His interactions with Australian Prime Minister Julia Gillard have been characterized as especially warm. He has described America's shifting focus to the Asia-Pacific region that is increasingly be presented as the centerpiece of this administration's foreign policy. And, backing up his assertion that the region is "of huge strategic importance to us", the President and Gillard have announced a new defense deal that will establish a U.S. military presence in Darwin and will deepen and enhance cooperation between the two nations' air forces.

There is no coyness about why a United States that is pulling back from other deployments around the world is establishing this new relationship. While Obama has said that the presence is not intended to contain China, there is no question that it is intended to both counterbalance what is seen as China's growing military clout and in particular to assure the ability to control key regional sea lanes. One of Obama's security deputies asserted that the deal was struck in direct "response to demand" from China's neighbors.

Britain's importance to the United States through most of the last century was due in large part to her strategic location off the coast of Europe, the area of America's principal economic and political interests. That Britain, though a fading empire, was still one of the world's most powerful nations and one that was deeply tied to America in almost every conceivable way, added to the "specialness" of the relationship.

While Australia is not as closely integrated with the U.S. economy as Britain nor is it as militarily powerful -- spending less than half of what Britain does on defense -- it does have a few things going for it. Much as Britain was the most natural ally in the European region, so too is Australia the most natural in the Asia-Pacific region. Its location -- near to Asia but separated by the sea -- offers a similar set of strategic advantages. It has cultivated close regional relationships and can be an effective interlocutor -- in some ways more effective than outlier Britain can be in the context of modern Europe (whatever that is). Moreover, with China and the rest of Asia on the rise, Australia is only likely to grow in significance and potential value as an ally.

What Obama and his Secretary of State Hillary Clinton are doing in Asia is as clear as it is deft. They are making China the centerpiece of their efforts, engaging deeply across a wide range of issues. They challenge where they feel they should. They cooperate wherever they can. And thus they are managing to deepen what is clearly the most important bilateral relationship on the planet. Meanwhile, through efforts like that in Australia, they are strengthening the U.S. position throughout Asia -- from the Koreas to Japan, across ASEAN, and on to India and the sub-continent. In all this, the old ties of empire give special place and ease of dealing to relations with the Australians, the Indians, and the Singaporeans. It is hard to see how these relationships will not continue to grow in significance during the decades ahead -- perhaps to a time when the relationship between two or more of England's stroppier colonies end up being more important than those any of them share with the "mother country."

(By the way, as a closing footnote, it should be noted that Secretary Clinton, who has played a central and effective role in these efforts working closely with the NSC team and a Department of Defense for whom this shift in focus has long been a top priority, is currently enjoying yet another affirmation of her special role in the cabinet having just won the top ranking among all senior members of the Obama team in the Partnership for Public Service's rating of leadership performance.)

Watching this weekend's Republican presidential debate on U.S. foreign policy, you might be forgiven if you thought it shed absolutely no light on U.S. foreign policy. After all, by definition ... and by God's good graces ... the views expressed represented those of people who will have precious little influence over America's international course. Only one of these people can be the Republican nominee. And, in part thanks to performances like what we saw on Saturday, even that individual is very likely not going to ever be president of the United States.

As a consequence the vapidity of Herman Cain is irrelevant. The pro-torture stance of the wing-nuts in the group is irrelevant. The ridiculous zero-based foreign aid formula suggested by Rick Perry is irrelevant. Even the pontificating of Republican non-Romney of the Month, Newt Gingrich is irrelevant. Because these weren't foreign policy ideas or positions. They were desperate cries for attention.

Sadly, also irrelevant will be thoughtful views offered by Jon Huntsman, who clearly distinguished himself as the most capable, thoughtful, experienced, and credible of the crew.

This means that the 30 minutes of the debate that CBS chose not to air will have a virtually identical impact to the 60 minutes of Obama-bashing, fear-mongering, and peacocking that actually were broadcast.

It is possible that some of the views that were offered by likely nominee Mitt Romney could be consequential. This would not seem to be good for U.S.-China relations except that there is virtually zero possibility that President Mitt Romney -- who would essentially be the hand-picked candidate of the business community and the major party presidential candidate with the closest ties to America's economic establishment in modern memory -- would actually follow through on his anti-Beijing saber-rattling once in office. Further, some of his statements were essentially meaningless to begin with -- like his assertion that a vote for him was the only way to avert Iran getting the bomb, not being backed by facts or even being remotely credible given how key what happens between now and when the next president takes office will be.

But more important still is that Romney isn't going to be the next President either. In all likelihood that will be Barack Obama. Here are 10 reasons why:

1. Obama is the incumbent. That matters. And he has become increasingly confident in using the bully pulpit to his advantage, at appearing presidential. The crucial issue is going to be economics.

2. Despite Europe's economic mess, a number of other factors suggest that the U.S. economy may begin to tick upward more during the next year. Other parts of the world are likely to be growing from the emerging markets to, in a modest way, Japan. More importantly, the likelihood that the U.S. unemployment rate declines the better part of a point to something closer to 8 percent is pretty good. That ought to be enough to make the case he avoided the abyss and turned things around in much the same way that Ronald Reagan did in 1984.

3. Like Reagan, Obama is liked and seen as trying hard to do the right thing. That, plus some signs of progress goes a long way with the American people.

4. Furthermore, none of these candidates are a Ronald Reagan. Moreover, none of them are even a George W. Bush, which is saying something. Mitt Romney is the whitest white man in America. He will look more like the establishment than Obama in an anti-establishment year. He will not get any journalistic good bounces because frankly it is hard to spin a narrative about the guy that will grab anyone's heartstrings. Want evidence, look at how desperately half the Republican party is at looking for alternatives.

5. That search for alternatives could lead to a third party candidate. If it's Ron Paul it will eat into Romney's base. It is highly unlikely the left will pose a similar challenge to Obama. As for the possibility of a centrist third party candidate, appealing as it may be, it will be less so to many if it appears that candidate can't win and will only increase the likelihood that Mitt Romney will be elected on the U.S. Chamber of Commerce ticket.

6. While external events in the world -- like the Iranian detonation of a nuclear device or a terror attack -- could hurt Obama, in all likelihood, given his growing comfort with foreign-policy and the tendency of the American people to rally around the president in times of crisis, it would be a mistake to count on such a development being more likely to help the Republican candidate.

7. The reality is that while foreign policy won't be central to the election, Obama has already succeeded in doing something remarkable: Taking it off the table. He is hard to criticize given his record with bin Laden, Al Awlaki, Qaddafi, meeting his promise in Iraq, starting to get out of Afghanistan, and restoring America's international reputation.

8. We haven't gotten to the one-on-one segment of the campaign yet. Whoever is the Republican candidate has to run against the very disciplined, intelligent, well-prepared, charismatic president. Which of those folks you saw Saturday night can hold their own versus Obama?

9. The Republican Party on the Hill, via the Tea Party and via its more extreme elements has adopted a bunch of policies that are astonishingly out of touch with the moment. They should be doing great given the economic problems. But they are not only seen as obstructionist on the Hill but they are seen as advocates of millionaires they don't want taxed and opposed to fairness in sharing the burden for the sacrifices fixing the economy will require.

10. By extension the leading voices for the Republican Party are folks like those on the stage ... and John Boehner and Eric Cantor and Mitch McConnell. Really? That's going to grab America in the current environment?

The electoral map says it will be close. But already Republican overreaching has pushed Ohio back toward Obama. The Republican hope re: Florida, Marco Rubio has suffered some self-inflicted wounds. Virginia gets bluer by the day. It's close ... but it's trending toward the President.

And so, while making predictions a year out is a sucker's game, for those of you who watched the Saturday debate and were disheartened there is at least all the above to suggest that none of it mattered that much anyway. As of right now the favorite to be the next president of the U.S. has to be the current president of the U.S.

So let me see if I understand this latest round of eurozone mania. The crack dealers and the police have gotten two junkies onto methadone and we are supposed to celebrate? The junkies are still hooked. The dealers are still peddling their poison. The cops are still unable to address the core issues that are key to solving the long-term bigger drug problem. There's no political leadership to speak of the question. And therefore, no real progress has actually been made. Yet, down at Delancey's bar and stock exchange it's drinks all around.

What the heck, folks? Do we need to shove markets into a cold shower of perspective every day now? They veer from irrational fear to irrational exuberance with such regularity that I am starting to think that the solution to Europe's financial problems -- for which the above was an ever so subtle metaphor -- may actually be drugs. Like lithium maybe.

Today, the markets swing back to hope because Italy has taken steps to embrace austerity, Don Bunga Bunga is headed his next career as a professional defendant, and the Greeks and Italians both seem to be opting for technocrats to right their capsized economies. That these same technocrats bought into the mainstream delusions and misrepresentations and miscalculations that led to these problems in the first place is no matter. All that markets care about is that it seems like they will follow the banks' prescriptions for preserving bank cash flows at the expense of the people of their home countries. Or as it was put in my favorite tweet of the morning, from Dave Johnson retweeted by Markos Moulitsas, founder of the Daily Kos, "Greek PM says let PEOPLE vote, immediately booted, replaced by a BANKER."

(It's remarkable that the "moral" obligation of countries to repay debt that never should have been made available to them in the first place is actually so immoral -- both because it rewards enabling malefactors and because it penalizes innocents. The banks again make money coming and going as they did playing both sides on the volatile trading in between. Wouldn't the world be a better place if those who underwrote government debt couldn't also engage in trading it -- which creates the opportunity to profit from deals they might not otherwise do? I'm just saying...)

Meanwhile there is still no progress on the eurozone's larger structural issues. There is still no consensus about how to restore growth to the damaged economies of the south and those nearby who they are dragging down. There has really been no change ... except for the worse ... with regard to the financial soundness of many of Europe's big banks. There is still no orderly path by which a country can opt out of the eurozone ... even though the existence of such a path would have helped nip this problem in the bud even before it began. There is still no clarity about whether or not the countries of Europe want the ECB to have the resources and regulatory tools needed to actually effectively play the role of lender of last resort. And frankly, it seems ever less likely that the IMF will actually get the additional capital it needs to play the role for which it was envisioned.

Look, I've dated people who were more or less bipolar. I learned a few things from the experience. One was that while you were in the relationship it made sense to try make the most of the highs. They could be great. But I also learned that the lows were when you had moments of real clarity about the unsustainability of it all. The highs would always be a lie until you fixed the core problem. I also learned that took time and patience and often a radical restructuring of the relationship...by which I mean I discovered how healthy an exit can be for all interested parties. (On this point, see Paul Krugman's very good piece today entitled: "Legends of the Fail.")

I also discovered that you can't live on the roller coaster forever. It's just too damn exhausting. That's how I'm starting to feel about this problem in the Eurozone. And I am inclined to think that's how the world is starting to feel too. Patience with authorities who don't deal with the big issues and seek to frame every minor triumph as something larger than it is will wear thin. It won't just be the Papandreous and Berlusconis who won't survive all this. Absent real progress on the bigger issues, Eurocrisis fatigue will soon start doing in the Merkels, Sarkozys, and Camerons. That's the one thing that is clear. One way or another, as far as this crisis goes, it's probably best to stand clear of the door marked "Exit."

I'm still waiting for the phone to ring and the editors of Time Magazine to ask me who the pick should be for Person of the Year. This will be one of those years when it's a concept choice, of that I'm certain. You know what I mean, when the choice is a group of people or a home appliance rather than one big name recipient. The only question in my mind is whether you call 2011 "The Year of the Mob" -- which is a bit uncharitable to some of the public demonstrations that championed important values with great courage...or "The Year of the Masses" or "The Year of the Street." That covers everything from the Arab Spring to Occupy Wall Street, from demonstrations in Athens against fiscal mismanagement and the burdens of austerity to those in London against raised tuitions, from the truckers strike in Shanghai to the mobs in State College Pennsylvania protesting the ouster of Joe Paterno or, one hopes, protesting the university looking the other way against charges of child abuse.

And of course, the ultimate example of mob mentality would be the performance of world markets, stampeding as though they were not on Wall Street but in the streets of Pamplona, rampaging from one crisis to another with precious little regard for facts, the long-term, fiduciary responsibility, or anything but the trade of the moment. As a consequence of this phenomenon and with an eye toward the uncertain outcomes of some of the other public demonstrations of the year, this might also be the year the editors run a thought provoking sidebar headlined "RIP: The Wisdom of Crowds." Because comforting as that notion was, crowds are only wise if all in them have equal access to the same information, have equal capacity for evaluating that information, have equal ability to move at the same speed, are playing on a level playing field. And as we know, they don't which is why the only people who still believe in efficient market theory are the ones who are peddling the old textbooks and academic papers they wrote about it. I certainly don't know a single major investor who believes in the idea.

Sadly, of course, we don't get to pick the winners of such illustrious prizes here at tiny FP. So, we have to make up our own awards that capture the spirit of the moment. Fortunately, this gives us more latitude. We don't have to limit our choices to people. We can go deeper. And in this case, that's precisely where we will go.

And that's why I would like to take this opportunity to announce our (my) selection for FP's First Annual Gland of the Year Award. While the competition in this year of Kardashian marital hijinks, Bunga Bunga parties, and the patter of little feet in the Élysée Palace was fierce, once again the winner trumped by a wide margin the runners-up, which as usual included a variety of reproductive glands from many lands not to mention several organs that happened to get votes despite not actually being glands --including the heart and the brain. And that winner, by a wide margin, explaining everything that happened in the global street and once again dominating (and making havoc of) global affairs is ...the Adrenal Gland.

Read on

Europe is a generalization. As recent events have demonstrated yet again, sharing a continent with someone doesn't necessarily make you their countryman … or even capable of cooperating with them when it is in your mutual self-interest. Yet, despite all evidence to the contrary, when we talk about the crisis in Europe, we talk about it as if it were a Europe-wide crisis. Worse, recently, political opportunists on the right have begun to argue that the problems in Greece, Italy, and Spain are an indictment of Europe as a whole and of "European" ideas like the welfare state.

But of course, the economic mess in which the Greeks, the Italians and others find themselves has nothing to do with their being European. It has to do with them being financially irresponsible. It has to do with them being baited into reckless practices by bankers with whom they were too cozy … and who themselves were so eager to lend that they suspended sensible risk assessment practices. Admittedly, the problems within these states have pan-European consequences and they have revealed serious shortcomings both within European Union institutions and among EU leaders. But it would not only be misleading to lump all the countries of Europe into one basket in terms of the issues that have been raised, it would also obscure the fact that within Europe itself exist superb examples of what these floundering countries might aspire to. (And the contrast between the success stories and the failures needs to be understood to begin to grapple with the real problems of economic and political integration that have not been sufficiently addressed to date in the context of the European Union.)

What's more, Europe's success stories not only quash absurd assertions that having a state with a strong social safety net is the problem, they offer examples that might be well followed outside Europe; say, in the United States, home to another broken, corrupted version of capitalism.

It is a point that Jeffrey Sachs absolutely correctly noted on "Morning Joe" this morning and that needs to be better understood. Not only is the "European model" or "Eurocapitalism" not dead -- it, to the extent it is defined by Europe's best performing countries, may well be the solution to balancing every state's desire for growth, their need for fiscal responsibility and the obligations of a moral, equitable, empowering social contract.

So, to begin where much of today's discussion stops, there are a group of high-performing northern European countries that rate higher than the United States or Southern Europe on the "Sovereign Fiscal Responsibility Index." Estonia ranks number 3 after Australia and New Zealand. Sweden is 4. Luxembourg is 6. Denmark and Britain are 8 and 9. Poland, the Netherlands, Norway and Slovakia are 13, 14, 15, and 16. Austria is 21, Finland is 22, Germany is 25, Italy is 27, and the United States is 28. Iceland, Greece, and Portugal are 32, 33, and 34. The SFRI report notes that in terms of "fiscal space" the amount of additional debt a country could add before getting into trouble "Scandinavian countries as well former British colonies appear well positioned with fiscal space in excess of 100 percent of GDP." They add that "Central and Northern European powers are currently in decent shape" but that "the PIIIGS" are already close to their debt limits and that the United States in the space just above that but at risk of deteriorating.

But these countries are not fiscally responsible at the extent of promoting either growth or providing social services. For example, Finland, Luxembourg, Germany, and Sweden all grew substantially faster than the United States in 2010. The United States ranks worse than Norway, Belgium, the Netherlands, and Finland in the OECD education rankings with countries like Germany, Estonia, Switzerland, Poland, and others finishing ahead of the United States in math scores. Virtually all northern European countries, plus Germany and Britain, have lower unemployment than the United States. Further, Europe's composite GINI (inequality) score is better than the United States with both northern and southern countries finishing well ahead of the United States, which ranks between Jamaica and Cameroon. And whereas the U.S. only invests 2.4 percent of GDP in infrastructure, Europe on the whole invests 5 percent.

And as I pointed out in the New York Times piece I did a couple weeks ago "Redefining the Meaning of Number 1" most of these countries in the northern and central parts of Europe finish well ahead of their struggling neighbors and the United States in terms of quality of life rankings. They achieve success and a balance between growth and fulfilling the terms of a robust social contract by performing neat tricks like guaranteeing health care to all and still spending a smaller percentage of their GDP on health than the U.S. and by relying on collective security to allow them to spend less on defense.

The point is that some parts of Europe are not only working well, but can be examples worth emulating -- both by the continent's more reckless debtors and the United States itself.

Perhaps by the time you read this, the asteroid named 2005 YU 55 will have sped past the earth, missing the top of your head by like 200,000 miles, which is nothing in astronomical terms. In fact, given that most items in space are light years apart, the near rendezvous with the 1,300 foot wide chunk of rock and ice is essentially the same thing as a direct hit.

Yet, because astronomers have told us not to worry, I haven't noticed long lines of cars heading out of the city and up toward higher ground. I don't recall reading about a run on hard hats or Bruce Willis and Ben Affleck heading into outer space to save us. There's been no panic. Even though a slight miscalculation on the part of the astronomers who track space rocks could have left us vulnerable to a devastating direct hit. This rock the size of skyscraper would obliterate a city if such a collision were to take place, even one of considerable size that has -- cockroach like -- resisted many other attempts by nature to dispose of it, like Los Angeles.

But despite the fact that many of them grew up lonely in musty-smelling rooms chock-full of collectible action-figures from Battlestar Gallactica and large wall calendars counting down the days before the next Comic Con, we take the reassuring words we have heard from our astronomers to heart. (Haven't we seen the movies, folks? Don't we realize that all abuse these nerds must have suffered in high school scarred them and left them with plenty of motive to drop a decimal place or two, move to a shack in the Rockies and watch the unhappy ending while snuggly tucked under their Luke Skywalker sheets?)

Jay Melosh, who I am hoping is actually a perfectly normal guy who played baseball and has gone on dates, is one of those "experts" upon whom we are relying. He is, according to the Los Angeles Times, a specialist in "impact cratering." What motivates a guy to choose such a life's work? It's probably better that we don't ask. Because we want him to be right. We need him to be right. After all, he is one of those whose words we find comforting enough to allow us to go about our business while 2005 YU55 hurtles straight at us. "This one," Melosh said, "would be a city-buster, but would not wipe out civilization."

What a relief. It would only destroy everything in a 60-mile wide radius if it hit land or create a monster tidal wave 200 feet high if it fell into the sea.

But we take him at his word because he's an expert. (Admittedly one who is far from both big cities and tidal-wave vulnerable shorelines.) Experts like him are telling us not to worry. And once again, trusting souls that we are, we are buying it.

We just have to hope that these experts are better than the experts who told us that deregulating international financial markets or allowing banks to cook up all sorts of derivative markets without any adult supervision would make us all safer. We have to hope that they are smarter than the experts that told us that bankers could be trusted to "self-regulate." We have to trust that they know more than the geniuses who got paid tens of millions to watch after other peoples money and who assured them the best place for it was with Bernie Madoff or in MF Global Holdings.

We have to trust that they are more attuned to reality than those who even now still suggest that once-in-a-hundred-year financial catastrophes occur every 100 years even though we could well be on the verge of our second such event in 3 years any minute now.

No, surely these underpaid socially-ostracized geeks whose word we are taking at face-value about the future of civilization must be better than all those Armani-suited, Harvard-educated millionaires who collect supermodels like the rest of us collect lint in our navels. Or the highly touted geniuses who regulate financial markets or the glamorous billionaire publishing magnate politicians who tell us not to worry they will return Italy to its former glory. Or the air traffic controllers who manage to keep the near-misses to a bare minimum. Or the highly-trained NFL or FIFA referees who never get one wrong. Or the doctors who never make a wrong diagnosis.

No, these are experts. We have nothing to worry about. Having said that, I have two final points for you. One, the next time you see a nerdy little kid who has taught himself elfin and can recite verbatim all the dialogue from the entire Lord of the Rings trilogy, hug him. He needs love. He needs to feel like he and the rest of civilization have at least something in common. And while you're at it, buy him an extra battery or two for his calculator. And two, having thought about how well the best experts are doing for us protecting us from global financial calamity and ensuring safe outcomes in other expert-dependent government systems from healthcare to transportation, I'm writing this from a secure corner of my basement. While wearing a snorkel.

The government of Iran, much like many across the Middle East, believes that the Obama administration is so consumed with a desire to undo the wrongs of the Bush era and get out from under the costs of two difficult, hard-to-justify wars in the region that it would never intervene against them militarily. Iranian leaders seem to believe that the United States would not risk another war in the region just to stop their development of nuclear weapons.

The government of Israel, also worried that its number one ally has lost its appetite for complex entanglements in the region, seems to think that by playing the Iran card it can goad the U.S. into action that will restore the bonds between the two nations. Israeli leaders believe that they can translate their perception of Iran as an existential threat against them and a brazen, rising regional hegemon into a new renewed U.S. commitment to the region and closer ties with Israel.

Both are wrong.

According to the U.K. newspaper the Guardian, which has an extraordinary package of stories on the growing Iran risk and the escalation of that risk associated with an upcoming International Atomic Energy Agency (IAEA) report that will reveal game-changing progress by Iran in its efforts to gain nuclear weapons capabilities, even America's closest allies in Britain believe "President Obama has a big decision to make in the coming months because he won't want to do anything just before an election." Wrong.

Here in the U.S., analysts believe that Obama would not risk being drawn into a war in the region or the upheaval a series of attacks might cause. Even though tensions are definitely rising and those familiar with the IAEA report that will be circulated next week say, "It is going to be hard for even Moscow or Beijing to downplay its significance," there is a sense that Obama won't pull the trigger. Iran analyst Karim Sadjadpour was quoted by the Guardian as saying, "A U.S. military attack on Iran is not going to happen during Obama's presidency. If you're Obama, and your priority is to resuscitate the American economy and decrease the U.S. footprint in the Middle East, bombing Iran would defeat those two objectives. Oil prices would skyrocket." While an attack is no sure thing yet, the analysis is wrong.

Certainly no one in the Obama Administration is eager to launch an attack on Iran. Taking steps that would risk being drawn into another war or that might damage the global economy further or could distract from the world at home would be vigorously opposed by several of the President's most senior advisors, and he undoubtedly would be deeply divided on the issue himself.

But in the end, as dangerous as an attack might be militarily and politically, if the President believes there is no other alternative to stopping Iran from gaining the ability to produce highly enriched uranium and thus manufacture nuclear weapons, he will seriously consider military action and it is hardly a certainty he won't take it. From a domestic political perspective, right now Obama's strong suit is his national security performance. For the first time in years, he has taken the issue away from the Republicans. Right now they simply cannot attack him as being weak or assert they understand defense better. That is why they are so silent on the issue. Obama has only four real areas of vulnerability on this front. First, if he pushes too hard for defense budget cuts before the election, the Republicans will go after him. He won't. He will seek cuts but will be comparatively cautious. Next, if there were a terrorist attack of some sort and the administration seemed unprepared or responded weakly, that would create a problem. But that is a perennial wild card. Third, if he distances himself from Israel, the Republicans will seek to capitalize on the sense some supporters of that country have that Obama is not a committed friend. There is already plenty of activity in that area ... and the Israelis are eager to take advantage of their perceived election year leverage. And finally, if Iran were to detonate a nuclear bomb, Obama would be blamed and fiercely attacked for a policy of engagement that ultimately proved to be toothless. 

As a consequence, the President and his advisors are acutely aware of the Iran issue. But their concerns go much deeper. The President and his national security leadership are deeply worried about the potential consequences associated with an Iranian nuclear breakthrough. It would likely trigger an arms race in the region at a time of considerable instability. It would immediately ratchet up tensions between Iran and Israel ... but also between Iran and its historic enemies in the Gulf. It would both raise Iran's perceived clout and underscore the absence of a counterweight either from the U.S., the West, or the international community at large.

While an attack on Iran's nuclear weapons facilities almost certainly would produce a spike in oil prices, those prices would stabilize if the attacks were successful and did not produce a protracted war. Further, with the world economy in a slump, prices are feeling less upward pressure anyway these days. However, if Iran gained nuclear weapons, it might trigger a kind of uncertainty that would be protracted and would have a longer-term effect on oil prices.

The British assumption that the President would not take this action close to the election is mistaken on two levels. First, from the most cynical perspective possible, a strong action right before the election in response to a genuine threat after an extended effort to pursue more peaceful options to resolving the issue might well work very well for the President politically. The American people's reaction to an attack at any time is likely to give the President the benefit of the doubt. That said, it would be a mistake to think this President would make such a cynical analysis. Should he act on an issue like this, he will do so without making any political calculus. He's a politician to be sure. But on national security matters he has grown both increasingly self-confident and proven himself to be exceptionally disciplined. Indeed, the calculus as to what he might do needs to factor in that he has achieved some success taken strong military actions of a focused nature. The "no more Middle East wars" notion went out the window with Libya. The "Obama is timid on these matters" thesis was actually silently put to an early death when the President, just in office, ordered the ultimately successful effort to eliminate Osama bin Laden.

Finally, the Israelis are wrong if they think that U.S. cooperation on this issue will restore the bond between the two nations.  They may work side-by-side on this as they did on the Stuxnet intervention. They share close ties. But so long as Israel pursues settlements and other policies that inflame the Palestinian situation and make a solution less likely, this administration will be more divided internally in its views on Israel than its public statements may suggest. Further, the reality is that history is moving against the Israelis. Not only are America's strategic priorities shifting -- the end of the Cold War and the War on Terror were both blows to the "indispensability" of Israel to the U.S. -- but other countries, like China and India, are gaining more influence in the region as they become more important consumers of the region's oil. And they view the Israeli-Palestinian issue as an irritant, a risk to their interests and a matter that needs to be disposed of, one way or another, whichever serves their ultimate goal of stable, cheap supplies of energy. In fact, paradoxically, it is probably a nuclear Iran that stands the best chance of keeping Israel more relevant to America.

None of this means America will act. But it would be a mistake to bet against it or to consider U.S. threats to be mere posturing.

The Phantom War will be different from all the others that came before it. There will be no triggering incidents, no frantic diplomatic efforts to stave off conflict, no declaration of war, no battles, and there will be no end to it. It will certainly, however, take a huge toll, destroy lives, shake great nations, and, ultimately, almost certainly result in death and mayhem. It may even result in more traditional forms of conflict.

And make no mistake about it, the Phantom War will touch you personally and, in all likelihood, it will rock your world ... and I don' t mean that in a good way.

Indeed, you will understand just how different Phantom warfare from the fact that it has already begun and most people don't even know it.

Some dimensions of the war have made headlines, such as the successful Stuxnet attack on Iran's nuclear program. Others are hinted at in reports, such as the just released report from the U.S. Office of the National Counterintelligence Executive (ONCIX). The 2011 report, produced in compliance with an act of Congress, details the degree to which foreign powers are actively invading U.S. cyberspace and conducting thousands upon thousands of operations that in a more traditional sense might be called reconnaissance, spying or sabotage.

The report is particularly striking in that it calls out Russia and China as particularly egregious violators who pose "significant and growing threats" to America's security and economic vitality. Calling them "the most aggressive collectors of U.S. economic information and technology," the ONCIX report goes on to predict that the two rival powers "will almost certainly continue to deploy significant resources and a wide array of tactics" in support of their efforts to level the playing field between themselves and the United States. But of course, the implication is clear, particularly in the wake of Stuxnet, cyber-reconnaissance and spying are just the tip of the iceberg. They test our defenses, test our borders and prepare for the days ahead of deeper engagement.

Said one experienced U.S. diplomat with whom I spoke this week, "the war is already under way and we are ill prepared for it. We know it is going to happen but we don't have the doctrines or the strategic awareness we need to manage the growing threat." Said one investor with whom I spoke this week, "This is the black swan I worry about. One day...one day soon, in the next couple of years...I expect a power grid to go down or a stock market to be penetrated in a way that will cause a massive disruption, even a panic."

There are signs everywhere that the issue is growing in importance and being viewed with a sense of urgency by those who are aware of it. Take this week's cybersecurity forum in London designed to address a problem that Britain alone estimates already costs it 27 billion pounds per year. Or look to the story that stirred some notoriety earlier this week when it was revealed the international group of online hackers known as Anonymous were challenging Mexico's brutal Zetas, a cartel that has been reaping havoc near the U.S. border for years. (See the New York Times: "After a Kidnapping, Hackers Take On a Ruthless Mexican Crime Syndicate.") The latter story indicates that just as modern conflicts are often between state and non-state actors, so too will this new form of conflict involve a plethora of groups all with very different objectives, often very difficult to trace or tell apart.

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