President Hosni Mubarak just appeared on television and didn’t step down, as many had thought he would. Instead, he insisted that he would stay in office through the September elections. He offered cosmetic changes and promises of reform down the road. For example, he said that he would lift the state of emergency…down the road…sometime when the time is right. He seems to have delegated some powers to his vice president, Omar Suleiman, while remaining in office himself.

This is of course manifestly unacceptable to the Egyptian people. Mubarak’s speech was a striking reminder of the capacity of dictators to fool themselves and see themselves as indispensable. If he thinks that his softer tone will win any support, he’s delusional. As he was speaking, the crowd in Tahrir was shouting “Irhal!” or “Go!” And the Egyptian state media — from television to Al Ahram, the dominant newspaper — have been turning against Mubarak, so he’s losing control even of his own state apparatus. An Arab friend of mine who has met Mubarak many, many times describes him as “a stubborn old man,” and that seems exactly the problem right now. Suleiman just spoke as well, praising Mubarak and asking the youth of Egypt to go home and stop watching satellite television. Only possible conclusion: he’s delusional, too. The regime seems so out of touch as to be almost suicidal.

It was interesting that Mubarak tried to push the nationalism button and blame outside forces (meaning the United States) for trying to push him out. That won’t succeed, but it’s actually beneficial to America, giving us credit for siding with people power that I don’t think we actually deserve.

My guess is that we’ll see massive demonstrations in many cities — not just Cairo — on Friday, a traditional day for demonstrations. In effect, Mubarak and Suleiman have just insulted the intelligence of the Egyptian people — and they will respond. The regime has managed to galvanize the protesters, and it may be committing suicide. And I worry a bit that somewhere or other we may see violence. People are getting frustrated, and police are scared.

One crucial question is what the military does next. It is sending signals of impatience, and there are hints that a coup could come. Senior generals have a huge stake in continuing the existing system, and at this point Mubarak is becoming an obstacle to their retaining their privileges. But in an Egyptian context, what would a coup mean? Mubarak’s regime is a largely military one (in civilian clothes): Mubarak, Vice President Omar Suleiman and so many others — including nearly all the governors — are career military men. So if the military now takes over, how different will the system be?

Another question: what should the United States do? At the end of the day, Washington has relatively little influence, but its messaging will be hugely important. And the flaw with our messaging has been that we’ve been too wishy-washy, and we’ve been perceived as supporting a slow and gradual transition under Suleiman — rather than siding with democracy. I hope that we will speak out more clearly (and Obama’s speech today was a step in that direction) to show respect for popular aspirations and against any kind of crackdown. One of the big questions in the next 48 hours is whether the authorities will crack down — and we should always be very clearly on the record against any use of violence.

To me, this speech is a reminder of how entrenched the powers that be are in Egypt. They have their entire way of life — and billions of dollars — at risk, and they’re not going to go easily. My hunch is that at some point they’ll throw Mubarak overboard, but even then they may then seek to maintain Mubarakism without Mubarak. This could get uglier. It will certainly be historic.