American media seems to be focused on domestic affairs while astonishing things are going beyond the borders—and we seem to stand by watching helplessly. The United States position of prominence is eroding.

Yesterday, at a summit in Shanghai between China’s President Xi Jinping and Russian President Vladimir Putin a massive 30-year natural gas deal was signed to provide Russian gas to China. The agreement has been under negotiation for years and its fruition is a big deal for energy markets and international politics.

Less noticed, but possibly even more interesting, was an agreement between Russia and China aimed at undermining the role of the US dollar as the base currency. The Russian bank VTB and the Bank of China signed an agreement in the presence of Xi and Putin to avoid using the dollar and conduct exchanges in domestic currencies. This is a really big signal.  The all mighty dollar may not always be all mighty.

Look at the world (or even just the United States) from the position of China. What makes America a super power? Is it the military? Partly. Is it nuclear weapons? Not so much. What really gives us leverage is the position of the dollar as the base currency. In the last financial crisis, we escaped largely by printing money. Other countries can’t get away with that without causing massive inflation. Sitting in Beijing, it could be seen as a financial attack—US Treasury printing tons on dollars that has the effect of exporting inflation to other countries.   We borrow money (by selling treasuries to finance our wars, debt, TARP, etc.) and then pay them off by, in essence, printing dollars.

The role of the dollar as base currency is a uniquely powerful lever. It is one that is rarely thought of in terms of national security, but nothing is more important. If we lose it, we will have lost our position as the last super power. Period.

Beijing, Moscow, and others are well aware of this. The role of the dollar also gives us the currently valuable tool of sanctions. If Washington decides to limit banking use of dollars for transactions with certain entities, e.g. in Russia or Iran, then we can impose our will on the international financial system. You can bet there is no higher strategic priority than to undermine that position.

We are blindly squandering this leverage from inattention and by our inability to control our appetite for printed dollars.  This is a national security issue, not just a budget issue.

Domestic politics may make it convenient to be staring at our navel while waiting for the next election.  However, the dynamics in the outside world and our shrinking position will effect our own standard of living here.

To see how the role of the dollar figures in international conflict, read James Rickards new book, “The Death of Money: The Coming Collapse of the International Monetary System.” While the title seems a little over the top, Rickards hits on some critical dynamics of an ongoing conflict that is not kinetic, but even more dangerous. There will be a moment when Washington wakes up. It’s only a question of when.