In a session presided over by King Salman bin Abdulaziz on March 28, Saudi Arabia’s cabinet approved a memorandum awarding the nation dialogue partner status in the Shanghai Cooperation Organization. This China-led organization currently includes China, India, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan and Uzbekistan. In addition to these eight full members, it also has four observer states and eight dialogue partners in addition to Saudi Arabia.

The White House has not yet responded to this development, but many American analysts are nervous about Saudi Arabia’s overtures to China. South Africa’s foreign minister recently let it slip that Saudi Arabia might also join the brics alliance in the near future, which is comprised of Brazil, Russia, India, China and South Africa. The expansion of the brics alliance is a threat to the United States’ global dominance, so any rapprochement between Saudi Arabia and China is significant.

Petrodollar’s demise: During the 1950s, over 90 percent of the world’s debt was denominated in dollars. An economic downturn in the early 1970s, however, caused nations to lose faith in the dollar’s stability. They started demanding gold for the dollars they held in reserve. Rather than watch American gold reserves deplete, President Richard Nixon abandoned what was left of the gold standard. To ensure the dollar remained the world’s reserve currency, he negotiated a deal with the Saudis: He promised to arm and protect Saudi Arabia if the Saudi royals would denominate all future oil sales in dollars. They agreed, and the dollar became an oil-backed currency.

The fact that the Organization of the Petroleum Exporting Countries uses dollars in all its oil transactions creates a massive demand for U.S. currency. Yet this fact also gives Saudi Arabia great power over the United States. If the Saudis were to dump the dollar for the Chinese yuan, the so-called petrodollar would cease to exist. The dollar would not be backed by gold, silver, oil or anything else valuable. It would become the unbacked fiat confetti it is in reality.

Economic collapse: The Bible indicates America’s economic problems will get worse. The Prophet Haggai describes future economic conditions: “Ye have sown much, and bring in little; ye eat, but ye have not enough; ye drink, but ye are not filled with drink; ye clothe you, but there is none warm; and he that earneth wages earneth wages to put it into a bag with holes” (Haggai 1:6). This verse indicates that people will work hard and have less because runaway inflation is destroying the currency. So far, America has been able to avoid such runaway inflation because the dollar is the global reserve currency. But Saudi Arabia’s shift to a Chinese economic alliance could soon change this.

What to do: Dealing with inflation requires smart budgeting. To learn how, read our free booklets Solve Your Money Troubles! and The Financial Law You Can’t Afford to Ignore.