Once the Saudi parliament, the Saudi Shura (Majlis as-Shura in Arabic), advises the King to revalue the riyal, the outlook for the U.S. dollar becomes seriously bearish.

That's because the question about de-pegging from the U.S. dollar is no more if, but when.

Since 2002, we have seen that the U.S. dollar is negatively correlated with oil prices. The Saudi dollar peg and that of its Gulf neighbors has had its pros and cons:

On the pro side, depreciation benefits the nascent non-oil sector in a limited way; currency stability attracts foreign investment and eases planning for debt repayment; and a dollar peg reduces trade and financial transaction costs while providing a credible nominal anchor.

On the con side, low or negative “real” interest rates; imported inflation that now runs in the “unacceptable and unsustainable” double digits; pressure to build up dollar assets; and losses on large foreign exchange reserves.

It’s clear to me that the cons now outweigh the pros.

Goldman Sachs analysts recently saw no more reason for continuation of their dollar peg as Saudi Arabia, the United Arab Emirates and Qatar have very low scores for a dollar-peg suitability and that, for all Gulf Cooperation Council (GCC) countries, greater monetary independence seems highly desirable.

De-pegging would give the Saudi Arabia Monetary Agency (their central bank) as well as the other GCC central banks, greater control over interest rates and restore logical, “real” positive interest rates in order to stem now out-of-control inflation.

So, Saudi Arabia could, in one way or another, follow Kuwait, which de-pegged in May 2007 and switched to a currency-basket peg in which the dollar still represents 70 percent of the basket.

Nevertheless, since depegging, the government has had to revalue the Kuwaiti dinar four times by mid-October to stem accelerating inflation.

I have no doubt that if Saudi Arabia revalues that would be a de facto depegging from the dollar, which would cause a profound rethinking about the dollar’s “real” actual purchasing power value. The psychological impact could be huge.

Of course, if that occurs, I wouldn’t be surprised to see also the Hong Dollar following suit, and that could be the final straw for the dollar.

What does this all mean for the investor who is still primarily in U.S. dollars?

Well, we cannot dismiss the fact that there exists an important chance that the dollar will have further to readjust globally (against one currency more than another) to lower levels because of imbalances that are starting to hurt all those countries with undervalued currencies because of their “de facto” dollar pegs.

We all know that nothing goes up or down in a straight line. So, I would consider further lightening up on dollars and converting them progressively into “real inflation-fighting” currencies and “real” liquid tangibles.