I long to be back in Cairo. I have fond memories of the two years I spent there from 1965 to 1967. I remember sipping sweet black tea in the Old City's Khan al-Khalili souk, hanging out on weekends at Groppi's Tea Room, and riding the train to the southern suburb of Maadi, where I attended an international high school. I have vivid memories of Tahrir Square's chaotic sidewalks. There were crowds of people everywhere, a moving mosaic of gentle, jostling chaos. It was a noisy city, home to both considerable wealth and desperate poverty, and over the three decades of President Hosni Mubarak's rule the inequality gap has grown even wider.

I wish I could be there today, in solidarity with the thousands of young and old Egyptians, to celebrate the demise of his dreadful regime. But what we are witnessing is more than the end of a government -- it is nothing less than the birth of a new liberal order in Egypt. And that's not only good news for the beleaguered citizens of Egypt, but also the United States and Israel.

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The upheaval in Egypt marks the demise of two generations of stagnation in the Arab world that began with the Naksa ("Setback") -- the Arabic word to describe the defeat in the 1967 war. That loss ushered in a cynical era of autocracy, corruption, repression, and fatalism. It marked the defeat of the secular Arab project and profoundly humiliated Egypt's Gamal Abdel Nasser, the last Arab leader who could plausibly claim to reflect the broad popular will. Nasser's defeat was also the defeat of any notion that the Arab world had a progressive, modernist future.

In the wake of the 1967 war, Mohamed Heikal, Egypt's prominent pundit, punned that power had shifted in the Arab world from thawra ("revolution") to tharwa ("wealth"). Not incidentally, the defeat of secular Arab nationalism created an intellectual vacuum that was filled by religiosity. As Syria's Yale-trained philosopher Sadik al-Azm said, "At the same time, the political regimes responsible for the military defeat began utilizing religion in general and Islam in particular in a campaign designed to protect them from the aftermath of the defeat."

Nasser's successor, Anwar Sadat, adopted the language of Islam, partly in an attempt to co-opt the Muslim Brotherhood and give himself a semblance of legitimacy. He cracked down on the secular left and shifted the regime to the right with his Open Door policies, welcoming American investment and influence. In the wake of the October 1973 war, Sadat was briefly seen as a genuinely popular national leader. In November 1977, he astonished everyone by flying to Jerusalem. Most Egyptians were tired of war and so welcomed the subsequent Camp David Accords and the Egypt-Israel peace treaty. But at the same time, Israel was still regarded with suspicion and even hostility. It was always a cold peace.

And then, of course, Sadat was assassinated by a group of Army officers associated with a cell of radical Islamists. The man who succeeded him, Air Force officer Hosni Mubarak, was a political nonentity.

Mubarak became the antithesis of Nasser. He used the military apparatus of Nasser's populist police state to sustain himself in power, but ditched the populism. Instead, he surrounded himself with a mercantile class of supplicants whom he favored with government contracts and outright graft. Nasser died with a modest bank account; Mubarak's family and associates have amassed fortunes reportedly worth $40 billion to $70 billion. The new pharaoh has ruled with arrogance, tolerated by the public out of a sense of fatalism and helplessness.

But now the Egyptian people, led by a younger generation, are determined to force him unceremoniously from power. Without a doubt he will soon be gone -- perhaps tomorrow, perhaps in a few weeks or months. But he will be gone, and with him an era.

U.S. President Barack Obama's administration has no control over these events. But we are now more than two weeks into the popular upheaval; Washington should have understood far earlier that it will be disastrous if the new era begins without the clear perception that the United States is on the side of the Egyptian people. This is not the time for talking about an orderly transfer of power. That sends the wrong message to the democrats in the street -- who by all accounts have acted orderly. They know from personal experience, and we can all see it on CNN and Al Jazeera, that it is only the regime's goons who have introduced disorder and violence into the uprising.

It is also certainly a major blunder for the administration to have signaled even its tepid support for Omar Suleiman, Mubarak's intelligence chief. Just the other day, newly appointed Vice President Suleiman had the gall to say that Egyptians did not yet have a "culture of democracy." Perhaps that's not altogether surprising from a secret police chief who is deeply complicit with America's renditions. Mamdouh Habib, an Egyptian-born Australian citizen who was detained by Pakistani security forces in October 2001 and subsequently flown by the CIA to Egypt, claims in his 2009 memoir My Story: The Tale of a Terrorist Who Wasn't that Suleiman personally took part in his torture-interrogation.

How the Obama administration could hitch its fortunes to such a man, even briefly, is inexplicable. Perhaps the administration hesitates to wholly embrace the populist tsunami out of fear that Mubarak's fall signals the end of the Camp David regime, which has kept the peace between Egypt and Israel for 30 years.

But a democratic Egypt could in the long run deliver to Israel something much better than Camp David's moribund cold peace. At the time, U.S. President Jimmy Carter's 1978 Camp David Accords -- followed by the 1979 Egypt-Israel peace treaty -- were a diplomatic triumph. But Carter's successors failed to get Israel's prime ministers to loosen their grip over the territories occupied in 1967. Over the decades, Washington ritualistically condemned the building of more and more settlements in the West Bank -- but did nothing to stop them. As such, Camp David is as discredited in the eyes of the Egyptian masses as is Mubarak himself. Indeed, one of the reasons Mubarak is so despised is that for three decades he made Egypt an accomplice to Israel's unilateralism.

But this does not mean that the Egypt of the Tahrir Square era will confront Israel militarily, or even break diplomatic relations. There is no domestic appetite for war. Nevertheless, the cold peace Israel has forged with Arab dictators is unraveling. This may, in the short term, empower Israeli Prime Minister Benjamin Netanyahu's Likud ideologues who will argue that Arab democrats are out to "delegitimize" Israel. But in the long run, the emergence of an Arab democratic polity should convince Israeli voters that their leaders have become too complacent and too isolationist. After Tahrir, a majority of Israelis may conclude that they can't live in the neighborhood without forging a real peace with their neighbors.

The separation wall was never a real answer to Israel's security predicament, and it will be less so when a democratically elected government governs Egypt. The policy of separation -- hafrada in Hebrew -- had some short-term strategic viability when the largest Arab country was willing to police Israel's southern border and keep Hamas penned up inside its Gaza prison. But no legitimate government in Cairo will be able to continue its complicity with the Gaza blockade -- particularly not if the Muslim Brotherhood is a player in a new government.

In reality, Israel will come under renewed pressure to deal with both Hamas and the Palestinian Authority in the West Bank. Hamas's ideology is certainly vile, but it won the last Palestinian legislative election in 2006 and has more or less observed a cease-fire with Israel since early 2009. In December 2010, the Hamas prime minister in Gaza, Ismail Haniyeh, announced that his party would abide by any peace settlement if it were to be ratified by a referendum of the Palestinian people. Furthermore, as we recently learned from Al Jazeera's Palestine Papers -- the leaked documents on the 2008 Abbas-Olmert talks -- the two sides are not that far apart on a comprehensive peace settlement that would create a Palestinian state.

So here is the uplifting news: What is happening in Tahrir Square may actually propel the politicians in Washington, Jerusalem, and Ramallah to forge the Israeli-Palestinian peace deal that all of us know is there for the taking. And if that doesn't happen? Absent a comprehensive peace settlement, Israel and the United States will find themselves increasingly isolated in the new Middle East.

Sure, there are imponderables and risks. But the real danger at the moment comes not from a strategic shift in the region, but rather from the possibility that Suleiman or some other Mubarak acolyte will use Egypt's Army to launch a coup d'état against the people in Tahrir Square. If that happens, Washington should break relations with the new dictator and impose economic sanctions. To do anything else would send a message to a new generation of Arabs that, like Mubarak and Suleiman, Americans don't think Arabs are ready for democracy.

Mercifully, I don't yet see Egypt headed that way. Something else is happening in the Arab street -- something extraordinarily good for the Arab world, but also good for Israel and America. We should embrace it.