The U.S. dollar is getting perilously close to losing its status as the world’s reserve currency, and the current nuclear deal with Iran could push it over the edge.

For years much has been written about the risks from debasing our currency as a result of deficit-spending, debt-accumulation and reckless money-printing. What’s vital to grasp now is that Americans will experience an abrupt decline in living standards once the dollar loses its status as the world’s reserve currency.

Worse, the dollar’s demise would also precipitate a new financial crisis — one that would make the 2008 collapse look like a summer storm.

The U.S. is a relatively benign economic world power. No one knows what it would be like if, say, the Chinese yuan becomes the reserve currency for global trading. But it’s apt to be far less benevolent than the dollar norm we all now just take for granted.

Saudi Arabia’s top trading partner for oil is now China — a country outspokenly hostile to the U.S. dollar remaining the world’s reserve currency. The House of Saud also sets the rules for OPEC, and is now threatened by President Obama’s pursuit of a nuclear deal with Iran.

Additionally, the fracking revolution has hurt OPEC by driving oil prices down, while weaning the U.S. from remaining an OPEC customer.

Understanding how the dollar became the world’s reserve currency is essential in order to grasp the risks we face today. When President Nixon suspended the convertibility of the dollar into gold in August 1971, there were immediate negative repercussions in the currency markets.

That move effectively ended the relative stability of the gold-backed Bretton Woods international currency regime and ushered in the instability of fiat currencies and floating exchange rates. This, combined with the inflationary effects of the oil embargo, caused precipitous weakness in the dollar.

In an effort to restore stability, in 1973 Nixon sent Secretary of State Henry Kissinger to negotiate with the House of Saud. A deal was struck to price oil in dollars in exchange for a U.S. commitment to defend Saudi oil fields. This led other OPEC countries to follow, which is how the petrodollar trading regime came into being and then expanded to include other commodity trading.

This ultimately resulted in the U.S. dollar becoming the world’s reserve currency — providing a key support for the dollar relative to other currencies in the global economy for the last four decades.

But quietly, with little news coverage, in the last five years everything has been changing due to a myriad of international currency and trade agreements that exclude the dollar. Not only has the stature of the U.S. been declining in the world, but rivalry and distrust have been rising, with a number of traditional allies no longer viewing the U.S. as a reliable partner.

Meanwhile, economic growth in China has prompted its leaders to create and muscle in on non-dollar trade agreements with not only our rivals such as Russia, but also with friends, such as Germany, Brazil, Australia, India, Japan, Chile, South Africa, Saudi Arabia and the United Arab Emirates.

Mideast governments are presently faced with increased threats from ISIS, al-Qaida, related terrorist groups and growing regional instability. Many U.S. allies among Sunni Arab states, such as Saudi Arabia, Egypt, Jordan and the U.A.E., are considering going it alone, because of lost trust from Obama’s pursuit of a temporary and feckless nuclear deal leading to acquiescence to Shia Iranian hegemony.

Feeling abandoned by the U.S., these countries are discussing making their own nuclear weapons security arrangements. In kind, they may also be inclined to widen petroleum trade to non-dollar currencies.

If other nations follow suit in abandoning the dollar for trade, the dollar would face an avalanche of pressure, with central banks world-wide dumping excess dollar holdings they no longer need. Its demise as the reserve currency could happen overnight, be irreversible, and produce a new financial crisis that would hit Americans disproportionately — causing a collapse in bond prices and a spike in interest rates that would make servicing U.S. debt unaffordable.

Obama stated clearly on the eve of his 2008 election that he intended to transform America. That change — from signature legislation in the Affordable Care Act, the Dodd-Frank bank reform and Consumer Protection Act, and a slew of executive orders and regulatory mandates — has already delivered unexpected consequences that have weighed heavily on the economy.

But it also turns out that transformation also meant radically changing America’s foreign policy and position in the world in the engagement of adversaries such as Iran. If a nuclear deal with Iran all but guarantees nuclear arms proliferation in the most unstable part of the world and alienates our friends who were seminal in establishing the dollar as the world’s reserve currency, it’s surely a bridge too far and a risk not worth taking.

Originally published at Investor’s Business Daily.