For investors, there is fear that a government shutdown would set the stage for a more momentous battle over the so-called debt ceiling. That is, if there is no agreement to raise the borrowing limit by mid-October, the government will not be able to issue more bonds and could default on its outstanding borrowing.But as paying this debt is considered "essential" and there are plenty of taxes rolling in, this is not actually going to happen. On the other hand, to the extent that investors believe it will and act accordingly, it could wreak havoc in the financial markets and send ripples through the economy.
Let us hope this circumstance is simply avoided, because it is less likely that we'll have a better informed or less irrational electorate any time soon.
