The gamesmanship of Congress is still reverberating through the world’s financial system with a big drop in stock markets today. But that may be only the start of the problems caused by the self-inflicted calamity. At risk is the source of the USofA’s real power around the globe – not the military, but the US Dollar itself.

The high standard of living enjoyed in the US is based on the fact that our currency is the standard “reserve currency” across the globe. All commodities and many long-term contracts are priced in US Dollars. If, or more likely when, that comes to a screeching halt the implications are vast for our economy and just about everything we do. Where it gets interesting is that, done well, it could be a liberating experience.

Imagine for a moment that you buy aluminum from Brasil for your factory in Malaysia. Your contract is written around the world price for your product, determined not in Ringgit or Real, the local currencies – it’s in US Dollars. Because you know that this might go up and down in the world markets, you have to hedge a bit – keep some accounts denoted in US Dollars. The checks you wire off to São Paulo are all in US Dollars and come from these accounts.

It’s been that way around the world since the Bretton Woods Conference in 1944. That’s when the (soon to be) victorious western powers sat down and devised a new global currency system based on the US Dollar. Every local currency around the world was measured against the Buck. That broke down a bit in 1968 when we had a spell of economic trouble, but the meat of it kept moving along. The Dollar now floats alongside other currencies but prices remain denoted in it. Every bank around the world keeps some dollar denoted accounts handy – and buys a lot of US debt in the form of Treasury Bills as interest-bearing equivalents of US Dollars.

Back with our example, we see our Malaysian and Brazilian factories starting to get very nervous. The US Dollar is up one day, down the next, and looking like it might be extremely unreliable over the long haul. They are getting nervous because a Congress far away is acting irresponsibly. There’s a good chance that they will want their leaders to do something about it, too.

That’s where things get interesting because the International Monetary Fund has been looking at a new system to replace the Dollar for some time. It’s called the SDR for “Special Drawing Rights”, a mouthful of a name that describes how it’s maintained. In essence, it’s a based on the US Dollar, British Pound, Japanese Yen, and the Euro. It can be used in international transactions in place of the US Dollar solo.

That’s not the only threat that the Supreme Dollar faces, however. Some Arab nations have proposed the “Gold Dinar” as a standard for oil prices – and it has been recognized as legal tender in Malaysia. It’s a 4.25 gram gold coin worth about $120 and based on traditional Islamic standards. There is also the Bitcoin movement to change the world over to a completely virtual standard of value. These are what we might call “Distributed Standards”, meaning that no sovereign nation controls them in any way. Such currencies are historically the norm in international trade, meaning they have appeal far beyond the current crisis.

But let’s say that our trading partners and their nations have had it with the dangerously unpredictable US Dollar and write their contracts in something else. As this catches on around the world, the reserves of US Dollars are suddenly not needed. That means a big excess of Dollars around the world, and by the laws of supply and demand the value of the Buck drops. If this happens overnight, it drops dramatically – and potential hyperinflation ensues.

The results could be catastrophic if it gets to the point where no one wants to be the last nation holding the bag full of worthless Dollars.

No one wants this to happen, of course. Destroying the US economy is not in any nation’s interest, so the transition will likely be as smooth as possible. But it will take careful management of the kind that we aren’t exactly known for right now. And it will surely mean that the value of the Dollar will drop – which is to say that imported oil, foods, and fancy toys will all become more expensive than they are now.

The upside? US manufacturing will become cheaper, and thus much more desirable. This would be what gets us out of the doldrums once and for all if done properly. And it will be much easier to manage our currency to fit the needs of our own economy rather than the needs of the entire global system, something which has caused a lot of strain since global trade started taking off 40-some years ago.

But, like nearly every change, it means that our ability to manage it is the key to whether it’s a net benefit or a problem. And the more we screw up, the more likely it is that we will have to face this new reality before we are ready for it. Fasten your seatbelts.