In what I consider the most impactful yet underreported news story this year, Saudi Arabia reportedly decoupled from the U.S. dollar, ending an 80-year deal with the United States. However, officials are now calling that “fake news,” stating that no decision has been made yet.

The truth is we’ll probably never know what was really said, but we do know that Saudi Arabia and other countries have been moving in this direction for years, which would have a disastrous impact on our economy.

This means that oil and other products would now be purchased in multiple currencies, including the Chinese RMB, Euros, Yen, and Yuan, instead of exclusively in US dollars. While this might seem to be a simple bookkeeping decision, it actually has massive financial implications for every one of us.

The first way it will affect America is that it weakens our standing within the global community, which puts us at a disadvantage when negotiating on matters of trade, debt, and war.

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If you’ve been paying any attention over the last few years, you know we’re already in a weak position and getting weaker in all three areas. With the U.S. dollar incrementally losing reserve currency status, it signals to the world that fewer nations perceive the country as the economic and military powerhouse it once was.

In short, we are quickly losing status, as well as political influence and economic benefits.

This is where things start to get complicated pretty fast because that loss of status leads to several adverse outcomes. The first is that just like on the individual level, credit matters, and our nation’s downgraded credit means two things—lower consumer confidence and higher interest rates. (Note: In case you weren’t aware, America was hit with a credit downgrade last year—one of only two times in history. It’s also worth noting that since we’ve come off the gold standard, our credit is based on how the world perceives America rather than being based on any kind of tangible assets.)

The higher interest rates affect us in obvious ways. Increased interest rates mean increased costs at every step in a transaction, so the end consumer pays significantly more for the same goods and services. This quickly drives the prices of literally everything up.

But it also affects us in non-obvious ways by pushing the companies that couldn’t acquire funding out of business. This is bad enough on the surface, but it’s even worse when you consider that small businesses employ roughly 99% of the US workforce. That means there will be an explosion of layoffs as these problems continue to grow, creating an entirely different set of problems.

For example, fewer employees means a business may be unable to continue serving its clients despite overcoming previous financial challenges. So, the outcome can still be the same. Now, you have fewer businesses, which also means less competition, and when companies aren’t reined in by customers having the ability to go elsewhere, monopolies tend to develop.

If you’ve ever had to talk to customer service for your phone company or garbage company, you know how they treat you when they don’t think they have to worry about losing you as a customer.

The issues quickly ripple out, affecting almost everyone.

Worse yet, as this cycle continues, my outlined problems snowball, creating a growing impact and greater instability. At the same time, lenders will ratchet down their underwriting guidelines to mitigate risk. After all, this is the only logical move because they need to survive the economic downturn, too.

So they will be more stringent in deciding whether to lend in the first place and if they do, how much. This means less capital is available, and more business owners are forced to compete for it. It also means they will enforce collection activity more quickly and aggressively. It’s pretty easy to see how quickly things can go downhill from here.

Side note: We’re already here because interest rates have effectively doubled, and even borrowers with excellent credit struggle to get approved. It’s only going to get worse.

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But the bigger problem, especially in the short term, is the impact this will have on other countries' perceptions of America. Once the sweater starts to unravel, other countries will be more likely to abandon the U.S. dollar, and when the panic kicks in, others will run for the door.

It’s worth noting that this is already in the works, with a consortium of nations actively pushing to eliminate the U.S. Dollar as the world reserve currency. This consortium is known as the BRICs and is made up of Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates. Together, members of BRICS encompass about 30% of the world's land surface and 45% of the global population, so this organization has considerable resources and influence.

Keep in mind that this is all happening at a time when the interest payment alone on our national debt already exceeds our defense spending, inflation is at historic levels, and government spending seems uncontrollable.

If America loses its reserve currency status, it could be the end of our country as we know it. It may be the tsunami that topples our entire economy.

On the other hand, if we can keep the wheels on this rocky wagon as we fix things—which will likely take decades, we might have a chance of saving this once-great nation and preserving our way of life for generations to come.

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Dr. David Phelps created Freedom Founders to help its members achieve the freedom they wanted in their lives by building the necessary financial foundation. He is a noted financial expert who is regularly cited by the media, and recently helped the FL Dept. of Education develop its new financial literacy curriculum.