* China signed a $5 billion deal to buy oil from the United Arab Emirates in Yuan.
* Russia recently announced it will supply China with all the crude it needs or wants and they won't transact using the US dollar.
* Finally, China state-run oil company Sinopec recently completed an $8.5 billion deal in Saudi Arabia to help build oil infrastructure."
Therefore the writing is on the wall: If Saudi Arabia walks away from our petrodollar arrangement with them, America is doomed.
And why wouldn't they walk away from it? Commodity producing countries around the world suffer the same fate as any American investor: If you simply put your dollars in the bank, your savings will get ravaged by inflation. You could leave it in the stock market, and then suffer violent booms and busts from the Fed's mismanagement of our economy. Or you can park your money in government bonds and treasuries and pray for the best, which is likely to be rather meager.
Yet that's exactly what most investors have been doing. In recent years, more than $400 billion in hot money has abandoned the stock markets and moved into bonds. And so it is that for the last 30 years most of these countries have been pouring their excess dollars into government bonds and Treasuries. That's created the greatest 30-year run for US government bonds in history. It's allowed us Americans to run up unprecedented Federal deficits and live way beyond our means, consuming trillions-of-dollars-worth more stuff than we produce as a country. The Fed has kept our taxes abnormally low by borrowing trillions (from investors around the world), and these low tax rates we've enjoyed have enabled most of us to live much larger and more luxury-filled lives than otherwise we could have.
But in doing that we've also created an enormous bubble, 4-times the size of the internet bubble and real estate bubble combined. And when countries decide to say "no mas" to the petrodollar requirement, this mega-bull market will see its day of reckoning. When that happens, it will make the stock market collapse of 2008 look like a cake walk.
Countries like Greece and Spain have already shown us the devastation that can happen when the national credit card runs out: According to the New York Times, Greece's economy shrunk almost 12% between 2009 and 2011 and will plummet another 6% this year. In the past few years, Greece has seen 25% unemployment , massive strikes and even violence erupt throughout the country. People are now even worried about the resurgence of the neo-Nazi party there. In Spain a million homes stand vacant after their owners were taken into foreclosure.