A hundred thousand police and special forces have been deployed throughout Beijing. Dozens of helicopters patrol the skies. Jet fighters are on standby. The Chinese authorities are highly prepared for security threats to the Olympics. They have good reason to be nervous.

First of all the Olympics are the world's biggest show window – a spectacle that keeps much of the world glued to TV sets. That makes the games an irresistible target for all sorts of attention-seeking malcontents, from ordinary citizens with a complaint against the government, to terrorists who are ready to commit mayhem in order to pursue their political or sectarian agendas.

As a young CBS News correspondent, I covered the attack on the 1972 Munich Olympics by the Palestinian terrorist group “Black September.” Security was lax at the Olympic village. (Shortly after the attack, I managed to get into the compound myself without the required credentials.) The terrorists had stormed the Israeli team's quarters, killed two of them and took nine hostages. All nine were later killed in a fire-fight between German snipers and the terrorists.

After the Munich games, countries hosting the Olympic games made security of the participants a top priority, but new menaces evolved. The bomb planted by an anti-abortion extremist at the 1996 Atlanta Olympics was aimed at spectators. The backpack crammed with pipe bombs and nails exploded in the Olympic Centennial Park where a concert was taking place. It killed one spectator and injured 111 others.

The Chinese government prepared for attacks not only on the games, but on buses, airplanes, governments offices – in short, any target that could grab the headlines. A terrorist attack anywhere in China during an event that has attracted tens of thousands of journalists from all over the world could turn government's celebration of its achievements into a public relations disaster. That's what the Communist Party leaders fear. It would be a huge loss of face.

The most obvious threats to the games come from ethnic areas that threaten to break away. China is a huge and diverse country that is not easy to hold together. In addition to the Tibetans, there is also Xinjiang in the far West, where Muslim Turkic-speakers have established short-lived independent states in the past, before being reabsorbed into China. Chinese authorities say a resurgence of ethnic nationalism since 1990 has led to hundreds of “terrorist incidents” in Xinjiang. And Muslim jihadis from the region have turned up in Pakistan and Afghanistan. Terrorism these days is increasingly global.

The irony of the Beijing Olympics may be that even if they turn out to be the peaceful celebration of China's economic achievements that the authorities worked so hard to produce, they may turn out to have been ill-timed. Some foreign affairs experts believe that the biggest threat facing the Chinese government these days is not dissidents or terrorists, but something much more mundane and all pervasive. It's inflation.

The economic miracle that the Communist Party built on cheap labor and subsidized exports is the key to its grip on power and the stability of the country. It is now threatened by a double blow of both inflation at home and the growing recession in its Western markets. In the popular Chinese view, it was inflation and corruption that brought down the Chinese Republican government (1911-1949) rather than the Communists or the war with Japan. And the 1989 Tiananmen Square riots were caused in part by worker unrest over falling living standards due to inflation. Inflation is once again rising in China and this year hit its highest rate in more than a decade. Chinese workers are paying substantially more for such staples as pork, beef, rice and vegetables.

That's the irony. The country's leaders are holding a celebratory party without realizing that the party may be over and harder times are ahead.