Last week, President Obama ordered all U.S. troops out of Iraq. Far from an isolated withdrawal, it is symbolic of what is happening on many fronts. America is not just contracting—it is in full retreat.

Forty thousand troops will immediately begin packing their duffel bags. Home in time for Christmas, says Obama. But what about the fledgling Iraqi democracy? They are on their own—just what the Iraqi Shiites and their Iranian counterparts have been waiting for. And the Kurds, who supported America against Saddam? The Sunnis that Iraq’s democracy supposedly represents? They too are on their own—that is, thrown under the Iranian Shiite bus.

But, Secretary of State Hillary Clinton warned Iran on Sunday to not miscalculate the U.S. withdrawal. America will continue to have “a very significant diplomatic presence in Iraq,” she said.

One day later, Reuters reported: U.S. ambassador to Syria flees.

It would be comical, if it weren’t deadly serious. A strong diplomatic presence is supposed to deter Iran when thousands of troops couldn’t? Four thousand, five hundred American soldiers, along with hundreds of thousands of Iraqis, lost their lives in the battle for Iraq. And now the country is being left for America’s number one enemy.

But the Great American Contraction isn’t limited to abandoning the Tigris and Euphrates. With Colonel Qadhafi dead, America’s air force will be flying home from Libya as well. In Afghanistan, the troops won’t last much longer—tentatively to 2013.

The most far-reaching and dangerous contraction, though, is set to occur in Europe.

In the early 1990s, there were well over 200,000 U.S. troops stationed in Europe. Today, that number is down to 41,000—and set to shrink a lot more.

Back in May, with little media coverage outside of Germany, the last American division in Europe packed up and left for its base at Fort Bliss, Texas. The famed U.S. 1st Armored Division returned after a 65-plus-year mission to, in the words of nato’s first Secretary General Lord Ismay, keep Germany down, Russia out, and America in. Criticize America as you will, but it kept the peace following two devastating world wars, and the threat of the Cold War.

Now, only four smaller, lighter “brigade combat teams” remain on the Continent—three in Germany and one in Italy. And from them, over 10,000 soldiers have been pilfered to beef up Afghanistan. So there are really only around 31,000 soldiers there.

One of those brigades is scheduled to come home in 2012. So America will evacuate another 1 out of 4 of its European soldiers. A second brigade is scheduled to come home in 2015—but according to Lt. Gen. Mark Hertling, who took over command of America’s troops in Europe, it could be home even sooner.

It is time for Europe to take responsibility for protecting itself, said recently retired Defense Secretary Robert Gates. “The blunt reality,” he told his European counterparts, “is that there will be dwindling appetite and patience in the U.S. to expend increasingly precious funds on behalf of nations that are apparently unwilling to devote the necessary resources or make the necessary changes to be serious and capable partners in their own defense.”

And so, in effect, America’s withdrawal will leave Europe to Germany—the only European nation with the economic, political and military competence to make the necessary changes to “defend” Europe.

Yes, just about everywhere you look, America is cutting back and retreating.

Last week, Merrill Lynch warned that America’s credit rating is about to get cut by another ratings agency. “[W]e expect at least one credit downgrade in late November or early December when the Super Committee crashes,” writes analyst Ethan S. Harris. If the Super Committee can’t reach a budget compromise, an automatic $1.2 trillion cut split between the military and non-military programs will result.

Expect massive military spending cuts—ones much larger than those necessitated by the Super Committee—in coming years. The shrinking economy demands it.

Jobs are contracting. Employment peaked in 2008. America is now back down to the number of jobs it had a decade ago.

The stock market is contracting. It too is back to where it was a decade ago.

Consumer debt is contracting. For the first time in years, the tough economy is forcing people to pay down debt. Others are shedding debt through default and bankruptcy.

House prices are shrinking. The pool of buyers is contracting.

“The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the U.S. government began recording it five decades ago,” wrote the Christian Science Monitor on October 19. The median wage is back to what it was in 1999, after adjusting for inflation.

In reality, the whole U.S. economy as measured by gross domestic product is probably contracting—if you take out government spending, which is powered by borrowing and has to be paid back later.

What does this all mean? It means that American power and influence is set for an astounding retreat. America’s economy is in a shambles and its military can no longer be supported. Thus America’s ability to shape the world in its image, to coerce and entreat nations to conform to its rule, has passed its zenith. American power has peaked, and is now well down the back slope.

It is a dangerous new world, one in which the reigning superpower is in rapid decline. Other powers are rising to challenge it—powers that are adverse if not openly hostile.

Those accustomed to the American order—meaning America’s allies in the English-speaking world—had better get set for upheaval. The fall of empires is not a gentle process. Contraction precedes collapse. The collapse of the British Empire coincided with two world wars.

Shrinkage, downsizing, withdrawal—retreat. Sadly, Americans are destined to hear a lot more of these terms in the years ahead.