All the indicators are in place.
Tensions are rising, threats issued, and the soldiers are being rallied.
Last-gasp final attempts to maintain the civility of diplomacy are due to be undertaken by the players in the 'Grand Game,' to see if the unthinkable can be averted.
When the countries involved meet for their summit in the South Korean city of Seoul, winning will mean a return to less volatile relations between each other, and ideally, a greater level of fiscal growth and prosperity for the people of all the actor countries.
A loss, however, could mean the unthinkable.
All out war.
Now before you run out and check your stockpiles in the fallout shelter and you begin moving your investment portfolios from equities and commodities to tinned food and shotguns, I should point out that this isn't a war of guns and bombs I'm talking about.
No, instead what we are speaking about here is an all-out currency war.
Currency wars can happen in a number of different ways, including artificially devaluing (or increasing) the strength of another nations dollars (or Pounds, or Euros . . . you get the idea.)
Different countries require different things from their currencies, as they relate to other currencies.
Very wealthy nations have, in the past, used their elevated currency values to purchase material and goods from countries with lower valued currencies for better relative prices to what they would pay within their own market.
So for export economies (like Canada) maintaining a low currency relative to the US dollar (for example) helped make Canadian goods, materials, and services attractive for US consumers.
It is this kind of currency dynamic that led to considerable Canadian success during the early days of NAFTA, when the low Canadian dollar (remember when it was valued at about half a buck U.S.?) kept Canadian trade goods flowing copiously into the U.S., and American tourists came in large waves, sometimes just on shopping expeditions.
As with all things, the passage of time has changed many of the dynamics of those days, and a new set of realities have taken root, leading to these rapid increases in tension.
The economic powerhouses of the West, foremost among these being the U.S., are not as powerful as they were at the end of the Cold War.
A reflection of the power of the globalization trends of the late 1990s, as well as the basic consumer desire to buy as much stuff as they can as cheaply as possible, created a mass movement of jobs out of the Western developed countries.
The largest expense for most organizations is traditionally payroll, so the most effective way to cut expenses (thus lowering the end price of products while maintaining profit margins) is to hire a cheaper workforce.
Thus, with trade pacts of old out of the way in the new global economy (where a country could demand certain manufacturing concessions from companies which wished to do business within their national markets,) a mass movement of low- and medium skilled manufacturing to developing economies has seen a drop in the standard of living for many in the developed world, and a growth in the same standard in the developing countries.
This has weakened the income not just of those who had formerly been employed in that level of manufacturing, but has dropped the national incomes of countries affected by job displacement by lowering the tax base of each.
With the global economic crisis putting further pressures on the job markets, countries that had already seen shrinking employment are now desperate to stem the flow of jobs and money out of their countries.
But with some nations (like China) controlling directly the value of their currency relative to other national currencies, things have begun to look ugly as countries vie to keep their export and import markets balanced, or preferably for some, in a state of surplus.
We can only hope that the summit in South Korea bears fruit, because if not, there could be further negative affects that might damage the economy, which is still dangerously fragile in its recovery.
