A Prelude to the Real Horror
Whatever issues the shutdown creates, it would likely be dwarfed by the prospect of a debt ceiling showdown. Though the two deadlines aren't related, they are coming one after the other: the nation is poised to hit the debt ceiling on October 17. If that happens, it could send panic throughout financial markets, sending stocks tumbling. It could also send interest rates spiking and threaten the nation's credit rating if investors and rating agencies decide that U.S. treasuries are risky.
Then again, it could mean lower interest rates as shaky investors put their money into treasuries.
"When investors are uncertain, they're going to go to high-quality investments or cash," says Canally. He expects investors will flock to investments that are considered ultra-safe, like treasuries, in the event of another debt ceiling debacle.
But the very fact that no one knows what to expect from hitting the debt ceiling is perhaps what makes it such a terrifying proposition. And it's why many economists want Washington to resolve the shutdown already so it can also get the debt ceiling out of the way as soon as possible.
Corrected on : Updated Oct. 1, 2013: This story was updated to reflect announcements made by Washington, D.C., Mayor Vincent Gray that the city would use a special reserve fund to keep services running in the event of a shutdown.