I enjoyed the Atlantic City Money Show, but as always - a common theme was: What can go wrong and throw the markets off course? As you know, I am normally an optimist, but I take crisis threats seriously, examining all the probabilities. One potential crisis that could wreck the stock market would be a Chinese invasion of Taiwan.
       Beijing threatens Taiwan from time to time, especially around national elections. People in China feel passionately that Taiwan is a province of China, not a truly independent nation. So it is not irrational to worry that Beijing might invade Taiwan. China apparently has nuclear submarines that already patrol the Straits of Taiwan.
       My personal view is that Taiwan will one day voluntarily want to join China. Even after decades of economic success, Taiwan still cannot float its currency or open its capital markets. Both are tightly regulated. The problem is that Taiwan is too small to be able to handle sudden large inflows or outflows of capital. Taiwan needs a friend and protector. The obvious "friend" is China.
       For the sake of discussion - to think through the whole possibility - let's assume Beijing does invade Taiwan. That would trigger U.S. military involvement. We pledged our support to Taiwan; we would send missiles, ships and troops. A Chinese invasion of Taiwan would be seen as a declaration of war against the United States. The consequences of that would be drastic, especially for China. We would boycott Chinese goods.
       We are China's largest market. Losing their U.S. trade would cripple China's economy. Their unemployment rate would soar. That would lead to internal political strife. America would refuse to honor the billions of U.S. Treasury obligations held by Beijing. Because China's banking system is in such awful shape, the loss of U.S. dollars and the U.S. market would effectively bankrupt China.
       Some might say that the hard-line politicians in Beijing wouldn't mind closing the door to world trade. After all, Mao isolated China for 25 years. Hundreds of millions of Chinese suffered terribly for that. Their suffering is not forgotten. Every Chinese over the age of 45 suffered in ways we can only imagine. That includes the politicians now in power. The Chinese want Taiwan, but not at the cost of everything they gained since 1980.
       I have spent a lot of time in rural China, as well as in the major cities. I see lots of posturing and saber rattling from Beijing, but no real action. I predict that the economic ties between Taiwan and China will grow to a point where both sides will seek permanent, peaceful solution. China is doing well by supporting Hong Kong's economy. The Pudong region of Shanghai is a big success, rivaling Singapore. The best way for Beijing to bring Taiwan back is to become so attractive that the people of Taiwan will want to rejoin China.
       Nasty surprises sometimes happen, so I will keep watching and reassessing this threat. If it ever rises to a probability, we will take action. Meanwhile, the saber rattling serves to prevent Taiwan from becoming too independent, or so tied to the U.S. that reuniting with China would be impossible. That is Beijing's strategy. Continue to develop at home, and patiently wait for the day when Taiwan will be ready to join China again. The Chinese are known for their patience. They can wait 50 years. My conclusion is that we can look forward to continued peace and prosperity in China and Taiwan for the next several years.
       Editor's Note: John Dessauer is editor of John Dessauer's Investor's World, 7811 Montrose Rd., Potomac, MD 20854, 1 year, 12 issues, $249. John Dessauer is America's foremost authority on global investing, using proven value-investing techniques and principles. Visit the web site at www.DessauerInvestor'sWorld.com.